Inherited Tenants: paying/paid on the 10th.

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Inherited Tenants: paying/paid on the 10th.

Christen G.
Rental Property Investor · Seattle, WA · Member since 2017 · 383 posts · 248 votes

I feel like I already know the answer to this, but would love ya'lls input, thoughts and encouragement, regardless: 

We've inherited tenants in a triplex all of whom were on M2M. Immediately we evicted the upstairs unit who was smoking in the house (while someone was living there on oxygen - wow! It's truly amazing this place didn't go up in flames!) and have started re-habbing it.  Once we got them out and got some things pulled up/ripped out, we definitely didn't know what we were getting ourselves into...and its eating some budget up.  No worries, we'll get through this, have some reserves, are polishing it up and will get it rented. I'm trying to stay positive on this unit b/c it's really a nice place (after 2 coats of Kilz, new floors and a paint job. ;)

Anyway, it's what happened this month with one of the the lower units that's bumming me out: A man, wife and 2 teenage daughters live in / have lived in this place for a while. It's in fine enough condition. The man is our main contact there and he's been very vocal since we acquired the building that he gets paid on the 10th and can't pay rent on the 1st. As the transition happened very quickly for these tenants (and all were very much spooked) we gave him a 1-month grace period / allowing him to pay on the 10th that first month and told him in no uncertain terms that the following month rent needs to be paid on the 1st and is late on the 5th.  Well...here we are, I drove down and posted notice - outlining the late fees and starting eviction. Mailing the other copy today. And he's calling saying the same thing: it will be late every month and he can't afford it with the late fees.  We responded that we needed notice to vacate by the 10th and if he can't afford rent with late fees then he wouldn't like our eventual rent increase (planned for 2 mo from now on all units).

My friends (not in real estate) are all like "just let him pay on the 10th, why is that so bad?" And trying to explain to them about how we set the rules so that we have the upper hand/how to train tenants isn't working/helping - it's just making me sound like an *******. To add a bit more backstory: the seller was very forthright in telling us that this man, "...occasionally pays late but he's a good guy" -- so we know that even if we give him a break and let him pay on the 10th -- it'll probably still be late. I KNOW IT'S A BUSINESS. But it sucks thinking about a man having to move his family b/c he can't budget correctly. And it sucks having to think about re-habbing another unit when it wasn't budgeted for.

Thoughts? Suggestions? Advice? Words of encouragement?

I've attached some photos of the smoking unit bc why not?

Thank you.

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David Tiemann
Investor · Hereford, TX · Member since 2016 · 53 posts · 42 votes
8y
Sometimes I have to take a step back and put myself in my tenants shoes. They live pay check to pay check. That’s why they are renters not owners. They have poor budgeting skills. That being said, I always want to move myself to the ‘top of the money chain.’ One way to do this is to make the rent due at the same time your tenant gets paid. He gets paid on the 10th then make his rent due on the 10th, his pockets are now full. I currently have 36 units and we have about 6 or so that have due dates that are not the 1st. It has worked very well for us, just a little more work to keep track of. Don’t misinterpret this as being soft, I will always charge a late fee, and if the rent is late you will get a ‘pay or quit’ notice. Good luck!
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  • David Tiemann
    Investor · Hereford, TX · Member since 2016 · 53 posts · 42 votes
    8y
    Sometimes I have to take a step back and put myself in my tenants shoes. They live pay check to pay check. That’s why they are renters not owners. They have poor budgeting skills. That being said, I always want to move myself to the ‘top of the money chain.’ One way to do this is to make the rent due at the same time your tenant gets paid. He gets paid on the 10th then make his rent due on the 10th, his pockets are now full. I currently have 36 units and we have about 6 or so that have due dates that are not the 1st. It has worked very well for us, just a little more work to keep track of. Don’t misinterpret this as being soft, I will always charge a late fee, and if the rent is late you will get a ‘pay or quit’ notice. Good luck!
    7Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    8y

    I would change his lease to run from 10th to 9th of the next month with rent due on the 10th.  In order to make the transition, he would need to pay 1/3 of a months rent on the 1st of the transition month, then full rent for the next "month" on the 10th.

    My lease also says any money I get can be applied to late fees or other charges first.  So, if I get rent but no late fees I don't have all the rent and can start an eviction for non-payment of rent.

