What should I do? Late Payment good tenant

[Christian Bors]

So here's the situation.

I inherited this tenant, let call her tenant A, when I first purchased the property back in July. It’s a triplex, I live there myself and rent the other two units. This is my first property and it has been great (living for free)! Anyways, tenant A has been great. She hasn’t complained and if there has been a small issue, I resolved it very quickly. She has also paid rent on time every month except for December. So on the forums, I came across someone who said for Christmas they give their tenants a $25 gift card if the tenant has paid on time and there hasn’t been any problems. I love this idea. I figured with both my tenants, I would do that since they have been great tenants. I have not had any issues and they both have been paying on time. Anyways, I go on vacation the first week of December so I tell the tenants please hold the checks until I return. When I returned, tenant A asked if I could hold off until Dec. 12th . I returned on the 8th. I enforced the late fee, which she understood. She paid the fee and we moved on. Well, for Christmas I gave tenant B who has never been late a $25 gift card. Now, friends and family are saying I am being too tough on the tenant A. They think I should still give her a gift card. My argument is why I should reward someone for bad behavior? I really like this tenant but if I give her a gift the month she was late, what happens next year? Say if she is late a couple of months. She will still expect a gift card for Christmas.

What are your thoughts? What should I do?

[BOB MARTIN]

First mistake is giving tenant B a gift card. If A and B talk, then you just opened a whole new can of worms. You should have just not have charged tenant A a late fee if this was the first time. Just make sure that they understand that they will have to pay late fee if rent is late in the future. I don't give my tenants presents. I just take care of repair issues in a timely manner. They appreciate that. But you better treat all tenants the same. Regardless. There are laws against discriminating against tenants. That's my opinion. To each his own. 

[Jesse T.]

If possible I would set-up an automatic payment for rent vs. collecting rent checks.  That way you should get paid on time without having to collect rent checks.  If tenant B prefers check, I would let the tenant continue as long as they pay on time.

If anything I would be tougher on Tenant A.  I would consider upping the late fee on renewal.

[Nicole A.]

It's not a reward or a punishment; it was supposed to be a holiday gift. I agree that you don't give a gift card for the holidays to one tenant and not the other. In fact, I personally think a $25 gift card is a bit much.

Perhaps in the future, you instead just give a plate of cookies, a dried soup in a jar that's colorful and pretty (I did this for tenants and my own neighbors), a Christmas ornament, or something along those lines.

Also, I'm willing to bet that your Tenant A needs you to deposit checks quickly because that's how they budget. With you gone during rent time, that messed her up. I'm not taking up for her, just explaining how some people work. Try getting another method of payment...or no checks. If it was a money order, she would have paid it already where the check isn't paid until you deposit. Or offer an online method. You should be able to go out of town during the beginning of the month without worry on being present to collect rent.

[BOB MARTIN]

First mistake is giving tenant B a gift card. If A and B talk, then you just opened a whole new can of worms. You should have just not have charged tenant A a late fee if this was the first time. Just make sure that they understand that they will have to pay late fee if rent is late in the future. I don't give my tenants presents. I just take care of repair issues in a timely manner. They appreciate that. But you better treat all tenants the same. Regardless. There are laws against discriminating against tenants. That's my opinion. To each his own. 

[Elizabeth Colegrove]

Honestly that is why I don't give gifts for holidays or "good behavior". I too when I first started thought I should, but honestly NOT worth it! I will send flowers if they have a baby, etc sometimes but honestly keep it business and you are MUCH better off.

[Drew MacDermott]

I agree with @Nicole A. It sounds as though your intent is to give a holiday gift which should have been to all tenants.

  One idea suggested and used by BP member Mike Butler is to give each tenant a $10 Holiday Rent Coupon for January rent.  The coupon has fine print which states it is void for any payments RECEIVED after January 1.  I plan on implementing this when I start buying properties.

[Brandon M.]

1st off, don't listen to friends and family who are not real estate investors. With tenants, if you give them an inch they will take 10 miles. You just have to set expectations accordingly. Tenant A doesn't have to know you gave anything to tenant B, they are separate tenants, have separate leases, they just happen to share the same roof. You have to run the property like a business, if you set rules you have to be firm with them. If you bend your own rules once they will expect you to bend them over and over again. It is tough sometimes being a landlord/property manager and a nice guy all at the same time, but you have to treat it like a business. 

