I have to collect rent from 25 tenants every month. Most drop the check in the rent box in the building. In my duplexes, they tape it to the door. I have one that pays cash, and I stop by to give a receipt. Some do Bill Pay, and I get a check in the mail. One mails a check directly, with a stamp. One pays with PayPal. Some tenants are roommates, and they each pay with a check.
As of April 2, I have received rent from 24 of 25, tenants with the 25th one coming on Friday. The late fee doesn’t kick in until the 5th, and this tenant is one of my longest term tenants. I have no worries about getting paid on Friday, although from an income and credit score perspective, she might be one of the weakest.
So, as you can see, I accept rents from my tenants, who are my customers, in as many ways as possible. If your customers want to pay, you have to be able to accept payment. I have heard some landlords make the tenants go to the bank and deposit the check. Some only take checks, no cash. Some landlords do direct deposit, drawn from the tenant’s bank account into their own. Of course, there is a fee for that. Make sure your tenants do not have to do too much in order to get their money to you.
The primary thing you need to get your rents on time, and in full, is you have to have quality tenants. One major fear of becoming a landlord is not getting rent from a tenant. Fear not, quality tenants pay their rent.
Now that I have the rents collected, a few bills need to be paid. Utilities are generally about $1,250. HOA dues are another $1,250. Taxes are $2,600. Mortgage payments are $4,500. These hard expenses add up to $9,600. There are also some ‘soft’ expenses. A reserve of $2,400 should also be set aside for maintenance, along with $1,225 for vacancy. And the property manager should also get paid $1,700, even though it was me. So, that adds up to an additional $5,325, or a total of about $15,000. That is a lot in anyone’s book. This needs to happen each and every month.
If I did not collect rent from a few tenants, the ability to pay these expenses would be severely threatened. If I was relying on the rents to be financially independent, I may have to get a job if the rents did not come in. Over time, they could force me into a very uncomfortable life style. In the extreme worse cases, you do not have enough money to file an eviction, and accept a partial payment, or let the tenant live there for free. This will be the beginning of the end.
No matter what your tenants excuse is for not paying, your mortgage company doesn’t care. Your HOA doesn’t care. Your utility companies do not care. Feeling sorry for a tenant is OK, but the rent still needs to come. If it doesn’t, the tenant needs to be replaced. Ideally, the tenant would not have been accepted in the first place.
Are your rents typically in on the first few days of the month?