Collecting Rent Advice/Help.

General Landlording & Rental Properties

Collecting Rent Advice/Help.

Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes

Good evening.

I am a landlord with a few rental properties and I am seeking some advice from other landlords on how they collect rent from their tenants in a timely manner. My lease currently states that rent is due on the first of the month and is late after the fifth of the month. Of course about 8/10 of my tenants translate this to mean rent is due on the fifth. When the fifth rolls around I get a few more rent deposits, but around 5:00 PM there are still two or three outstanding rents.

This is when I send a text message or call and ask where the rent is at. This is when I get the excuse as to why its not paid and when it will be deposited. Most of the time they will uphold there end of the bargain and deposit it when they say they will.

So what is really bothering me is, the fact that on the fifth of the month(due date) I am having to chase my tenats down and ask where the rent is. I have asked my tenants to please give me a heads up if they will be late but rarely to I get any warning.

Can anyone please help me with a better way to go about collecting rent without seeming like to much of a pushy landlord. I believe I have been able to keep my tenants happy by showing them respect and being understanding when they tell me they will be late, but frankly I am tired of getting all worked up on due date wondering who will pay and who wont!!!

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SFR Investor · Jacksonville, FL · Member since 2012 · 285 posts · 83 votes

13y

Aaron C. Run your business like a business. If your lease agreements call for penalties after the 5th, send your tenants an invoice for the late fees, make a copy of the late fees and make sure they understand that monies collected go toward late fees 1st and rents 2nd. So if by next month the rent is paid on the 1st, but the late fees have still not been paid, they get more late fees for next month. I have 13 properties, all my "clients" know I am in charge.

Someone is always in control of your business. If you are not, the animals in the zoo are and we all know that nothing good comes from animals in the zoo being in charge.

Jon Holdman's idea is a good one on offering 2-3 percent discount if paid on the 1st. Jeffrey Taylor, Mr. Landlord, has a great program and has an online service that you can use to process all payments so you never see the checks. You can also use Quickbooks or Peachtree to send your tenants a late notice in WRITING so they see an invoice when they are late. Again, it is a business. Run it like a business!

When you think you are pushy, ask yourself, would the bank give me a week to pay without sending out a threatening letter?

Jack Bobeck

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Chasing the rent is just part of the deal when you bought your rentals.

I give them a small discount, 2-3% if the rent is deposited by 9:00 PM on the first. Its the full amount if its there by the 4th, late fees after that. And I always charge late fees. Some disagree with the idea of the on-time discount, but it has dramatically improved my payments on the first. Like you, I don't like wondering who's going to pay and who's not. I'll text the tenants a reminder, if needed, but the current ones are pretty good.
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Juan Espinosa
Rental Property Investor · Kalamazoo, MI · Member since 2013 · 19 posts · 3 votes
13y
I collect rent from my tenants on the first, and give them a grace period of a week, tops, to pay. After that I charge them a late payment fee, which is disclosed in the lease agreement. I make sure to type that portion out in BOLD lettering. I keep a log of who pays on time and who does not. Don't be concerned with being labeled a pushy landlord, because those that are thinking that are the same ones being late with the rent. Hope this helps. I have never tried this, but maybe setting up a reward program for tenants who pay on time.
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
Thanks for the response. Yes, I currently charge a 10% late fee, which is upheld most of the time for the repeat offenders. Going forward with my next leases I will try the incentive plan. That seems like it is a good idea.

But I am starting to realize that chasing rent is just part of the business.
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Jack Bobeck
SFR Investor · Jacksonville, FL · Member since 2012 · 285 posts · 83 votes
13y
Aaron C. Run your business like a business. If your lease agreements call for penalties after the 5th, send your tenants an invoice for the late fees, make a copy of the late fees and make sure they understand that monies collected go toward late fees 1st and rents 2nd. So if by next month the rent is paid on the 1st, but the late fees have still not been paid, they get more late fees for next month. I have 13 properties, all my "clients" know I am in charge.

Someone is always in control of your business. If you are not, the animals in the zoo are and we all know that nothing good comes from animals in the zoo being in charge.

Jon Holdman's idea is a good one on offering 2-3 percent discount if paid on the 1st. Jeffrey Taylor, Mr. Landlord, has a great program and has an online service that you can use to process all payments so you never see the checks. You can also use Quickbooks or Peachtree to send your tenants a late notice in WRITING so they see an invoice when they are late. Again, it is a business. Run it like a business!

When you think you are pushy, ask yourself, would the bank give me a week to pay without sending out a threatening letter?

Jack Bobeck
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
Jack Bobeck Good advice. I have been thinking of sending out formal requests and will most likely beging doing this. I have actually considered creating an LLC under a different name to make it appear an outside management company is sending the letters. This will allow me to use that as a buffer and still appear as the good guy, but then again that still might be labeling me as a pushover.

