Inheriting a long term tenant that is paying late but catches up
Investor · Lutz, FL · Member since 2016 · 66 posts · 17 votes
I am buying a duplex and inheriting a tenant that has been there for 4 years, a single mom. It seems she is usually late with rent payments but catches up within few months. She is otherwise good tenant and keep her unit clean. Her lease doesn't expire for almost a year. I am new at this, any advice on how to handle this situation is appreciated. I have been listening to podcasts about being firm in my rules but this is an otherwise good tenant. Suggestions?
I was a single mother and often struggled, including having to go to the food bank, even. I never paid my rent late and never asked for a favor from my landlord, to allow me to pay my rent late.
When she pays the rent late because she buys her kids birthday presents - it's really you buying the presents for the kids.
When a tenant doesn't pay rent, you are the one paying for whatever it is they chose to spend their money on instead of rent.
And don't assume they're scrimping on macaroni and cheese or buying a funky old car. They're spending their money. They're just not giving it to you.
It's not your job to support her. If she can't afford your apartment, she needs to find one she can afford. It's called being a grown-up.
That's a tough question. Everyone has their own personal philosophy on the issue. My personal thought is you have a long term tenant, which pays rent late, but keeps the place clean and does get caught back up. I would determine why the tenant is late, see if there is a legitimate reason. If there is a way to change the due date for rent payments so she isn't late, or some other way to work with her. Based on what you have said, she sounds like a good tenant. I would try and work with her if at all possible.
Another note, being a single mom who is sometimes late means she is probably limited where she can go. If you work with her and the long term numbers net right for you, she is likely to stay for awhile.
Thanks for helpful suggestions. She is a single mom with one job that doesn't pay that well and is looking for a second job. She is a responsible tenant overall. Good suggestion about trying to work with her.
When inheriting tenants I always make it very clear payment in full on time is mandatory if I am going to view you as a good tenant. Paying late is not acceptable for any tenant regardless of their personal situation. As your landlord it is not my business or of any interest to me as to why you wish to pay late. Rent payment is universally understood as being due in full and on time. If a tenant does not have the money to pay on time they borrow the money from a friend (steal it if they have to) but they do not borrow it from their landlord. I am not a bank, social work, church group, family member or friend.
If you are a good tenant you will pay on time, If you can not I will do what I can to help you move to more affordable housing.
Remember you do not have a good tenant if they do not fulfill their one primary responsibility of paying in full and on time. Your tenant is probably choosing to spend the money on her children ahead of paying her rent. Find out what month their birthdays are in and you will know when she will pay late and partial rent.
I believe she pays late because that's what she's accustomed to and has been allowed. You might run things differently and will need to explain to her now--before rent is due--that you expect it on time or you immediately start filing for eviction.
I do not think it's fair that you change a due date for a tenant. When you have tenants with all different due dates, that makes more work for you. The last thing you need when managing properties, tenants, and your business is to keep track of multiple due dates. Just like normal, everyone should be due on the 1st and late if not received by the 3rd or 5th.
I have a nine day grace period in all my leases. That being said nothing deviates from the lease as I feel I am more than generous with my grace period. People tend to pay late when there bi-weekly paycheck falls on a certain Thursday or Friday of the month. Having my grace period allows me to be flexible while still enforcing a strict lease agreement. My late payment is a daily fee but the grace period allows payments up the the ninth with no penalty. On the 9th rent is officially late and the daily amount is changed from the 2nd to the 9th after that each day is the daily amount. Our software emails the tenant every day its late so keeps the reminders going. We have very little issues.
I looked at it like most mortgages work where its due on the 1st but not technically late until the 15th.
If paid after the 9th the fee is retro to the 1st. I rent to the lower to middle income levels that have a hard time managing there bills which is what the tenant the OP mentioned reminds me of. Most people in my area are paid bi-weekly and are living paycheck to paycheck. This works for me may not for you.
Thanks all. Much appreciated viewpoints. Derek and others, how much late fee do you charge? I have heard $20-100 per day. Is is OK for me to send out letters to tenants when I take over informing of new ownership and expectations about rent payment on time?
I have a tough time calling a tenant a good tenant when they don't pay on time. Maybe the apartment is to expensive for her?
In these situations in my experience the tenant will catch up temporarily or maybe even stay on track for a couple years but eventually something will happen where it will bury them in a hole they can't find themselves out of. If there isn't enough money, there isn't enough money.
