Hello Fellow BP'ers!
So, I've been renting to the same tenants going on 3 years! Exciting, yes. Everything has been fairly uneventful with them - except for having to replace the whole HVAC system the first summer they were in it because it failed (not their fault) - and they do take really good care of the property, they get along with the neighbors, and have even fixed a couple things themselves - like a leaking toilet. Great, right?! Well, about 3 months in, they were late with the rent. No big deal, they gave a reasonable excuse, but then it became a habit. Now, I have noticed that they are on the same pay schedule as I am with my work and have always made the rent payment no later than that following paycheck. So, it seems more of a lack of budgeting. However, that's not an excuse and I know I should've nipped it in the bud.
Any who, I'm getting ready to move and rent out the SFH we're currently in and I want to do everything right from the start on this one and fix the issue on the current one.
So, my question for the problem child is, would it be fair to offer them two options: 1) Keep things as is - not enforcing the late payment, but raise the rent $50/month or 2) Keep rent the same, but enforce the late payment policy?
Things to note: I have not raised the rent at all in the 3 years nor have I charged them a late payment. Reason for the lack of rent increase is I'm charging a fair amount, if not just slightly under market value, based on my area and the size/square footage of the home. I technically could raise it a bit, if I wanted.
Thank you all, in advance!
If you just raise the rent and still don’t enforce your own late fee policy, the problem is just going to continue...and maybe get worse because they’ll have to come up with more rent money and there’s still no incentive to pay on time. My advice, if you’re already at fair market rent, is just start enforcing your late fee so the tenant has an incentive to pay on time and you end up with more money if/when they pay late. The goal should be to have rent paid on time. You do that by enforcing the terms of your lease.
This may be difficult to read but your tenant isn’t a “problem child” in need of training. You need some Landlord training before taking on another tenant.
This is a very common scenario with landlords who have just one tenant. They say the tenant is “easy”....if only they would pay on time. I promise you: looking the other way while multiple tenants break your lease agreement will be bad for your business.
The best way to enter your next lease agreement is to correct this current situation. Once you do this, you’ll have the experience and confidence necessary to enforce future leases.
Call your current tenants and explain to them that you are committed to enforcing the current lease, nothing more, nothing less. When they pay late they must include the late fee as agreed. Then, if they pay late and don’t include the late fee, it means they are challenging you. Rise to the challenge and demand the late fee, legally if necessary. One of two things will happen: they will pay on time or you’ll make more money.
Do not cave; you can do this! We’ve all been there, and you really do need this training. Your life will be easier, especially if you plan on having multiple tenants.
I would guess the late payer is doing this simply because they can.
Rent is not a priority for them. And it does not seem like getting it on time has been a high priority (or at least a communicated clearly to the tenant)...
It is one of those crucial confrontations (as the book title goes). They are breaking a promise monthly to you.
But, don't fret, I would not go strong arm them and start beating on the door. Instead, suggest a meeting.
Have a script. Have a clear message and angle.
For example, I might say something like: I wanted to meet to let you know am moving from a flexible hobby landlord to a real business next month. It is the next level. I am excited about growing. And I would like to keep you as a tenant in the process, but I can no longer pay your rent every month (explain you are literally making the mortgage payment out of your own funds to keep a roof over their heads). With more rentals it will not be mathematically possible. Not possible. No wiggle room. Zero. So I will putting a notice to pay rent or quit the premises (move out) on the 3rd as a prerequisite to the eviction process (at this point their ears perk up). I want to keep you as a tenant (you are not evil after all) so I want you to know ahead of time. I am really hoping we can keep the arrangement working in my next level as a landlord but it will be entirely up to you. If they balk or drag their feet, then set a move out date(at end of lease or end of month if month-to-month).
Or you may have better script or angle but since you have been taking the late rent you have a tougher task having rewarded the behavior some.
With the new tenant, make sure the timely rent payment policy is emphasized and enforced from the on-boarding process.
Best of luck!
@Michael Boyer Wow!! What a great script!! I’m saving this one!
Obviously your tenant is not the problem it is your business practices that are the problem. You basically have no business practices. At this point it will be extremely difficult to change the way you have set their payment schedule. Easier to wait till you change tenants.
Another sign that you have no business practices in place is your lack of yearly rent increases. Cost of living goes up every year and so should rental rates.
It is obvious you are a hobby landlord if you believe your rents are at market after 3 years of no increases.