Question though. How should I go about starting the notices? I have never sent them before. So do I just start all of a sudden?
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Bill Robinson
Investor · Member since 2008 · 41 posts · 8 votes
13y
Just to share -- Early on we wanted to be the "understanding landlord"... we are doing much better now as the "by the book landlord".

We used to try and work with our tenants about why they were going to be paying late. We don't anymore. Their rent is due, the eviction notice arrives every time on time. It took a year of moving out the problem tenants. Now we get 15 of 16 rents on time as opposed to 8 of 16. I even send letters in November reminding my tenants that the best gift they can give is the roof over their family's head. It isn't worded that harsh, but the point is made.
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
Bill Robinson

Bill,
On the day that rent is due and has not been received, what is your process? Do you call your tenant and ask where rent is, followed up with a written late notice. Or do you immediately send them a pay or quit notice? Just curious on your method that seems to work well for you.
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Nick Miller
Fort Wayne, IN · Member since 2013 · 66 posts · 12 votes
13y
Aaron C. I have found that tenants take the path of least resistance and that if I can make paying rent easier than not paying rent it is always paid. This might sound like a pie in the sky statement but the truth of the matter is that most banks have a way to create automated bill payment without any fees.

If money is automatically debited from my tenants accounts on Friday of each week or on the 1st of the month and all they have to do is... nothing at all. 99 out of 100 times I get paid without any problems.

I use Chase bank and they have a wonderful payment portal called "quick pay" if you don't do business with Chase simply talk to your business banker to see what your bank provides that would be similar.

However, make sure there is a way you can deny payment in the event of an eviction!
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
Nick Miller
Thanks Nick. Ive already went down that path before, but I prefer the direct deposit method at a bank. With this I dont have to hear the excuses of "my internet went down" blah blah blah.
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Sam W.
Investor · Northeast, OH · Member since 2012 · 239 posts · 106 votes
13y
Aaron C.,

I feel your pain. The monthly ritual of checking off who's paid, who's late, and who's avoiding me.

Can you explain the direct deposit method you referenced? I still use the old fashioned tenant mails or drops off their rent. The one thing I like about that is that we can see most of the tenants every month. I'm not looking to be friends with them (and they don't want to be friends with me) but, like you said, I treat them with respect and like to interact with them.
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Nick Miller
Fort Wayne, IN · Member since 2013 · 66 posts · 12 votes
13y
you want to set up completely automatic payments... If they have to turn on the computer and click "send money" it will not happen.

With quick pay I had one tenant pay me rent 2 months after moving out and another paid me rent for 5 months after I sold the property (I refunded the money each month) they simply neglected to cancel the automatic payments.
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Jack Bobeck
SFR Investor · Jacksonville, FL · Member since 2012 · 285 posts · 83 votes
13y
Aaron C. Jeffrey Taylor has what he calls a Resident Handbook that he gives to each tenant (he and I call them clients). I take and place his handbook in a white binder and place this as well as a copy of their lease (no one can find their lease to know what is in it) and I also add other items to the binder. The binder is to stay in the house at all times and there is a fee for losing it at the time of leaving the property.

The LLC is not a big deal, just tell the clients in the properties that you manage the properties for the owners and you have come to provide them with an invoice for their late fees. Once you get an online system, you can send them emails on the 2nd (rent is late on the 2nd) and on the 6th (day they penalty kicks in).

And RENT MUST BE in your hands on the 5th. No postmark dates no excuses, it is there by the 5th or LATE. No exceptions.

Drop me a line and I can tell you more about what I do.

Jack Bobeck
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
Sam W.

Sam. Yes its a headache trying to collect rent. But anyways what I have my tenants do is deposit rent directly into my bank account. I use a major bank which can be found just about anywhere my tenant lives. When my tenant signs the lease I give them 12 deposit slips with a bank account number I use strictly for deposit purposes only. I then transfer that money into my Operating account so there is never any money that can be fraudulently withdrawn.

It works out great(when they pay) and also makes it wasy for tax purposes.
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Donald Hendricks
Investor · Clarksville, IN · Member since 2012 · 226 posts · 96 votes
13y
You guys are much nicer then what I was taught.

Rent due on the 1st

Rent is late on the 2nd, late penalty assessed.

3 day notice to quit posted on the 3rd. .

Eviction filed on the 7th.

Out by the 30th.
1 Reply
Donald Hendricks
Investor · Clarksville, IN · Member since 2012 · 226 posts · 96 votes
13y
Originally posted by Aaron C.:
Sam W.
Sam. Yes its a headache trying to collect rent. But anyways what I have my tenants do is deposit rent directly into my bank account. I use a major bank which can be found just about anywhere my tenant lives. When my tenant signs the lease I give them 12 deposit slips with a bank account number I use strictly for deposit purposes only. I then transfer that money into my Operating account so there is never any money that can be fraudulently withdrawn.

