Tenant always pays late, but takes excellent care of property

55 Replies

I have a SF rental with tenants that have been there for about a year and a half. It is a very nice family who takes absolutely immaculate care of the property. The carpet still looks brand new! 

The problem is that it's more rent than they can afford. They always pay, but it is a week or two late every single time. They said changing the due date from the first to the 15th would help, which we did... but nope, still always late. 

I've made it clear this isn't okay, but the fact is they're living paycheck to paycheck and it's hard for them to pay on time--whenever that may be. 

They rented their previous place for five years and I love the opportunity for a long-term tenant, but I'm tired of the stress of never knowing when we'll get paid. Their lease is up in August and I'm thinking of increasing their rent from $1,850 to $1,900 (the market rate) and calling and nudging them toward something more affordable elsewhere. Then I could dangle the carrot of giving them their deposit back promptly, bla bla. 

It's great having clean renters that may stay for years but always getting rent late sucks. More importantly, moving them out now may avoid an eviction situation later if they just can't pay at some point. 

How would you handle this?

First, are you an investor (for profit/cash flow), or running a maid service (house is taken care of)?

Second, if they are truly late because the payment is too high...I'd put them into a different property

My personal opinion (I have a few local rental homes, and one of my tenants went through loss of a job, etc)... increase the rent to $1,900/month when the time comes (or don't - $50 versus great tenants is a petty sum), and offer them a $100 discount (or $50 discount off current rent if you choose to not increase it) for paying before a certain date, providing that they pay it via some online means - such as:

http://lmgtfy.com/?q=rent+collection+online

I have great tenants (the ones who went through a job loss) - who take care of all the small repairs... and I do not mind discounting their rent below market value in exchange for their occupancy of my rental home.

I realize there are several schools of though on this, and that's fine.  This is simply the one I choose to personally pursue, as not everything in life is about top dollar.

Does their income qualify? If so then they have money management issues. I would sit down and have a heart to heart with them and look them in the eye and tell them it is unacceptable and they are going to force me to do something I don't want to do. They sound like good people that are bad with money. I would give them a copy of FPU from Dave Ramsey and tell them I don't want to take the roof out from over their families head but the next time we have to talk about this will be a very bad day for both of us.

You have let it slide and trained them that you will take it. You need to change that.

I give a gift card at Christmas time of 5 dollars everytime the rent is paid on time.
30 dollars =6 months on time.

Originally posted by @Mary lou L. :

I give a gift card at Christmas time of 5 dollars everytime the rent is paid on time.
30 dollars =6 months on time.

Isn't that insensitive toward tenants who do not celebrate or believe in Christmas?

Just kidding...

emphasize at renewal that since late rent is taking a huge 'domino effect' in late fees ur being assessed for mortgage, tax, etc, u need to start assessing a daily late fee and of course add it to the new lease agreement good luck and dont forget show appreciation of how they take care of place =d

Originally posted by Account Closed:

u need to start assessing a daily late fee 

 This isn't legal in most states. Where have you successfully done this?

yep its illegal to suddenly add anything for the matter to an existing agreement onesidedly but thats why i said at renewal add it to the new agreement.

some folks charge $25 first day late then $10 each day. i do from now on $10 day from day 1 late till day 5 then notice to quit or pay posted on day 6. thats $50 total late fee for 5 days late then i have to go thru the trouble to type up and post a pay or quit which to me realistically takes an hour or more esp if their location far away, think gas, time, mileage, etc.

NO late fee for paying 1, 2, 3, 6,7,8 days late says its OK to run progressively a few days to a week or so late to see how much u can get away with.

What does their income say they should be able to afford?  Do they have any unusual expenses?  

What is your current lease status with them?  Are they on a renewal lease or month-to-month?  On a month to month I might try an early payment incentive and see if that improves timely payments.  

A structural solution may fix your problem.

(Almost) all my tenants pay via ACH autodraft. That's just a requirement of leasing one of my houses. I don't want to chase money. Problem is, if they bounce one, it takes about 3 days before you know that an ACH has bounced.

Had a tenant I really liked who bounced about 1 out of 3 payments. She was right on the edge of being able to afford the place, and sometimes didn't manage her money well. 