No rent increases, no late fees, no notices of pay or quit........your tenants are the least of your problems........good luck changing yourself.
Thanks for all the feedback everyone! I truly appreciate it! I definitely could've used better terminology with the tenants - yes, the problem is me. People will only get away with what you let them get away with.
I know I have tons to learn, process/practices to change, create, and implement.
@Thomas S. Yes, I admit I have been a "hobby" landlord, but I am going to change that. I appreciate you taking the time to post and point that out.
@Denice S. It wasn't, I could've used better terminology in writing my post. It is me that's the problem for not taking the responsibility of landlording seriously, but I'm going to change it. And I appreciate the feed back!
@Kyle J. Makes sense and I appreciate the feedback!
@Michael Boyer So, I've been trying to schedule a date to meetup with the tenants to discuss the transition, but it's never a good time for them - work schedules, prior engagements, etc.
They've mentioned doing it over the phone or thru IM would be fine with them, but I really feel this should be a face to face discussion. At the same time I would like to get this done sooner rather than later.
Would a formal email suffice, if nothing else to notify of the transition, and to have wording in there to tell them I'm more than happy to have a face to face discussion for questioning?
Again, thank you for your initial input and suggestion, I truly appreciate it!
Hi Dominic, I think several landlord books mention when the rent is late (and this is a late rent discussion), you send a strong message when you show up (like at their door).
So I agree with your idea of the in person meeting. I think you drop by.
And next time they are late, you just post the official notice (like big on their door or certified mail) to pay rent or quit the premises (or whatever terminology and process you use in WV).
A perennially late tenant that is being evasive may not even be one to retain. I would look at non-renewing the lease or giving notice if month to month (don't recall your exact facts from earlier).
Best of luck
@Michael Boyer Thank you again for your quick input on my topic. FYI, the idea to show up and explain the transition was YOUR idea lol! However, I don't believe I can just show up without scheduling something. For one, I need to make sure they are going to be there; and two, the lease stipulates for maintenance, inspections, etc I need to give at least a 24 hour notice. So, while they don't need to be there, I do need to let them know. So, I could tell them I'm going to show up on 'X' date to discuss an important topic, but they aren't required to be there and that would defeat the purpose.
So, I'm going to try to schedule something for this weekend and if we can't agree on a date/time, I'm going to draft a professional email explaining the situation and the transition from a hobby landlord to a professional business, following your wonderful guideline above, which is not untruthful either. I am expanding my business and am actually looking at several multifamily properties with my brother to partner on, so it is definitely exciting times!. While it won't have the same impact, I'm sure the first time they are late after that and there's a notice on their door, they'll get the point I'm serious.
Thank you again, kind sir!
My favorite quote is "There's always enough time and money for what's important to you," it goes for everyone, regardless of income, age, everything-- if it's important, money or time is available! Rent not important? Money isn't there! Rent is important-- it gets paid!
Check your state laws, if you can offer rent at a discount if paid by the first, I would! We had a habitually late payer, and instead of raising rent, we told them "it's the same if you pay by the first, $25 after that, and then $25 late fee" and this has worked for 90% of our tenants, and the ones that CHOOSE to pay later, pay more.. simple and easy, it's their choice! I have forgiven a late fee, but it's only when communication is strong, and it's always only been a 1x deal. I would NEVER forgive it 2x in a row, then it's a habit in how they treat you. You're training them how to treat you, and how to rank you! The more you think about late fees as a **CHOICE***, and not a fee, the better!
If you haven't already, have it done online.. we use cozy.co, and it can easily be verified if they pay or not, and you could stress that it can be set up to be automatic, so it's a zero stress for them!
Lastly, if I were in your shoes, I'd put them on a M2M lease, whether it's them not prioritizing you, or straight up having money problems, it will be easier to end things this way if it comes to that!
A-okay! To each their own...
Everyone has their own style. I think I would stop by so they get the clue and connection (no rent in the mail means we get a Dominic visit--not an avoidable, agreed upon potential, possible some time in the future Dominic visit).
But keep in mind: it is your property.
Yes, you want proper notice to go inside but not show up at the door.
To just stop by you are within your rights to do that--there is not any tenant expectation they won't get a visit by the owner (especially if chronically late and playing hide and seek).
The tenant profile tells me they may just use your date/time appointment to be gone.... or unavailable. Again....
