Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
So this may sound like a basic questions, but why is rent due on the first of the month? What about people who want to move during the middle of the month? Other bills in life are billed monthly, but the due date is based on the start date - like my car payment due on the 25th of each month. Has anyone every done a system of rents rolling in based on when they moved in? Or does this have to do with move out notice laws/procedures, like 20 days notice before the end of the month? Is this just the simplest way?
The 1st is just an easy date. If you based it on the day they moved in, now you have as many due dates to keep track of as you do rental properties! The less work for you, the better.
If a tenant moves in in the middle of the month, they must still pay a full 1st month's rent. However, the following month, on the 1st, the rent amount will be prorated.
1. Keep all tenants on the same rent date or first few days. Because renters salary are close to the first and government agency payments are between 1st-3rd of month.
2. Mortgages are usually due by the 1st with a potential late payment date of the 15th, so you need the funds to be "settled/good" for you to cover the mortgage.
3. Most renters move on the 1st, you would get a smaller pool of tenants if you were doing odd days.
Note: also agree, charge full month first month and pro-rate second month to adjust for 1st month if they moved in off the 1st
As everyone has already stated, it's mostly for simplicity.
I do the same with my private notes. When I close on a deal I put right in my offer that my payments are due on the 8th. Even with my commercial bank loans. I have 18 different notes for my 45 units. I couldn't imagine trying to keep track of it of they were spread all over the month.
That said, I do also have a few tenants on a half on the 1st/half on the 15th schedule.
My team and I manage a little over 400 properties in San Diego and I think I would actually cry if we had to keep track of rent due dates that we set based on move-in.
I do SFR rentals for middle-class tenants. My rents are all paid electronically through ACH or through eRentPayment.com. Most are on the 1st or 15th, but some others are based on the date they move in.
Even with good-credit folks, some of them have trouble managing their cash flow, so we've occasionally broken rent into bi-monthly or even weekly payments, so we suck it out of their bank account right after their direct deposit puts it in. Since I'm not having to chase checks, I don't care whether we do 1, 2 or 4 payments a month.
If someone does have an NSF, my bookkeeper and I immediately get email letting us know, so we can deal with it. In our scenario, there's really nothing special about the 1st of the month that makes it any different than any other. And since I typically turn over my rentals after a year or two, it's nice to have leases ending on different dates rather than all at once.
(I keep 15-20 rentals at any given time but turn over a lot - I mainly rent them because selling a house I've renovated without keeping it a year is a huge tax hit for short-term vs. long-term capital gains.)
I think for PMs that are handling their rentals manually without the use of a solid property management platform to do the heavy lifting, then handling rents due on different days definitely can be a nightmare. If you aren't using a property management specific program, I couldn't recommend anything other than pro-rating and having all rents due on the same day each month.
However, if your property management software supports anniversary billing, it's just as easy as billing on the 1st since the application does all the work.
@Michael Hayworth That's what I was kind of wondering, if anybody did it differently and if it works. I can see how it works for you since everything is automated. Yeah, if it were old school, I can see why the first of the month. But that's how it started, and that's what has stuck. But interesting to see that people can do it other ways and make it work too.
Julie Marquez you can do whatever you want. I had a working-class fourplex. one guy's rent was due the day he received his social security check (the 3rd of the month). Another paid weekly. Another biweekly. They received cash based on when their employers paid them and wanted to get that cash to me as soon as they could. I wanted the cash, so I was happy to accommodate. Others here would call me nuts for doing so, but it worked for me. Just make sure it's clear in your rental agreement and that the agreement is correct in the eyes of your local jurisdiction.
I usually say the 1st, so it's easier. HOWEVER, and this is a big asterisk, if the person gets paid on the 10th and 25th for example, I may adjust the date due and prorate it. I only do this for two tenants. The first one was habitually late, and when I finally asked her why, she mentioned her pay dates. I told her if she had told me that in the beginning, I would have adjusted for her, prorated things, and she would have saved a ton in late fees. I greatly appreciate a tenant who is proactive in not only telling me that they will be late, but following through with when they will pay me. They are customers, and will get treated with kindness and respect, BUT, I expect the same in return.
The second tenant I do that for because I just bought the house he is in, and I offered for him to stay. I mentioned that I did this for another tenant, and would he prefer the 1st of the month, or a different date? I noticed on the rent rolls, he was constantly paying on the 11th, when the rent was due on the 1st. I asked him about it, and he said he gets paid on the 10th and 25th. So, I told him I would happily make the rent due on the 10th, late on the 15th. HOWEVER, I won't budge on late fees because I'm cutting him a break on adjusting the due date.
So far, it's been a good decision for all involved.
Difficult to scale, I know, but I have a couple of tenants who, because of their sub-par credit scores, are paying their rent by direct deposit into an account I set up specifically for that property. Both get paid every 2-weeks, and always on the same day of the week. I adjusted the term of the lease from monthly to bi-weekly, collected the equivalent of 1 month rent for the security deposit, pro-rated the first periods rent on move-in, give them the routing & account numbers so they can set up the direct deposit from their paycheck. Then I just log in periodically and transfer the money to a different account so it doesn't magically disappear. So far no problems, but if ever a deposit doesn't happen on schedule, then I should know immediately and can go deal with it.
@Dan Schwartz @Account Closed I love how you guys are willing to work with tenants in such a good customer service way. And of course, getting their money as soon as they get paid is a good reason to be flexible, and a win win for both sides.
@Robert Lindflott You are okay with giving your account and routing number to tenants? That seems a tad too trusting for me.
@Julie Marquez, I agree it requires a bit of trust, which is why I always verify the deposits were made and then transfer the money into a different account asap. Sometimes I forget to make the transfer right away, but fortunately haven't had any trouble yet.
If you ever pay for anything with a personal check, you're giving the recipient that same information on your check.
@Dan Schwartz @Account Closed I love how you guys are willing to work with tenants in such a good customer service way. And of course, getting their money as soon as they get paid is a good reason to be flexible, and a win win for both sides.
@Robert Lindflott You are okay with giving your account and routing number to tenants? That seems a tad too trusting for me.
Thanks Julie!
Yes, I've found that if I treat my tenants as customers (I have a property manager, so I rarely talk to them directly), they tend to take care of the property MUCH better. That being said, there is also the underlying notion that I won't be taken advantage of. :) I always try to find the win-win situation in everything, so we can all build up each of our lives higher. They get a great place to live, I get my retirement funded that much further. :)
In general, does the rent pay for the current month, or the previous month? For example, if rent is due on July 1, is that paying for the month of July or the month of June?
In general, does the rent pay for the current month, or the previous month? For example, if rent is due on July 1, is that paying for the month of July or the month of June?
Rent due is always paying for the current month. So July 1st rent pays for all of July. But if someone is really late and didn't pay June until July, any received money pays for the oldest due money first.