Rent Collection: It’s April 2; do you know where your rents are?

packs-163497_1280-PDI 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?

4 Replies to “Rent Collection: It’s April 2; do you know where your rents are?”

  1. Eric,

    You have a great system in place, and being able to collect basically all your rent by the 2nd of each month is really impressive. Having quality tenants is imperative to long term success, and I need to do a better job of that…

    You really can’t stress quality enough… Thanks for the tips!

    1. I am always open to bounce ideas off of. I used to have tenants that would get behind on rent. I have had tenants owe me over $3000. Some get caught up, some do not. But it is always better to just get tenants that can pay, and leave the headaches to the amateurs.

  2. We have a co-op student as a tenant for four months every four months. The one we have now is really good, actually his Dad is paying us through direct deposit email to our bank account. The one we had last term was terrible. We had to hound him for the money and I was not impressed. Other than him, we haven’t really had any problems, other than maybe being a few days late.

    I can’t imagine collecting that many rent cheques every month. It would be so much easier if you could have direct deposit from email for them all. It costs the send $1 on their side to do though.

    The worst fear about buying a place and renting out a complete unit is what if you get deadbeat tenants in there and then can’t get them out with no money coming in. It appears, here at least, that the laws favour the tenants rather than the landlords.

    1. Yes, it is never good to evict a tenant. Using credit score, and income, weeds out the worst. Any rent not collected from a tenant with higher income and credit, can be received in a judgement from the Courts. That is another great reason to have great tenants. Deadbeats do not care if their credit score gets ruined, it already is. And if you get a garnishment, they just change jobs and you start from scratch.

      Most of my rent is in the collection box. I am there anyway, so it is easy to just open it up. It helps me keep an eye on the places too. At some point, I plan on not being in MN, I will go to a direct deposit method then.

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