Collecting/Paying rent

6 Replies

Hello, I am looking to purchase a duplex with my fiancé sometime next June. This will be my first property and I plan on renting the other unit out. I am a BEGINNER to all of this. When it's time to pay the mortgage every month, let's say the 1st of the month. Do I tell the tenant to send me the money on the 29th or 30th or the previous month? Or do I say the rent is due on the 1st of the month (I pay the whole rent and then put the money they give me back into my account)? Any suggestions? 

Thank you!

Mortgages usually have a 5 to 15 day grace period and leases usually have a 5 day grace period.  I would set up a bank draft so that the mortgage comes out on the day it is actually due and also ask tenant to pay rent on the 1st of every month.

@Nathan Galvan , rent is generally due on the 1st (just how it is). If you close on your duplex on a 15th of the month, your first mortgage payment will not be due for 45 days. That gives you plenty of time to focus on acquiring an acceptable tenant. Ideally, you will get a prorated first months rent before the mortgage payment is due. This will help to offset the first mortgage payment. 

For the second mortgage payment, you will probably have to make the payment before the rent check is cleared. Don't spend any of the rent money, and set up a direct deposit for your mortgage from your rental deposit account to start for the third mortgage payment. 

I would be very alarmed if you are having problems paying mortgage without a tenant in place for at least 3 months. In long term operation, things happen and it might take a lot of time and $$ to fix and make the unit rent ready. All landlords should consider having reserves for their rentals. Usually the bank requires 6 months Principle Interest Tax and Insurance payments in cash reserves when issuing a loan for an investment property. Since you are planning to acquire this as a primary residence and house hack, this is a great way to get started but I would advice a new landlord to take the same conservative precautions when starting out. Have plenty of cash reserves for the times when things go south. An investor will need to create wealth and keep it. Good luck!

I would have them pay on the 1st. Remember rent and your mortgage are 100% UNRELATED. Your tenant is not concerned with your mortgage and as such make sure you can pay it if your tenant does or doesn't not pay you rent.

You need a full months mortgage payment as a reserve.  The timeliness of the renter doesn't matter and you make payments from and receive rents into this account.

Originally posted by @James Wise :

I would have them pay on the 1st. Remember rent and your mortgage are 100% UNRELATED. Your tenant is not concerned with your mortgage and as such make sure you can pay it if your tenant does or doesn't not pay you rent.

 This is the correct answer.

I would add that you shouldn't negotiate your tenants rental terms around your mortgage. You should pay your mortgage on the due date, and you consider agreeing with the tenant on a due date that will warrant the highest chance for on-time payment from them.

Vacancy is a very real occurrence, along with tenant turnover. Rent payments will simply not be available every time the mortgage is due. Prepare accordingly! Good luck!