Do you accept Cash for Rent? - Best Way to Collect in MHP

14 Replies

I have a 22 pad MHP under contract and am doing my DD.  The seller's agent is telling me that the seller currently collects most all rent in form of cash that he stops by and collects each month.   I don't want to continue this for several reasons like safety, record keeping,...etc.  But there may be good reasons to allow it?   First of all there are many longer terms tenants in place that are used to paying this way.  What are you MHP owners doing in terms of collecting rents from large numbers of tenants?

Thanks BP! 

@Reid Hanley If they are paying, don't fix what isn't broken. I would implement easy ways for the tenants to pay, once you buy it. The easier you make it, the better. Like Cozy or some other app. A lot of poor people, who get govt. assistance direct deposited each month, withdraw all of their money from the bank on the 1st. This is how they pay their bills. Or they will buy money orders, which is a hassle. I used to have tenants that pay in cash. They would call me and I would go pick it up because they were elderly and could not drive. Don't be too good to interact with your tenants.

@Reid Hanley , I assume you are local giving you the ability to accept cash? If you're leaving rent collections in the hands of a manager, then that's a no-go. If you are local, do you really want to go around personally collecting rents? Your time is spent better elsewhere (like buying more parks). 

When I first started, I had tenants deposit directly into our bank account. You can either preprint deposit slips for the year with the unit # and hand them out, or tell the tenants to write the unit # on the deposit slips at the bank. Depending on your bank, when deposits are made you can view deposit images online and update rent roll accordingly.

If you do feel the need to go around and collect I would recommend money orders and even have a secured drop box on site to cut down on the # of rounds you make. Also, I have never had a complaint about money orders.

Nope. Never. I allow payment by checks or PayPal. I also have in  my lease that if I have to come collect the rent it's a $25 convenience fee. Why would you want to go collect rent via cash every month? You'd have to issue receipts to everybody for records purposes, and you are absolutely setting yourself up to be robbed if your routine is carrying around large amounts of cash on the 1st of every month. 

Hi Reid, 

I think it is a matter of what you are wanting and where you are in your investing career. Personally I would not accept rent in cash but it really depends on the person and their situation. 

Reasons Against Accepting Cash:

1. If you are looking at securing more loans in the future, having a good debt to income ratio will help you secure a loan easier. The banks will be more inclined to give a loan when they see your rents are higher compared to the debt you have financed. Accepting cash and not reporting it will hinder this. 

2. You do not have to be worried about being audited by the IRS (peace of mind)

Reasons for Accepting cash:

1. If you are at a time in you life when you are not looking to get anymore loans and want to minimize your tax liability, accepting cash could be a great way to do this. 

 

There are obviously more positives and negative to both sides but those are a couple that hopefully help a little. Long Distance real estate investing by @David Greene is a great source. I just read his book and he goes into the pros and cons to this exact problem. 

Best of luck, 

-Dylan Mathias

Depends on the level of the tenant.   Put yourself in their shoes for a moment. 

Older people may not trust banks.  

Immigrants (legal or not) are well known for "mattress money."  At one point there were mortgage loans for mattress money people who didn't use banks. 

People with poor credit (for whatever reason, you can have 350 credit score after one uninsured  trip to the hospital) or a history of bounced checks cannot get a bank account.

I'd investigate the reasons the tenants pay cash.  May be something as simple as the previous owner was fudging on his taxes.