    Are you sure you're up for being a landlord?  It can get much worse than this.

    1Reply
  • Ryan Fagan
    Real Estate Broker · Westampton, NJ · Member since 2014 · 57 posts · 31 votes
    8y

    I agree with the others here. Arbitrarily having the 1st to the 5th as a pay window is not that important as long as he pays on time in the cycle. It’s not being weak to set up his payment cycle to how the tenant is paid. If he is late in the new window then charge him a late fee.

    1Reply
  • Christen G.
    OP
    Rental Property Investor · Seattle, WA · Member since 2017 · 383 posts · 248 votes
    8y
    Thanks everyone. Where my head is at is this: if he can’t afford a late fee + rent on Day 10 - then he certainly won’t be able to afford a rent increase in 2 mo. That plus what the seller said leaves me to believe he’s just not a fit for how we’ll be running this business.
    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    I have a lot of tenants, if I allowed each to choose when their rent was due It would be additional work for me to operate my business. Every tenant in the world knows that rent is due on the first and they also know that the landlord makes the rules.

    It is difficult to understand that a tenant would be so arrogant as to risk putting themselves on the street but many do it. Tenants like this believe that their landlord is week and that they, as the tenant, are in charge. There is no way their landlord would ever stand up to them.

    I would let him know that when I was prepared he would not have his lease renewed if he was ever late with rent again. 

    Either you train them or they train you and you live with it.

    If you change his due date to the 10th your training will have begun.

    2Reply
  • Hernell D.
    Rental Property Investor · Los Angeles, CA · Member since 2016 · 67 posts · 35 votes
    8y
    Here’s one more vote for moving the tenants due date to the 10th. Life happens and although it isn’t your job to take care of your tenants short comings or lack of budgeting skills it shouldn’t hurt too much to move the due date to the 10th. Also something to think about is if your tenant cant realistically afford the rent increase that you have coming in the next couple months. I would definitely raise rents regardless of if he could afford it or not but I’d give him some leads for finding a new place that he would be able to afford so I know I’ve done my part to make sure he and his family aren’t homeless. There’s only so much you can do for people to ensure they have a roof over their heads.
    0Reply
  • Daria B.
    Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
    8y

    @Christen G.

    I read your post twice to let it sink in, in addition to the other posts and what comes to mind is: Is your tenant stuck on this 10th pay date just because he gets paid on this date or is there more to the story?.

    I like the idea of moving the due date to when your tenant is able to pay - but that doesn’t work for every landlord. And as you mentioned it doesn’t fit your business model.

    I’ve never thought of doing that myself (I don’t self manage as I have very good PMs) and I had a tenant that once she began being late, it remained that way until it was corrected. An outgoing PM ( she was getting out of the PM business ) allowed this to happen with the tenant and didn’t correct it so when the in-coming PM took over I found out it was common business. While the tenant paid the late fee, it was still unnecessary to do so. The in-coming PM worked with the tenant to get her on a budget that allowed her to learn how to manage her money for bills and living. In a few  months she was paying on time. She was also able to save money to buy her own place. The in-coming PM went beyond what I imagined and created a win-win solution for everyone.

    Have you discussed with your tenant why he just has to pay on the 10th. I know he said that’s when he gets paid but if he’s eating through his funds that have him always paying late then perhaps helping him ( if he’s amenable ) get to the 1st in paying by understanding why he’s dead set on the 10th. I’ve found that it’s never just one thing. 

    Just a suggestion based on what I experienced. 

    1Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    8y

    I have a few tenants that I allow to pay on their schedule, as long as they aren't a PITA I work with them

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  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    8y

    Does it really make that big of a difference what the "due date" is as long as its consistent and on time every month? Unless you don't have the reserves to pay the mortgage on the 1st unless you have the tenant rent check, then it really doesn't matter.....you re still getting paid at the same time every month.....

    If you were running 15 properties and were trying to work with 10 different dates, sure it would be a huge PITA....but if you are doing just a couple, I don't see the big deal

    I would set his payment on the 10th...late past the 13th...and be strict as hell....NO EXCEPTIONS....ALWAYS enforce the late fee....no BS stories....

    The big issue is the upcoming rent increase......let him know it's coming...... don't budge on it happening.......and the issue may move itself out anyway.....