Your name is on the title, you pay the mortgage--so you can show up on the outside of the premises for a reasonable purpose. It is your right.... They have lease of the premises not a protective bubble to prevent you stopping by.
I am all for leaving great tenants alone for quiet enjoyment--but the catch is they have to meet their side of the deal (paying rent, following rules, responding, etc)... This seems not to be the case--hence you get to be a slightly more ubiquitous presence in their life until they follow the terms of the lease.
You could even work over there--and that may be a time to talk if they are around.
But I think you have a classic series of failed promises by them (to pay rent on time) and may want to think about a Crucial Confrontation (not violent of course--just verbal) by the book of the same title-- or start the wheels turning on getting these professional tenants on the way out.
You may have to exercise that "no muscle" some and set some expectations.
You might have a line of great tenants out there that pay on time and may wonder what took you so long when you say "bye" to these folks.
Honestly, if you are hesitant to stop by your own property without an appointment I might think about hiring out management. It may be you are more inclined to be an investor/owner (which is great) and it could be you profit from hiring the person that would already have these folks in line or long gone and getting you a worry free stream payments from your property.
Best of luck!
This is a interesting business in that tenants either train their landlords or landlords train their tenants. For some strange reason tenants never seem to have any compunctions about breaking rules but landlords, espically new ones, usually have difficulty enforcing them. Odd if you believe the landlord is suppose to be the one in control. Personally I enjoy training tenants but for some reason may do not consider this to be a essential part of a landlords responsibilities. This is the primary reason there are so many bad tenants.
Anyway that aside I have always had a strict policy of sending official business letters as a follow up to all communications regarding tenant issues. Whether it be by phone, meet in person or use email it is always followed by official written notice. This is mandatory if you are stepping up to a profesional level. Copies need to be kept in your personal files of every landlord/tenant communication.
This is another situation that provides strong support for M2M leases. Leverage.
You should also be aware that aside from for emergencies you may not enter on to a property without written notification in the case of a SFH. This applies to the entire property not just the building. The exception being that you have the right to enter to post official notices on a tenants door. You may not engage with a tenant without either written notice or invitation by the tenant.
In the case of a multi unit you may enter any common areas without notification and may legally knock on the tenants door assuming it opens onto what would be considered a common area.
Instead of face-to-face, I'd send written notice that rent is being raised to x amount beginning whatever date is required notice by your lease or landlord/tenant laws, and that late fees will be charged unless received by grace period in lease (my lease says 5th of month before late fee is charged). It's also in my lease that if they mail payment, it must be in my possession by due date, no leeway for mail issues, so the burden is on them to mail it early or take the hit if I don't get it in time. Make sure you have tracking (certified, Priority) so proof you sent it, or post it on the door & take a picture, or hand them a copy, even if you discuss it face to face, to protect yourself. And then enforce the terms.
@Dominic Scatto lots of good advice from others on how to handle this.
One word of caution, only take action here if you are ready to follow through. In other words don't charge a late fee if you have no intent on collecting it. If they refuse to pay fees, be ready to proceed to eviction. I doubt it will come to that, but the worst thing would be "getting tough" then not following through again.
I would give them a rent increase and tell them you are enforcing late fees going forward. I would be fine sending them an e-mail and mailing a copy of the notice. Anything I can do over the phone, text or e-mail saves me time and money. Just explain that you have bills and taxes, so you need prompt payment. I would also make it clear if they are unable to commit to paying rent on time, that you need to get someone different in the property. Don't be scared of them leaving. Every other landlord is going to expect on time payment, so it is not like you are being difficult asking for what is normal for the other 99%.
Another way to look at this. If you purchase more properties and start enforcing late fees on new tenants, it is not legal to treat your old tenants differently. I tell tenants I am legally required to enforce my late fees on everyone. It would be discriminatory to enforce the policy on one tenant and not another.
One thing to consider, "Does your late fee send a message to not be late?" A $25 late fee doesn't send the same message as $100 late fee. I use 10% of rent for the late fee. Remember the lease is the ground rules for everyone to follow. This tenant won't change until you replace them especially if they are avoiding you. I would give proper notice and do a walk thru of the unit to check the state its in. Take pics and or videos.
enforce the late fee
Thank you everyone.
I have been considering hiring a property manager, but I did want to experience doing it myself for experience and to help to know what to look for in one. I've been calling around to different property management companies. So far, they've told me they would have to have the manager call me and explain the details to me - which I thought was odd. Shouldn't the receptionist know the basics - like the costs and what they provide?