Yes you are required to inform your tenants you are the new landlord and inform them of your policies.
You also need to study your state landlord tenant regulations so you can be certain what you are doing is legal. They are the codes you operate your business by.
Also you should be aware that when starting out if you are uncertain how to deal with tenants and are uncertain as to how to implement practices due to personal emotional conflicts you would be advised to hire a property manager.
Business practices should have no consideration for individual tenants or their "life" situation.
Based on my recent 'lessons learned', I would suggest that you make sure to get the application from the seller and, if it does not have the tenant's SSN and DOB, try to have your tenant complete a registration form immediately after you close to get that information. Reason: If you ever have to evict them and want to recover unpaid rent in small claims court, you may have to have their DOB in order for the sheriff to serve them. (Not so with L/T Writs). This recommendation is based on my experience with NH law and process, so your state may be different. And, if you want to report them to the credit bureaus, you must have their SSN.
I'm a strong believer in using your position as a landlord to help people. If your deal is good, you can easily handle a few late payments, as long as they are eventually paid. That being said, everyone has priorities when it comes to their spending, and you need to make sure that you are near the top. Rent is probably not going to replace feeding her children (nor should it) on her priority chain, but it should be more important than the electricity bill or car payment, let alone discretionary spending like eating out or going on vacation.
You'll find a lot more satisfaction in the rental game if you treat it with a modicum of compassion, rather than being the Dickensian monster that many people think of when they hear the word "landlord". Plenty of people on this site disagree with me on that, but that's my $0.02.
I was a single mother and often struggled, including having to go to the food bank, even. I never paid my rent late and never asked for a favor from my landlord, to allow me to pay my rent late.
When she pays the rent late because she buys her kids birthday presents - it's really you buying the presents for the kids.
When a tenant doesn't pay rent, you are the one paying for whatever it is they chose to spend their money on instead of rent.
And don't assume they're scrimping on macaroni and cheese or buying a funky old car. They're spending their money. They're just not giving it to you.
It's not your job to support her. If she can't afford your apartment, she needs to find one she can afford. It's called being a grown-up.
@Ally Kumar The amount you charge is generally relative to the amount you charge for in rent. Certain areas have limits and restrictions on how much you can actually charge for a late fee. Best is to check with your state tenant landlord laws. I rent to lower and middle income so my policy is 5.00 dollars a day. The first week grace period the five dollars is waived until the 9th but on the 9th $35 is charged and then its $5 dollars a day going forward. This scales to your property as a 1500-2500 a month rent would be obviously be a higher fee. Today is a digital world and most people have a smart phone and can get emails like a text message so I find it beneficial to use software that can auto email statements, receipts, notices, late payment warnings and fees. The software takes the human emotion out of the equation and tenants react to it like they would getting a bank fee or credit card fee which leaves little room for the typically excuses as well as having to deal with them. I do explain the lease in great detail with every tenant and there are repercussions for not paying on time other than the fee. Example being if a tenant pays on the 8th every time while they do not get a late fee they are still considered late which reported if used as a future reference. My system is not for everyone but if you have adequate cash reserves it works pretty nicely.
Interesting that the private housing industry is the most unprofessional and poorly operated business in existence in my opinion. Every business for the most part is customer oriented yet housing, which in my opinion is the most important, is not treated as such by the providers.
Most private housing providers treat the business as a hobby unfortunately.
I believe tenants are far more secure and more fairly treated by professional/corporate landlords than hobby landlords due to consistency of policy enforcement. Many private landlords allow personal attachment to interfere with business decisions and makes them appear, at times, bat s**t crazy.
(bat s**t crazy is my opinion of the private industry in general and not directed toward any individual landlord)
It's simple, follow the rules. If rent is due on the 1st, and they have not paid by x date, send them a notice to pay or quit. If they don't pay in FULL by the time the notice told them, take them to court. You can dismiss the summons if they pay it in full before the court date. Do tell them that they only get one dismissal. The next summons for payment, you see through to the end. My state only allows one dismissal per 12 months for rents due. Otherwise you will be a landlord that more success landlords buy property from for pennies on the dollar.
This late pay pattern compounds over time and units. So you have a few units today that don't pay on time, up to a month late at times, or more.. then you double your portfolio and the number of late pays double, then a few other tenants hit hard times, suddenly you go from just a few to most your portfolio is late paying. That's when the vacancies come along, and your now down even more.. Then repair cost kicks in for them vacant units, and now your losing thousand of dollars per month, and your struggling to pay your mortgages, taxes, and insurance.