[Christian Bors]

@Jesse T. Thanks for the response. I totally agree with you, I need a payment system. I just bought my second property so I definitely don't want to deal with checks. I am looking into different systems as we speak.

@Nicole A. I think you are right. I should have just baked them cookies. This was my first investment so mistakes have been made.  Cookies would have been cheaper and I could have ate some myself! Also, I know I need a rent payment system. What do you use/recommend? And again, I agree that the tenant doesn't budget so I probably threw everything off for her. I need a system so If I'm not around the first of the month I still get paid.

@BOB MARTIN thanks for the response. I am concerned that they could talk to each other. I don't think they interact but it is certainly a possibility.  What would you recommend I do now? Should I give tenant A a gift card and suck it. Call it a tough lesson learned? What should I do?

@Elizabeth Colegrove you're right. This is a business and it should be ran as a business. My bank doesn't give me a Christmas gift because I pay the mortgage haha. Tough lesson learn. Lucky it's only a 25-50$ lesson :) what would you recommend I do now? Should I leave things as is or should I give tenant A a gift card so things can't get worse? 

[Nicole A.]

@Christian Bors Mistakes are the best teacher! Take it from us who have made much bigger mistakes in the past. :-)

Just always remember to treat everyone equally. It sounds like you have some pretty good tenants.

If your tenants are internet savvy, you could offer Intuit online payment. It's only 50 cents.

https://ipn.intuit.com/

I'm sure there's other online options. Or they could set up some sort of bank transfer that happens automatically.

Another option that I use is PayNearMe. This is not an online payment system. But the tenant goes to a nearby 7-eleven or Dollar Tree to pay rent for a $3.99 fee (they pay the fee). Then the PayNearMe system at the store electronically sends the payment to you. You receive a message instantly when they pay rent. I use this because many of my tenants either don't use or don't trust electronic online payments.

I think there a few threads on here that gives tons of payment option ideas too.

[Franklin Romine]

@Christian Bors For a few years I gave gift cards and this year I didn't.  It adds up with multiple units.  I do send a card.  It gets confusing when you send some cards and others not because of your relationship with the tenants.  The best practice is send the same thing to everyone.  Your probably have a loser tenant that needs to be retrained if they can't separate nice gestures from business. 

You never know how someone will wake up.  One month you could have good communication with a tenant and the next month they are a nut case.  Life in general is a roller coaster for everyone, it doesn't matter if your poor or rich.

Frank

[Christian Bors]

@Nicole A. So should I give tenant A a gift card to be fair? Also, thanks for the suggestions I will look into that.

[Christian Bors]

@Franklin Romine Thanks for the response. It seems like the consensus is that I should give everyone the same thing. Keep things simple. Hmmm, well now I know. I could still give Her a gift card and say it's for the holidays...

[Aly W.]

I would give any tenant that shares a roof the same gift (if you want to give gifts). Tenants talk to each other. You may think they don't interact, but they likely do. 

I send my tenants holiday cards at Christmas. We had several tenants over the years that had babies, and we sent Babies R Us gift cards. One of those tenants ended up being evicted. As @Franklin Romine said, a great tenant can turn into a nightmare depending on their personal situation. Blanket gifts for all tenants can be an accounting nightmare, and the cost adds up. I received cards from previous landlords when I rented, but never gifts.

I use www.erentpayment.com for online payments that debit the tenant's account, or I have them deposit the rent at my bank directly into my business account. No checks, ever. I'm not in the collection business. I don't want to chase or process any more paper than I have to.

[Elizabeth Colegrove]

@Christian Bors 

I would give her the gift. Also just as an fyi, i personally forgo the first late fee. I always give everyone "one" benefit of the doubt. Heck we all have moments. I alway say its "one" time but it needs to be on time. The first time usually happens during set up so this lets me be nice but establish a precedent.

[JERMAINE LUCAS]

Jermaine here, we do not reward our tenants with gift cards or that kind of stuff, we just provide a clean quiet and safe place to live, and given tenants $25 gift cards gets pretty expensive at around 20 units,

For the past couple years we sent out a simple holiday card and in any event most tenants just want to be left alone

[Kirk R.]

@Christian Bors Can you get the one you already gave back to make it fair? jk

[Christian Bors]

@Aly W. I wish...

[AHMAD S.]

