When you accept a tenant that makes less than 3.5x the rent, rent payments are a struggle to them. They live paycheck to paycheck, generally have low credit scores, and often the rent doesn’t match up in a timely fashion with the paycheck. It is a tough situation. If you tack on a late fee, it is a surefire eviction.
When I rented to Section 8 tenants and other low-income people, I had to just wait for the rent to come. It was far better to have a slow paying tenant, than a vacancy. The problem is a slow payer turns into a non-payer very quickly. After only 30 days, you are two months behind in collecting rent. Adding an eviction expense would make the cost even higher. So you let it ride longer. If you took in a tenant that was making less than 3.5x the rent, it was mostly your own fault for them not making payment, you rent was too high for them. You should have waited for a more qualified tenant.
In today’s rental market, you can get well-qualified renters. They have the money to pay rent, but they might have a budgeting problem. This will be indicated by their credit score. They do not want to get evicted and move; they will pay. I always charge a late fee now. Often when you tell a tenant that asks about a late payment that they can pay late but “just include the $75 fee”, they somehow come up with the money for the rent payment in a timely manner.
With 24 renters, I cannot have a bunch of them not paying. I need the revenue to pay my bills too. While I will probably always have a late payer or two, there are ways to avoid late payments. Often the tenants just need a reminder.
I send a group text message to all my renters about three days before the end of the month. A simple message, just to remind them the first of the month is coming, and rent is due soon. It takes all of three minutes, or less, and is free.
On the second of the month, after I have collected all my rents from tenants on the first, I send another message to all tenants that have not paid. Generally, there is one or two that have not put the check in my rent box, and occasionally I missed a check that didn’t fall all the way to the bottom of the rent box. Either way, it is another reminder that saves late fees, gets your rent faster, and could ruin a good landlord tenant relationship from a simple mix-up.
If I still have some that have not paid on the 5th, unless I have already received word of a late payment, I send another text. I rarely have to do this, I think only one time in the past two years.
So the lesson is this. Get renters that can afford the rent easily. Remind them that rent is due. Increase profits with late fees. Avoid late payments altogether with the proper amount of diligence and incentives for your tenants.
Have you ever had to pay a late fee as a renter? Or a late mortgage payment?