Lease Agreement - Late Charge and how much to charge?

[Alexander Lang]

Hello BP family!

So I am a newer Investor/Landlord (since 2014). My question to fellow investors and landlords is how do you charge your late fee structure on your lease agreement, and how much do you charge? 

My state of Minnesota allows me to charge a max of 8% of the rental agreement ($1400/month). I was curious if anyone has another method or knows of any that work better than just a flat late fee like I charge? I don't want to turn away good renters, but I also don't want to attract tenants that feel a smaller fee is easier to manage, say $25-$50.

My Current late charge section includes the following taken from my current lease agreement:

"A late fee of $112.00, (not to exceed 8% of the monthly rent), shall be added and due for any payment of rent made after the 1st of the month. Any late fee(s) are due upon the following month's rent due date. Any dishonored check shall be treated as unpaid rent, and subject to a additional fee of $25, in addition to applicable late fee charges" 

I currently work in the financial field full time, so fee's are fee's. The banks don't let anyone slide, and charge you an overdraft or late payment, but being new to the real estate game, is this along those lines as well? Any ideas to improve? Is that too steep of a fee? What works for you? 

Thank you in advance for any input!!

[Rick Santasiere]

@Alexander Langas always, check your local real estate law, but I have a little trick I use in CT and it goes like this: If you and the tenant agree on a rent on $100/month, you write the lease up as the rent being $110/mo (you would explain this to the tenant prior to just suprising them with something they didn't understand:), you would then write the following:

"A credit of $10 will be credited to the tenant each month the rent is paid on or before the first of the month." Two things are at play with this scenario, and they are beautiful:  First, there are some states (Connecticut is one of them) that doesn't allow late fees until a certain date; this scenario "builds in the late fee" without calling it a late fee. Second, it's a great honest and respectful discussion between you and the tenant, and it builds a rapport, and it's black and white:  You pay me on the first (for a credit), or you pay me on the 2nd and third for full rent (which is 10% over the agreed upon rental amount). Use whatever % your state allows for.  I also put something along these lines after it. "If rent is not received by midnight on the 10th day, Notice to Quit will be filed by [insert attorney name and address] and immediate eviction process begins per state of CT guidelines." I saw some great responses, this is just another creative option. Hope it adds value to someone !!