@Linda D. Thank you for your input, I appreciate it! Yes, I have tried to get them to pay online and have even offered to come over and help them get everything setup, but they weren't for it. I even tried to explain all of the benefits and the time it would save them from having to drive to the bank to deposit it - as they have been. They didn't want to go with it.
@Michael Boyer As Thomas pointed out, it's a SFH and I can't just stroll up to talk. Hiring out has been on my radar. Thank you again for your input, as always!
@Thomas S. Great idea! Does it depend on the state you're in or the lease, if an email would be considered as official? I'm not saying sending a certified letter is a bad idea (I'm going to that in this case), I'm just curious why one wouldn't be able to print out the email and file it, or just save it on the computer or Google Drive in my case?
@Lynn M. I'm going to have to go that route, and it'll probably be best. Thank you for taking the time to post!
@Jim Adrian It's a $50 late fee.
@Joe Splitrock I'm definitely ready to follow thru. They do take great care of the property, but they are late more so than not, and they always do pay, but I need to be consistent across the board - as you stated. Honestly, them being late is more money in my pocket, but I need to start enforcing it and collecting that money. Thank you for making that point!
Sounds like they are paying late because they know they can without repercussion. Why not, right? I would just let them know that starting next month you will start charging the late fee outlined in the lease and let it play out from there.
As far as the new tenant goes I recommend making the late rent fee automated. If you haven't marked a payment as received then it automatically sends the late fee to the tenant. There are a lot of programs out there that will let you set it up like that. We use buildium, but there are less pricier programs for smaller landlords also.
Your tenant is on a month to month lease so you can rewrite a new lease at any time and require them to sign and abide by the lease or if they refuse you can give them a 30 day notice that you are terminating the lease and they must move.
You are not in a precarious situation and it is very easy to fix everything without a lot of fear or work.
1. Put together a new lease.
2. Raise the rent by $50.00 in this new lease.
3. Rewrite your late fee policy. Make it a late fee of $50.00 if one day late and then $7.00 each day it is late after that. This will hurt if they are late and the pain will be the best teacher.
4. Do all of these changes through official letters since they will not meet with you and seem to be avoiding you. If they continue to avoid you you will have to send them a lease termination letter and make them move. Use this as the only option if they do not sign the new lease within say "5 business days".
I will assure you they know they have a good landlord, are getting a property at a great price and know that they should be paying rent on time but are choosing to not pay it.
They will not move because even with an increase they are getting a great deal.
Now, once you implement this new lease and late rent payment policy stick to it. Do not accept any rent payment without the entire late fee included. If they mail a check and it is only for the rent but no late fee's return it to them and immediately post the notice that they are late on rent and you will be filing an eviction if not paid within (whatever the law says for the number of days in West Virginia) number of days. They will test you because you have worked hard at proving you are a very nice person.
You still will be a very nice person but this is not personal and you are only abiding by the lease as you and they agreed to.
You can do this and will learn from it. Don"t waste your money on a property manager for one SFR.
A $50 late fee isn't high enough in my book but not sure what your rent is so it could me sense. I like a flat fee as its easier to remember and calculated than a fee per day late.
@Michael Noto I use Rentalutions (and have tried to get them use it, even offering to come over and get it setup for them) and have it setup to remind them via email and I will be switching on the auto-late fee charge feature after I get the email out. I can't force them to use it, can I?
@Michael Jones It's a year lease, not month to month and the late fee is $50, but I do live in WV. The property is about 45 minutes away in VA, so not too terrible. I'm still drafting the email that I'll be sending, but will have it to them by tonight.
Thank you both for the input!
@Jim Adrian The rent for the 3 bed 2 bath SFH of about 1100sqft is $1100/month. According to rentometer.com, I'm about avg for rent in that area for that type of home. I could go higher and do plan on raising the rents at lease renewal by $25.
@Dominic Scatto when does their year-long lease expire? Does your state allow you to raise the rent mid-lease? I don't know the laws in your state, so do check carefully.
If they are consistently late with rent, why would you consider renewing the lease?
@Susan H. It expires at the end of October and we can't raise rents mid-lease. They take great care of the property and don't complain or nit pick and they always pay. Them being late just means more money in my pocket, I just need to enforce it.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.