She got paid bi-weekly, so we changed her autodraft to bi-weekly so that we'd draft her account on payday. Her money went in via direct deposit, and her rent went right back out via ACH. She didn't really have a chance to spend it on anything else.

Breaking it up into smaller payments on payday vs. one larger payment each month solved my problem. Might solve yours.

Michael Hayworth, Home Front DFW Remodeling | 817‑697‑5021 | http://www.HomeFrontDFW.com

Give them a 30 day notice of change of terms. The terms will be that you will no longer accept late rent after the 3rd. Then if they don't pay move to evict. Be firm. Be strict.

so, a SF rental @ $1900/mo that can house a family tells me this is a low income area. So, the fact they are taking good care of the place makes me think they are motivated to do well. Eviction and placing a new tenant is going to cost some money and lost rent.

Personally, I would have a talk with them to see what the issue really is. If it is poor money management, try to get them some help. If it is low income, see how they can increase it.

Normally I would say to just set the rules and follow them. But in this case (low income and great tenant) I would try to work to improve their situation through some financial education.

The SF rental market is super hot right now. They could be replaced very easy and with much higher rent. But really good tenants who treat the place like an owner are hard to come by. Plus if you can help them you'll feel really good.

oops, I was thinking SF was San Francisco not single family. So disregard.

Depending on if they are rolling late or they simply don't pay.

Also depends on your situation.  Each tenant turnover incurs work (namely clean up, small fixes and re-listing).  Obviously you will lean more towards to keep your tenants if you have high turnover costs (e.g. you hire someone to clean / list the rental property), instead of DIY.

I would talk with them and ask them how much they can really pay each month, Then you know if you want to keep them or not.  I have lowered rents many times over the years and usually it was the right decision to receive less and keep good renters.  If you are  into the house and are very tight to the mortgage then they have to go but if you are just wanting to get all you can then  you should really think about trying to keep them as they  are probly your  best answer. I do not see 50 or 100$ making any difference if it was to loose a good renter.

If you want them out then offer to pay to help them move or find another place to go. Stalling is only  going to make the matter worse and more expensive. I am  only second guessing but I suspect you did not do a good job  of checking them out before you let them in>?  Just a thought!!!

Originally posted by @Scott J. :

I have a SF rental with tenants that have been there for about a year and a half. It is a very nice family who takes absolutely immaculate care of the property. The carpet still looks brand new! 

The problem is that it's more rent than they can afford. They always pay, but it is a week or two late every single time. They said changing the due date from the first to the 15th would help, which we did... but nope, still always late. 

I've made it clear this isn't okay, but the fact is they're living paycheck to paycheck and it's hard for them to pay on time--whenever that may be. 

They rented their previous place for five years and I love the opportunity for a long-term tenant, but I'm tired of the stress of never knowing when we'll get paid. Their lease is up in August and I'm thinking of increasing their rent from $1,850 to $1,900 (the market rate) and calling and nudging them toward something more affordable elsewhere. Then I could dangle the carrot of giving them their deposit back promptly, bla bla. 

It's great having clean renters that may stay for years but always getting rent late sucks. More importantly, moving them out now may avoid an eviction situation later if they just can't pay at some point. 

How would you handle this?

 It's really hard to find tenants who take really good care of your property.

And if $50 more per month is reasonable, based on your market, then sure, raise the rent to that.

It would appear that you can afford to keep this place, even if the tenant pays late, and that you just find this irritating.

So, do you have a late fee in place?  If not, when you renew, you need to add one.  Some tenants will willingly pay a late fee.  If you can afford to wait for your rent, then you get more money by allowing late fees.

I can tell you that finding tenants who keep properties immaculate are hard to find.

So, if you look at it this way, you have a tenant who is fantastic as far as taking care of the place, and not only that, but they regularly pay late and are willingly pay a late fee that you can pocket - you might want to consider yourself blessed.

I've said it before, and I'll say it again, "Rationalization is the most expensive word in a REI vocabulary".

Originally posted by @Michael Hayworth :

A structural solution may fix your problem.

