3 Questions of a new Landlord

5 Replies

        Hey Everyone!,

        I just recently bought my first rental and i've got some basic questions.  Any help regarding below would be GREATLY appreciated.  THANK YOU!

        1.)  What do you suggest regarding a pay schedule for tenant. 

        A.) Should you give them the option of which day of the month is best for them so they can pay you timely?

        OR

        B.)  Pick a random day of the month say the first and stick with that date?

2.)  What do you suggest for methods of payment? Cash, Credit, Check, Direct Deposit?

A,)  I was thinking either Direct Deposit or Check

3.) What do you suggest for late fees?  I have a 5 day grace period i'm willing to give. But not sure whether or not I should go with a daily fee for each day or a one time charge for that fee.

Thank for the help guys much appreciated.

I'm also new to this, so take that into consideration:

I currently take cash for my rental, but am investigating forms of direct deposit.

I collect on the first, but this date was chosen by the tenant as the most advantageous day for her to pay. As long as i collect before the mortgage is due, im pretty comfortable.

Havent had to deal with late fees yet, but my lease states 5% after 5 days.

Originally posted by @Nick Ferrari :

        Hey Everyone!,

        I just recently bought my first rental and i've got some basic questions.  Any help regarding below would be GREATLY appreciated.  THANK YOU!

        1.)  What do you suggest regarding a pay schedule for tenant. 

        A.) Should you give them the option of which day of the month is best for them so they can pay you timely?

        OR

        B.)  Pick a random day of the month say the first and stick with that date?

2.)  What do you suggest for methods of payment? Cash, Credit, Check, Direct Deposit?

A,)  I was thinking either Direct Deposit or Check

3.) What do you suggest for late fees?  I have a 5 day grace period i'm willing to give. But not sure whether or not I should go with a daily fee for each day or a one time charge for that fee.

Thank for the help guys much appreciated.

 Hi Nick, congratulations on your first deal. 

I am fairly new to this also so I will tell you what I have picked up from much more experienced and smarter people.

1: Never accept cash...you are just asking to be robbed :) Money order, cashiers check, personal check etc. I wouldn't have them coming to your house to drop off rent either (I am buying from a couple who have their tenants come to their house to pay them rent). 

A few ways to go about it...

a: Online...there are lots of property management software that can easily handle this, many for free e.g cozy, tenant cloud, unit dash, verticalrent etc.

b: Pay into your bank account directly...ie they drive to your bank and deposit into your account. Some people say have a separate account and move the money out as soon as they deposit it. I've never heard anyone say a tenant was able to access they money after they deposited it so this may be overkill.

c: other services like 'pay near me,' dwolla etc

d: Mail the check...get ready for the occasional "my check got lost in the mail" excuse.

2: Make your rent due on the 1st without exceptions other than grace period. It may not matter right now that you have one property but when you keep adding units and everyone is on a different pay schedule, it becomes a headache to keep track of who is on time and who is late...everyone pays on the 1st, easy to see who is delinquent.

3: Get very familiar with your state landlord tenant laws ASAP. There very strict rules for what you can and cannot charge. In my area, I cannot charge more than 10% of rent in late fees. Seriously though, google that and download it (yes it is a beast to get through). Follow the rules to the letter. 

4: Get this book and read cover to  cover : https://www.amazon.com/Book-Managing-Rental-Proper...

and/or this one : https://www.amazon.com/Landlording-Autopilot-No-Br...

Congrats again and good luck.

1. You should do as most PMs and Landlords do, and have rent due on the 1st. A tenant should be used to this and not surprised by this. If you change due dates for tenants because it "aligns with their paycheck better", you can almost guarantee that they'll still pay rent late. Then, also, you do not want different tenants to have different due dates because that creates a lot more work for you. Now you have several dates to keep up with. Trust me, it doesn't sound like a lot, but with multiple tenants, details can easily get mixed up and then cost you.

2. They should only pay via some sort of online rent-paying system, direct deposit into your account, or mail. If they send by mail, you should state that rent must be RECEIVED by the due date so that they can't use the "it's in the mail" line. There are tons of online systems to use that you can google and read about. I do not recommend cash. Again, creates more work (and risk or robbery of course). There is no papertrail with cash to help you prove payments. And with cash, you now have to go to the bank.

3. Give no more than 5 day grace period. When I was managing on my own, I gave 3 days. Going back to my theme of not creating more work for yourself, I recommend a flat late fee. If it's a late fee that increases by the day, then you have all this extra work to figure out, and then you also have to be sure you don't accidentally charge a higher late fee than your rental area legally allows. If my tenants rent is late if not received by the 5th, then at midnight on the 6th, the full legally-allowed late fee is charged. You should also quickly follow this up with the first step in your eviction process so that they know you're serious. When they pay the rent, you can simply cancel the eviction proceedings. If they don't pay by the promised date, then you just keep that process humming along.

First: download your state statutes and learn them. That will help you keep things legal on your part.
Second: You can draft your leases for payment at any time but I have found that having all rents due at the same time makes it easier. Once you get several units, you don't want to forget "Joe" had his due on the 14th!
Third: Remember, security deposits do NOT belong to the landlord. Deposit them as required by law. If you have the option, forget the interest bearing accounts if you have to pay that to the tenant. That will be time consuming and even more work if segregated into one account and then having to divide up the interest received.
I would use a standard lease--possibly one adapted by your state association. They are usually pretty thorough.

I do not allow tenants to choose a pay date. I do have a late policy that attempts to deal with situations that cause tenants to be late in a manner that encourages communication and follow through and that eliminates habitual lateness. In addition to a monthly schedule, I also offer a bi-weekly schedule (at an additional cost) that allows tenants to elect to pay every two weeks on the Sunday closest to their pay day. If we were not using an online property management program this would be  too big of a pita but it has turned out to be convenient  for use especially when we are remodeling because we get a little scheduled cash flow in the middle of the month.

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