All suggestions were very good, i would NEVER tell a tenant I'm going on vacation if I'm in your scenario living in a triplex with tenants paying your loan, more often then not, they will act up and get to relaxed and not pay rent or worse yet, damage the place.  There should be secure mailbox or put rent under your door, and tell them due on 1st or eviction, late fee to me is just excuse of tardiness.  I would never give any gift card or anything like that, instead re-invest it your unit and raise rents.  Have them refer to as "Landlord" or Mr. Bors, like Brandon M. else said, give a tenant and inch, they will take more like 10 miles, just be firm yet fair with all tenants.

[Stephen E.]

@Christian Bors I had a similar situation this year with one of my best tenants. He claimed he had some banking issues and was late with the rent by about five days. He told me in advance, but when I went round he made a side comment that he could have got an overdraft to pay rent but that would have cost money. So he stiffed me instead - free! Except I said he was ineligible for the 2% prompt payment discount so there was a cost albeit a small one (no late fees in Ontario but discounts to 2% max are OK). That was a few months ago but at Christmas I gave him what I gave everyone else this year - movie passes for two adult admissions plus coke and popcorn. None of my landlords ever did anything like that for me when I was a renter.

So in a nutshell I would have charged the late fee and given the Christmas gift and called it a day. Seems fair to me. Good luck with your landlording adventures, you are braver than me to have tenants living with you in the same building.

[Pat P.]

You might consider her a good tenant, but she will in the future be a better tenant - you did the right thing.  no feelings allowed - this is a business.  Why do you want to make it your problem - it is not - it is her's until you correct it.

[Andrew Whicker]

You talk about the necessity of tenant consistency without acknowledging your own.  You asked the tenant to pay later in the month.  As was pointed out above, she may be on a pay schedule that doesn't line up with your vacations.  She told you she would be late and paid on the day she promised.  As a result you charged her a late fee and took away her Christmas present after acknowledging how good of a tenant she was all year.

Good job?

You can't have it both ways.  

[Kenneth LaVoie]

Great question. I do believe in "Rewarding" great tenants but when it's something so black and white as a gift card, it is tough because other tenants quickly know...

Personally, I would give "A" the card THIS year given her stated good history then maybe discontinue the gift card program, or clarify it in black and white for yourself. (i.e. tenants who've been under our roof x years and never been more than 3 days late 2x in the current year, etc.) Then you can explain it if you choose.

Rewarding can fly under the radar much better I think when it's "informal" such as upgrades and repairs. You know you need 44 new vinyly replacement windows in your triplex but tenant B gets them first because she's paid on time and solved world hunger twice. Now if you're "called out" you COULD take the "I don't explain myself" stance, OR you could say, "Well, her windows were in a little worse shape, etc."

Just some stray thoughts ...

[Brett Iwanowicz]

I like to send monthly statements via email to tenants, which also has our web portal to make online payments.  I give the tenants an opportunity to let me know if rent is going to be late, if there is a valid reason, we will agree on a date to make the payment. If rent is not paid on the agreed date, I charge our late fee and any additional fees associated.  

I also do not charge tenants a late fee, for a first offense, we all have made mistakes, are forgetful and things happen, it is out of courtesy.

My prior and current business is/was driven by poor landlords, when tenants understand you appreciate them and care for them, it does wonders!  Never jump to conclusions, never take offense and always give them opportunities to redeem a mistake, within reason of coarse. Some may take the standpoint that tenants would take advantage of this, hire a quality management company and you don't have to worry about this, personally I would rather loose two months of rent waiting for the right tenant.   In fact I have on a few of my properties and I could not be happier, I spent $25,000, upgrading two apartments, tenants pay on time and the units are spotless.

Personally it is important to remember, in giving we should never expect anything in return. 

I would have to disagree with the last post, if she is in fact a good tenant, some leniency at times is worth it.  Of coarse we are all here to learn how to make money but we can't always be focused on $$ signs.

[Brandon Hicks]

Easiest payment method is to just have the tenants drive the payment to your bank and deposit it. They get a receipt and you have one less contact point with the tenants. Imagine scaling your business and having to go door to door....

[Account Closed]

Just another thought on the gift idea... I know an owner of two 40+ unit buildings. He makes a charitable donation at Christmas on behalf of the tenants and sends a copy of the thank-you letter to each tenant. On a smaller scale I think it would still be nice, depending on the tenant profile.