    5Reply
  • Derrick E.
    Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
    8y

    You said he is a long term tenant and has always paid. I don't see the big deal with letting them pay on the 10th every month?

    I have one tenant who splits up her rent with $400 on the 1st and the other $400 on the 15th. She always pays and takes care of the place so why would I care as long as I get my money and she isn't a headache?

    Good tenants are hard to find. 

    Why do you have to raise their rent? Couldn't you just wait until you get the top one rented out first, this way you don't have both units vacant?

    5Reply
  • Ericka G.
    Investor · Atlanta, GA · Member since 2015 · 366 posts · 283 votes
    8y
    I agree with the others who recommend letting him pay on the 10th. I have a very similar situation in that I also purchased a triplex and inherited 3 tenants. One was a long-term tenant who let me know he had an agreement with the previous landlord to pay on the 7th. I agreed to honor that and he pays on the 7th. He has been late a few times, but then pays the late fee without complaint. This may be foolish but I don’t mind because he ALWAYS pays and that just means more $ if he is a bit late. He has turned out to be a very helpful with things around the property as well. I think each case is different and have found being a little flexible with a GOOD tenant can strengthen the relationship overall.
    3Reply
  • Jack Ni
    Lonoke, AR · Member since 2017 · 43 posts · 16 votes
    8y

    I also inherited  a tenant that is suppose to pay rent on the 1st each month but she gets payed in the 6th. She keep the house clean and nice so no late fee lol 

    1Reply
  • Rod HanksBusiness Member
    Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
    8y
    Sounds like you need to go ahead and ask him to move. If he can’t pay now, when you raise the rent he won’t be able to pay then. It’s difficult training an inherited tenant as they are used to the way the previous landlord ran the property.
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    1Reply
  • Ihe O.
    Investor · Laurel, MD · Member since 2016 · 395 posts · 191 votes
    8y

    Your friends are right and it does make you sound like a ******.  This is a total non-problem.

    2Reply
  • Amy A.
    Portland, ME · Member since 2012 · 616 posts · 550 votes
    8y

    It sounds like he gets paid twice per month, the 1st and 3rd Friday.  Therefore, why can't he pay a week early instead of a week late?

    1Reply
  • Matthew Moore
    Colorado Springs, CO · Member since 2016 · 84 posts · 48 votes
    8y
    Two more months of payment will help you even if he does move out when you increase
    1Reply
  • Frank Chin
    Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
    8y

    I agree with those that suggest you set the due date to the 10th.

    It's somewhat of a budget issue, but also a financial management issue. We're retired now and mortgages paid off, including our rentals. But we still remember the time early on that we struggle with our paychecks.

    From the beginning, I established bank overdraft facilities and make sure everyone is paid on the due date, whether cash is in the bank or not. Long term, budget wise we didn't overspend, it's just that bills don't always match up with cash flow. When we did that, we owe the banks from $1,000 to $5000 during the year. But by doing so, everyone is paid on time and my credit score is good.

    I know some people do not believe in doing what I do, like your tenant, and insist you wait till the 10th of the month. Doing this, their credit score suffers if they do that to everyone. Now, in NYS, if I own less than 5 families, I am not required to bank tenant deposits into special escrow accounts, so I keep some of the tenant deposits in my rental checking account as reserves, so I can issue checks for my mortgages even though not all of the tenants paid on the 1st. I usually ask for 1-1/2 month security, so cash flow wise, I'm covered.

    Through the years, if on a monthly basis, we got every one paid up by the 10th, we consider it a very good month, and fortunately we manage that 99% of the time.

    2Reply
  • Victor N.
    Investor · Wellington, KS · Member since 2016 · 256 posts · 188 votes
    8y
    Slightly off topic, this is one of the reasons why I always negotiate the due date on rental mortgages to fall on the 15th and carry reserves. I would also transition to collecting his rent on the 15th and raise rent when you have the empty unit rented. You should think about minimizing expenses (turnover) and maximizing cash flow even before tenant training. Btw, I always charge late fees and post Pay or Quit Notices. I also work with tenants working out payment up front because they are obviously worried about paying me and will try to do so. Let him decide if he will pay your higher rent when the time comes, don't assume he won't especially on the 10th of each month. Those are my thoughts, the neat thing is you get to run your business the way you want to do.
    1Reply
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