Rent money trickling in. What to do?

Question

I have a young family in my property renting it out currently. It’s a low income home so I don’t expect them to be perfect however I see now that collecting the rent is slowly becoming an issue each month. In the past she was paying it half on the 15th, the rest on the last day. Then I noticed she would send it all on the last day. Then she would send it in the 5 day grace period, and now she sent $900 out of $1,150 and said the rest will be late because things are tight. In our lease we have a $125 late fee if it’s late but I’m worried that imposing that fee will cause them to fall even further behind. How would you handle this? Do you come off as understanding and say this is your one free pass to be late, or put your foot down and slam them with the fee? This is the first time they are officially late on he rent, but we are only about 5 months into the lease.

Marcia Maynard · Answer

What does your rental agreement say? Enforce it. Be aware that legal action, vacancy, and turnover cost will set you back a significant amount and being homeless is a dire consequence, so you both have motivation to make this work.For us, rent is due on the first and late on the second. If it isn't received or postmarked by the fifth, we charge a $50 late fee. We send a "Rent Past Due" letter that explains in clear terms what we expect the tenant to do and what the consequences are for not following the terms of the rental agreement. If the tenant hasn't paid by the 15th of the month, they will be in trouble, as the next month's rent will soon be due. It then becomes an endless struggle. A perpetual game of catch up.At this juncture, I would recommend you sit down with your tenant and review the terms of the rental agreement. If a tenant can't pay the rent when it's due, then they can't afford to live in the property and it's best to talk with them about a move-out plan. You will be amazed at how suddenly payment of rent becomes more important than buying new shoes or paying for a new transmission for their GMC. The tenant needs to set their priorities right. You have allowed them to stray. Time to right the ship.We rent to folks on fixed income who need affordable housing.... the low income sector. We don't expect any less of them than we do of those with higher income. But we do make our rental agreement clear and reasonable for all. I think a $125 late fee is onerous for low income properties. I can see you're reluctant to collect it and you fear the tenant can't afford it. So what use is it?Find out the root cause of the tenant behavior. Are they unable or unwilling to pay the rent on time. What would it take for the tenant to turn this around? Does the tenant receive sufficient income to afford to rent your place? Does the tenant receive their income monthly, biweekly, or weekly? From one source or from two or more? By direct deposit or another way?Be open and honest with the tenant. Obviously, the status quo is not working for you. Find the moxie within you to take action. Hope this helps!

Jay Hinrichs · Answer

being late now and going into December you can pretty much almost count on this issue not resolving. I am the worst at this.. so I sold all my rentals..

Marcia Maynard · Answer

Here's our Rent Past Due letter. It gets results! I rarely need to Pay Rent or Quit notice. I send it on letterhead. It reiterates the terms of our rental agreement. Feel free to modify it for your own needs.*****Dear _____________________________,Your rent is now past due. Please pay your rent promptly so you may continue to live in the unit that you now occupy.As per your rental agreement:Rent is due on the first (1st) day of the month.Rent is late on the second (2nd) day of the month.We allow a grace period through the fifth (5th) day of the month to pay your rent without incurring a late fee.On the sixth (6th) day of the month we charge a late fee of fifty dollars ($50.00).If we do not receive your rent in full in a timely manner, we will serve you with a 3-day legal notice, “Notice to Pay Rent or Quit”. Each time we serve a legal notice, we charge an additional twenty dollars ($20.00) posting fee.If you do not follow the terms of the “Notice to Pay Rent or Quit” we may then begin eviction proceedings against you and you will be charged with the crime of “Unlawful Detainer” if a judge upholds our claim.The amount of rent now due, as of today’s date _________________, is as follows:Current Month Late Fee_______________Current Month Rent_______________TOTAL DUE_______________Time is of the essence. If you have not already posted your rent via the mail, please call us immediately to make arrangements for us to collect the rent in person.Thank you for your prompt attention to this matter!Sincerely,Fischer Properties – Owners

Nathan Gesner · Answer

Your policy should be fleshed out, spelled out, and dealt out.Rent is due on or before the first day of each month. If all owed amounts are not paid in full by the 5th day of the month, a late fee of $XXX or XX% will be assessed. If all owed amounts are not paid by the 10th day of the month, Landlord shall initiate the eviction in accordance with state law.It doesn't have to be complex but write it down and then follow it.It doesn't matter if things are tight. It doesn't matter if the late fee causes her to freak out or move out. Hold the line. In the vast majority of cases, they will find a way to get back on track and then they'll stay on track because they know your policy and that you enforce it. If you are wishy-washy, they will be, too.

Owen Dashner · Answer

If you aren't firm the first time it happens, they will know they can get away with it again. Always set the precedent early. They are choosing to use your rent money for other things, it's your job to enforce your lease to the letter, otherwise it is just a piece of paper with no real consequences. Blame the lease if it makes you uncomfortable to be the bad guy (and I get it, it's not fun).

Matt A. · Answer

I went through a similar situation with one of our tenants... and (hopefully) just resolved it. Bottom line is husband & wife and for 6 of the last 10 months rent was late (late enough to generate a late fee). They paid it but I had to continually get on the phone and hound them for rent.I went to sit with her a couple weeks ago to see how we might be able to help. Turns out she pays the rent, HE pays the other bills (his income is more sporadic). Where she was having issues was "saving" enough to make the payment... so we worked out a schedule for the next 52 weeks to pay 'every other' week half of the rent (there are a couple of "skips" in here if you sit down with a calendar) when she gets paid. Bringing along a copy of their accounting to show they have paid $600 in late fees puts it in perspective as well. The net is we put it in writing for her, and she is agreeable to paying this way IN ADVANCE, some cases many weeks in advance too!As I just implemented it we can only wait to see how this works, however we did setup the ACH transfer in our system (I just switched from Cozy to Rentec Direct) and have begun the process... so money is coming in as scheduled.I thought about the eviction route as well (they have been with us for 3 years now - relatively quiet and stable), however in thinking through the costs of just the make-ready its not worth the hassle... new carpet, paint... an month of vacancy. They are at market rent, so I cannot complain there. Its probably worth your investment in an hour or so to spend time and figure out what the issue is. It may be solvable. If not, then you can always turn towards removing the problem (or tenant)... however Id take that as a last course of action - eviction is expensive enough, and you sure dont want the place torn up if they get pi$$ed at you.

Dennis M. · Answer

Money trickling in ? .. let an eviction trickle in

Renee Potoczny · Answer

Thank you @Marcia Maynard. That is a great letter! Thank you for sharing it.

Michinori Kaneko · Answer

definitely charge the late fee. if you don't stand firm the first time, then it becomes "okay" that they are late, and that will be their expectation going forward.

Jon A. · Answer

Never accept partial payment. It will make it much more difficult to evict them from what I understand.