What If My Tenants Don’t Pay The Rent On Time?
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I own and manage several of my own investment properties in Minnesota as well as a few others that I own out-of-state that are managed for me by a management-company (that also collects the rent from the tenants). |
But for my local properties, I collect the rent from my tenants each and every month - and make the payments on those properties as well.
I have a client that recently asked me about an investment property that he owns and manages himself - who was pretty upset about the fact that it was the 5th of the month already - but his tenants had NOT yet sent him the rent-check.
Should he call? Should he email? Should he go over there? What should he do if
he didn't get the rent from this tenant?
I told him not to panic...
Tenants tend to pay their rent before ANY other bills (cell phones, credit cards, whatever) because most people are more worried about keeping a roof over their head than if they've got full cable to watch. And, since I knew that he had a "late fee" clause already written into his lease, I knew he'd be making a little extra bling anyway!
I usually allow a 3-day window for payment because sometimes a weekend or holiday just gets in the way, or a goofy payday can mess someone up - no big deal. If my tenants are more than 3 days late, I charge $25 for being late. Then, if I still don't receive the check it's an additional $5 per day that they're late as an incentive to pay sooner than later.
But, even in this guy's scenario, it turned out the tenants had had a family emergency out of state & the wife thought the husband paid the rent, and the husband thought the wife paid the rent.
As an investor and landlord - this is a reality that you will face from time to time...
But before you start worrying about this, let me assure you that the occasional late rent-check is unusual if you've done the appropriate background checks. And, if you follow the guidelines that I teach, your lease-agreement with your tenants will require that they pay you late-fees for ANY payments that are sent late.
In my years of investing, I have yet to have a tenant that doesn't make a payment - but slightly late payments are actually somewhat common near holidays, but usually only a day or two... no big deal. More often it's a day or two early!
But this is the reason your lender also requires that you have 2 to 6 months reserve on hand "just in case". You should never be cutting it so close that one rent check could make or break you. But I also know that when rent-payments are late - I'm gonna make a little EXTRA money that month!
This is what happened to my client too.
He
did end up getting his rent-check, and although it was about a week late, and
his tenants abided by the least-agreement and sent him a late fee with the rent
- which not only relieved his concerns, but put a smile on his face because he
had an extra 45 bucks
in his
pocket that month!
AA
landlord also has the right to recoup any late-fees from the tenants
damage-deposit, in the event that the tenant doesn't remember to send their late
fees (which covers you either way).