It works out great(when they pay) and also makes it wasy for tax purposes.

And what happens when they deposit $1.00 and you have now accepted a partial rent payment? As I understand it in my state, you are stuck waiting the month out to file for an eviction.
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
I am in Georgia and it is a pretty landlord friendly state. If they were to deposit that $1 all you would have to do is prove you made it very clear you would not accept any partial payments and prove you attempted to return that money. Then after filing the writ send another notice saying no partial payments will be accepted.
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OP
Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
13y
Originally posted by Donald Hendricks:
You guys are much nicer then what I was taught.
Rent due on the 1st

Rent is late on the 2nd, late penalty assessed.

3 day notice to quit posted on the 3rd. .

Eviction filed on the 7th.

Out by the 30th.

Ouch,

Thats pretty harsh Donald. But im sure its effective and really shows your tenants whos boss. Unfortunately I dont think I can be so harsh, but maybe I will give that method a shot.

1 Reply
Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
This is mine:
- Rent due on the 1st
- Grace period until the 5th
- After the 5th its $10 per day late fee

Of the 6 tenants I have:
- One pays on the 25th (of the prior month)
- One pays on the 1st or 2nd
- One pays on the 3rd or 4th
- The other 3 pay on the 5th

Sometimes I have tenants pay late and pay the late fee. A couple months one told me in advance that they were going to be late and racked up $100 per month in fees. (Some type of emergency.) But she paid the fees and the next month went back to the normal schedule.
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George Paiva
Investor · Milford, CT · Member since 2012 · 592 posts · 285 votes
13y
If I don't get payment on the 1st, I am sending emails, Txts or Followup reminder calls. It not ideal but just part of the business. I do strongly suggest sticking to a late fee. One tenant I was understanding and waived it. Then the following month they took it as a open gesture to be late anyway. Yep get them on late fee and don't feel bad.

One tenant needed to always be reminded. We got her to setup online bill pay through the bank which cuts a check to me. Best part its a re-occurring check so now no need for reminders.
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Scott W.
Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
13y
Dawn A. you can only go so high on late fees, which are reasonable. $100 is not reasonable. i could be incorrect about your state but most states don't allow that. if they did, banks would be charging anyone with a loan that amount all day long.
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
Originally posted by Sam W.:
... I still use the old fashioned tenant mails or drops off their rent. The one thing I like about that is that we can see most of the tenants every month. ...

With this approach there is another benefit - you go to your bank for a visit bringing the bank your money; banks like that and they actually get to see those customers who bring them money ... I can assure you that they less frequently see the face of the landlord who has everything direct deposited.
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Patrick L.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
13y
Originally posted by Scott W.:
Dawn A. you can only go so high on late fees, which are reasonable. $100 is not reasonable. i could be incorrect about your state but most states don't allow that. if they did, banks would be charging anyone with a loan that amount all day long.

If that rent is under $1,000/month your $100 late fee would be considered "unreasonable" by a judge in any legal action were required. I always make sure my late fees do not exceed 10% of the monthly rent.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
Scott W. -- There is no written Wisconsin statute as to what amount of a late fee is considered "reasonable". There is a late fee statute for storage facilities which states "A late fee of $20 or 20 percent of the monthly rental amount, whichever is greater, is presumed reasonable. An operator may charge a higher late fee but has the burden of proof that the higher late fee is reasonable."

The City of Madison specifically states that the late fee cannot be more than 5% of the month's rent, but that is in Madison and I'm in Milwaukee.

It would be up to the judge if taken that far. But the late fee stipulation is on the very first page of the lease that the tenant signs.

I would always advise anyone renting property to read their state and local statutes to find out what is and what isn't in them.
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Karen Rittenhouse
Flipper/Rehabber · Greensboro, NC · Member since 2010 · 623 posts · 615 votes
13y
You are not a pushy landlord. You gave them the property and they promised to pay. They did not. There are consequences

Our state gives tenants 5 days to pay. They're due on the 1st, late after 5pm on the 5th. On the 6th, we send a pay-or-quit notice. On the 9th, we file eviction papers at court. One or two times of this and they know you're serious. No phone calls, no hassles, just the way it is.

Once you get more properties and have more time into management, you will not worry about whether or not they like it. If they don't, they move and you can look for a tenant with better paying habits.

We are in court by the 20th of the month so, if they don't pay, we can have them out the same month. Usually, they pay including court costs and late fees.

Train your tenants, don't let them train you. It works out better for everyone.
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