I see this type of landlording everyday. It's the type of deals I look for. Last Friday, I closed on some properties, the landlord had given up and just clocked empty units for over 3 years because he could not afford to chase down the non-paying units, could not pay to evict, and could not pay to repair, so it became cheaper to just leave units sitting vacant while he only paid the bank note. He sold me all his units for 10-15k less per unit than what he had paid for them over the years.
Make rules, and make yourself and the tenants follow them.
Interesting that the private housing industry is the most unprofessional and poorly operated business in existence in my opinion. Every business for the most part is customer oriented yet housing, which in my opinion is the most important, is not treated as such by the providers.
Most private housing providers treat the business as a hobby unfortunately.
I believe tenants are far more secure and more fairly treated by professional/corporate landlords than hobby landlords due to consistency of policy enforcement. Many private landlords allow personal attachment to interfere with business decisions and makes them appear, at times, bat s**t crazy.
(bat s**t crazy is my opinion of the private industry in general and not directed toward any individual landlord)
I see your point, but almost all industries allow significant leeway in their business when asked. Ever accidentally overcharged a credit card, forgot to pay a bill, or misjudged an expense? Generally if you're a good customer, the business will forgive any late fees and often even set up a payment plan. I'm not saying landlords should let themselves be taken advantage of, but often accepting a payment a few days late costs nothing, while an eviction or vacancy is very expensive.
I have this exact situation. The former landlord let her get away with it. And I have to. I have spoke with her in person about it. I did like her and I know the other tenets like her. She has tried to catch up but it is difficult if not impossible for her. I have gone against my own philosophy and made an exception for her. She pays by the the 20th each month or there is a late fee (I have not charged her a late fee yet). She talks with the manager of the complex monthly, yada yada yada. I made a judgement gut call, which I never feel is smart in this business. So far so good hopefully it won't bite me in the butt. A guys got to sleep at night, and I know people made exceptions for me when my life wasn't going real smoothly.
Best of luck
The underlying problem is that tenants do not make mistakes (usually), they intentionally take advantage of landlords because they choose to place the landlord at a lower priority than all other financial commitments. Those other business are the ones getting paid instead of the landlord yet having a roof over ones head should be their number one priority in life.
Why do they choose to pay rent late or partial, because they believe the landlord is powerless to stop them. They pay those they fear the most.
Cost is irrelevant it is attitude that is wonky. Why do landlords think it is OK to be placed at the bottom of a payment priority list. When a tenant pays late the message they send their landlord is S***w You. The landlord should respond with, No S***w You here is your invitation to leave so I can find a tenant that respects our relationship.
On the first of the month a tenant hands their landlord partial rent a says, Here is the rent I am a little short so S***W You, I mean sorry.
As a landlord I do not choose to provide housing to those with a S***w You Mr. landlord attitude.
I think an important detail in this thread that everyone has overlooked is that the current tenant is on an existing lease.
That being said, you need to thoroughly acquaint yourself with the terms of that contract to determine whether or not you can charge a late fee. If the lease doesn't provide for it, you can't legally charge them a late fee.
You can, of course, have this woman sign a new lease (or amendments) at any time, but she is not required to.
I agree with most here that she is not a good tenant if she is paying late. This is a business. Treat it like one and you will reap the returns. If she is not paying you, she is paying someone else. I can guarantee no matter how low-paying her job is, her monthly net income is more than her rent.
@Ashley Schroeder I use Buildium. It is web based software that is updated frequently - click the name to check it out.
There service is not free so it may not be viable unless you have some units for it to make sense. I manage my own properties instead of using a property management company so the cost for me makes sense.
But there are tons of other paid and free management software out there.
just google rental property management software and you will find tons. Cozy, Quicken, rentpost, appfolio etc.
Buildium allows me to enforce rules without being the bad guy and lets me collect payments in the form of electronic check, debit card, credit card or good old fashion cash. If you have questions about it let me know I would be happy to help you.
I think right now is a good time to set a new precedent for this particular renter. You want to be her priority #1, not whatever else is occupying her pocket book instead of rent these months. You could encourage her to switch over to automated ACH payments with a discount perhaps. Something that would be compelling to her to save a few dollars each month, and compelling to you to get rent on time every single month.