Rental Property Investor · Silver Spring, MD · Member since 2017 · 85 posts · 59 votes
I have a tenant who has been in one of my houses for almost a year. His first two months he paid on time. Since then he's paid late every single month. But he has paid and is otherwise a responsible guy. I hired him to do some landscaping work at a new place I'm rehabbing that will be listed soon. He asked if he could move to the newer bigger place. His current rent is 1100/mo, and the new place would be 1500/mo. I told him I was worried since he seemed to be having trouble making 1100/mo payments I wasn't sure if he could make 1500/mo payments. He tells me that he got hit hard by COVID (he's a landscaper) and lost income, but he thinks he should be able to make 1500/mo. I'm worried about it - he was always late and seems to be just scraping by, I don't want the extra 400/mo in rent to bury him financially. How would you handle this? Normally I look for an income of 3x rent, but I'm not sure how to apply that to the last year given how abnormal 2020 was.
@Ari Bachrach IMO your first mistake is in letting late payments slide. Payments are due on the 1st. If they don't pay by the 1st, they are late and you should charge late fees.
If he cannot even pay his current rent on time, why would you expect him to pay a more expensive rent on time? Allowing him more expensive rent will only worsen the situation. Don't expose yourself to that.
We have experienced this exact situation with one of our tenants. Rent was currently $1400 on a property an they have always paid late but always pay the late fees accrued. The tenants decided they wanted to move into a newly renovated property of ours which increased their rent to $2200. We increased their deposit to accommodate the variance between the two properties. They continue to pay late every month and continue to pay the late fees associated. If you expect that your tenant will not be able to make the payment on time I would increase the deposit and increase the late fees to motivate them more to pay on time.
@Ari Bachrach You already know the answer to this, and it’s “No”.
He’s already PROVEN he struggles with the lower payment. No reason in the world to consider him for a place with a larger payment.
If you were to allow him to move into the place with the larger payment, you’ll just end up with more late payments (and possibly even non-payments).
Stick to your screening criteria. If anything, in this era of eviction moratoriums and delayed evictions, we should be tightening our screening criteria, not relaxing them or making exceptions.
If the tenant pays after the 1st, they are late and should be charged late fees. If you let them slide the 1st time, then it becomes a habit. I would not ask him to move to the $1500 / month place because that will only mean trouble as the tenant is already having trouble making rent payments. I would find a new tenant
@Ari Bachrach As the saying goes...the best predictor of future behavior is past behavior. Having a larger property and higher rent is not going to magically make the tenant pay on time.
Well.... i would never presume to make a decision for a tenant nor try to channel them to make a choice - if he wants the place he can apply and then you can deny him if appropriate using your written criteria. Last year was terrible for landscapers - he should be able to provide you with pre covid documentation proving he can make the rent.
If he does not pass the criteria then decline his move.
As for the late rent - be sure you are charging the late fee stipulated in your lease.
I read this book and saw this movie. They paid late for 3 years till I tired of chasing rent. Sure they paid late and paid late fees but they caused for follow up than all other tenants. When they departed I had more damages and cleaning than should have been. This is why they say to people like you and I that, No good deed goes unpunished!
Lastly, market rents seem to be increasing at every renewal in many markets. If he won’t pay $1100 on time, probably won’t pay $1500 on time, what’s happens when you want to raise the rent to $1650?
@Ari Bachrach list the place for rent and tell him to fill out an application and pay the application fee. Make it clear that you are advertising it and will be accepting multiple applications. Then hopefully he will advise not to apply, or you find more qualified tenants. Then the process is telling him no. Either way it’s a win.
Of course "he thinks" he can make the payment. Everyone who has ever gotten into financial trouble thought they could cover the payment. Why would anyone do anything they thought they couldn't manage?
What if you went to the bank and told them you "you think you can make the payment" on a bigger loan? Banks don't deal in emotion or work on the honor system - neither should you. It comes down to facts and there are only two things that matter for making payments:
1. Income - this is ability to pay, meaning do you have enough money coming in to pay all financial obligations plus the added expense.
2. Payment history - this is likelihood of paying, meaning do you have a history of paying.
As a landlord, your job is to use logic and history to screen people, which often means disappointing people. If we just "trusted" people to make payments, there would be no point in screening people at all. My advice is look at this tenants request as you would any new applicant. If this tenant was applying to rent the property, would they pass your screening criteria? That is your answer.
If you do let him move to the new place, make sure you have late fees in your lease. People will take as much "rope" as you give them. It is your job to give them boundaries.
We had a similar situation but we leased a smaller cheaper home to someone that was paying late on a regular basis. Guess what? They paid the cheaper rent late almost every month and we finally had to evict in January for non payment. We were just tired of the drama and stress of trying to squeeze rent out of them. We have another property with an inherited tenant and they'll be leaving that property as well if they don't get their act together... As to the question in the original post, it would be a hard no for me.
I read this book and saw this movie. They paid late for 3 years till I tired of chasing rent. Sure they paid late and paid late fees but they caused for follow up than all other tenants. When they departed I had more damages and cleaning than should have been. This is why they say to people like you and I that, No good deed goes unpunished!
Lastly, market rents seem to be increasing at every renewal in many markets. If he won’t pay $1100 on time, probably won’t pay $1500 on time, what’s happens when you want to raise the rent to $1650?
Good luck!
Yup, I too have read this book and seen this movie.
Have you had a tenant that only pays if you remind them? I've had a tenant where if I don't say anything I don't hear anything from them. One time I wanted to see how long it would take without me reminding for them to actually pay on their own. So, I didn't say anything for a month. After like 45 days, I finally sent them a text and they promptly paid the rent with all the late fees.
I got this tenant pretty early on in my investment days. So, I learned to send them a reminder text the day before due date and they would pay it no problem. But if I didn't say anything, then nothing. I know they didn't have trouble financially because they were always happy to pay the late fees. Kinda weird situation.
Nowadays, I won't tolerate something like that. I have too many doors now and would be a big hassle to have to chase down rent every month.