BiggerPockets

I give a $25 discount if the rent is paid by midnight on the first of the month, which is technically "on time"...

In general, my tenants use direct deposit and have the funds there at least 24 hours before the first, so I'm happy to give the discount.

I'd tell them NO - it does not matter to me whether they pay monthly or quarterly or annually, so why do I give them a discount?

That makes a lot of sense. I don't see the logic of offering a discount only if it is paid on time. For instances, one of my rentals I have the agreement at 850, but if they pay on the 1st its 750. Rent is always 750, but they understand the importance of paying on time.

Plus, I read somewhere on here once say "they don't offer discounts b/c your doctor, dentist, mortgage company, etc doesn't offer you discounts on payments so why should you".

I've represented a landlord that found a tenant willing to pay the entire amount of the lease in full before beginning the lease. The tenants were able to get the place for $100/mo less than it was listed for, but truthfully it was probably listed too high to begin with, so I didn't feel my clients (landlord) were being exposed to any unnecessary loss.

As for inability to evict- I'm not entirely sure that's correct. This may vary by state and be what is accounting for the discrepancy here. As it happened, the tenants caused no problems and obviously paid on time.

Absolutely. I have one of mine that pays six months in advance and I am happy to cut them a small break with the hope that they renew atbthe same rate( cheper than market). The easy way to think is that they discount you are "losing" offsets the risk involved in tenants not paying or falling behind. I am happy to give up 50bucks a month to 100% eliminate collection risk. It helps stabilize the investment model as your two variables are collections and repairs.

I am not in favor of this kind of discount unless you think there's a concern that you're not going to get paid in the future.

Look at the math:

Let's say the rent is $500 and you offer a 5% discount for paying in advance. And let's say, for the sake of discussion, that you're willing to give someone a 10 day grace period before you charge them a late charge (overly generous in my opinion, but run with it).

That means you're willing to give up 5% of your income for basically "borrowing" the money (the rent that you haven't collected) for only 10 days. That's a half-percent per day, or a 180%-plus cost of funds.

In dollar terms, you're giving up $300 a year on a $500/month property. Why are you giving away 18 days worth of rent each year when you plan to collect that rent only days thereafter anyway?

And if you're like me with a zero-tolerance on late payments -- even one day late -- then you really have no incentive to give a discount for prepayment because that money is getting there on or before the 1st of the month anyway.

Again, all of this assumes that you view the rent as 100% collectible in a reasonable amount of time.