Training Tenant/Constant Late Rent Payments

[Dominic Scatto]

Hello Fellow BP'ers!

So, I've been renting to the same tenants going on 3 years! Exciting, yes. Everything has been fairly uneventful with them - except for having to replace the whole HVAC system the first summer they were in it because it failed (not their fault) - and they do take really good care of the property, they get along with the neighbors, and have even fixed a couple things themselves - like a leaking toilet. Great, right?! Well, about 3 months in, they were late with the rent. No big deal, they gave a reasonable excuse, but then it became a habit. Now, I have noticed that they are on the same pay schedule as I am with my work and have always made the rent payment no later than that following paycheck. So, it seems more of a lack of budgeting. However, that's not an excuse and I know I should've nipped it in the bud. 

Any who, I'm getting ready to move and rent out the SFH we're currently in and I want to do everything right from the start on this one and fix the issue on the current one.

So, my question for the problem child is, would it be fair to offer them two options: 1) Keep things as is - not enforcing the late payment, but raise the rent $50/month or 2) Keep rent the same, but enforce the late payment policy?

Things to note: I have not raised the rent at all in the 3 years nor have I charged them a late payment. Reason for the lack of rent increase is I'm charging a fair amount,  if not just slightly under market value, based on my area and the size/square footage of the home. I technically could raise it a bit, if I wanted.

Thoughts/Opinions/Suggestions?

Thank you all, in advance!

[Michael Boyer]

I would guess the late payer is doing this simply because they can.

Rent is not a priority for them. And it does not seem like getting it on time has been a high priority (or at least a communicated clearly to the tenant)...

It is one of those crucial confrontations (as the book title goes). They are breaking a promise monthly to you.

But, don't fret, I would not go strong arm them and start beating on the door. Instead, suggest a meeting.

Have a script. Have a clear message and angle. 

For example, I might say something like: I wanted to meet to let you know am moving from a flexible hobby landlord to a real business next month. It is the next level. I am excited about growing. And I would like to keep you as a tenant in the process, but I can no longer pay your rent every month (explain you are literally making the mortgage payment out of your own funds to keep a roof over their heads). With more rentals it will not be mathematically possible. Not possible. No wiggle room. Zero. So I will putting a notice to pay rent or quit the premises (move out) on the 3rd as a prerequisite to the eviction process (at this point their ears perk up). I want to keep you as a tenant (you are not evil after all) so I want you to know ahead of time. I am really hoping we can keep the arrangement working in my next level as a landlord but it will be entirely up to you. If they balk or drag their feet, then set a move out date(at end of lease or end of month if month-to-month).

Or you may have better script  or angle but since you have been taking the late rent you have a tougher task having rewarded the behavior some.

With the new tenant, make sure the timely rent payment policy is emphasized and enforced from the on-boarding process.

Best of luck!