(Almost) all my tenants pay via ACH autodraft. That's just a requirement of leasing one of my houses. I don't want to chase money. Problem is, if they bounce one, it takes about 3 days before you know that an ACH has bounced.

Had a tenant I really liked who bounced about 1 out of 3 payments. She was right on the edge of being able to afford the place, and sometimes didn't manage her money well. 

She got paid bi-weekly, so we changed her autodraft to bi-weekly so that we'd draft her account on payday. Her money went in via direct deposit, and her rent went right back out via ACH. She didn't really have a chance to spend it on anything else.

Breaking it up into smaller payments on payday vs. one larger payment each month solved my problem. Might solve yours.

Exactly. I have a good tenant that I want to keep, who had trouble paying in full on time, although she always paid with the late fee. But she mentioned she might have to find a cheaper place, as paying the full rent on the first (she gets paid twice a month) was leaving her with very little money until her next payday. And late fees aren't cheap. I agreed to break up the rent payment to twice a month. Problem solved. 

The cost of a turnover, plus the vacancy time in a Class C area where a vacant house is a target, made it worth working with a good tenant. They're rare in that area. If it was one of our rentals in a different area, this might not be the solution.

They're tenants. Most are on the balls of their ***. That is why they rent instead of owning. Make an official due date, and a real due date in your head that is two weeks later.

Are they pretty consistent at being only a week or two late?

Originally posted by @Lew Payne :
Originally posted by @Mary lou Long:

I give a gift card at Christmas time of 5 dollars everytime the rent is paid on time.
30 dollars =6 months on time.

Isn't that insensitive toward tenants who do not celebrate or believe in Christmas?

Just kidding...

Hmm great point! No complaints so far. I've also put coupon type vouchers to use towards rent when they wish. 

I should call it end of year tenant bonus! 

I know expenses at the end of the year can get crazy esp if there are children. So it's my  way to thank them. 

Enjoy collecting your late fee and be glad they take care of the unit as well as they do!

If you don't collect a late fee, you do need to start charging one upon lease renewal.  Not sure about the California rules (sometimes a little "special" on tenant-landlord).  In Georgia, easily defensible up to 10% of the rent per month in Magistrate Court.  As a long-time landlord, I will assure that this will be the LEAST of your problems.  

As long as I knew they were going to pay I'd suck it up but then I run my business such that  I don't have mortgage payments dependent on the timely receipt of rent. 

Consider how much it would  cost you at unit turnover time if you had a tenant that was always punctual but didn't look after the property. Then count your blessings.

This is good feedback for all owners who can't think.

You will not renew their lease , "nor help them find another place".  You write a new lease with very strict damage refund, a penalty of $100 for late payment of 5 days and eviction for 7 days. You find another resident who pays the market price.

Originally posted by @Scott J. :

They rented their previous place for five years and I love the opportunity for a long-term tenant, but I'm tired of the stress of never knowing when we'll get paid. Their lease is up in August and I'm thinking of increasing their rent from $1,850 to $1,900 (the market rate) and calling and nudging them toward something more affordable elsewhere. Then I could dangle the carrot of giving them their deposit back promptly, bla bla. 

It's great having clean renters that may stay for years but always getting rent late sucks. More importantly, moving them out now may avoid an eviction situation later if they just can't pay at some point. 

How would you handle this?

Playing devils advocate a bit, look at this another way, if you evict and get them out in a timely manner (which doesn't seem very possible in CA), then how long before the house is able to be making money again?

Will it need a bit of paint, will it rent immediately, will you get 0 days downtime?

At best, you're looking at 2 weeks downtime, and if the current tenant makes you go through eviction process, or even start it, then you're stuck for a few weeks with no income.

So lets say, the property sits idle for 1 month before the new tenants start their lease, that's $1850 you didn't collect, vs $1900 for the new rent - so it's going to take approximately 38 months for you to make up that one month of missing rent.

And then there is the issue that the next tenant maybe worse than the previous one, maybe the property will turn over again in 12 months time, who knows? Better the devil you know.

Here's the other problem - where exactly do they get the deposit and first month rent from for the next place they move to? Bet you it's coming out of your money.

As long as you aren't struggling for money yourself, I'd say suck it up for the time being.