Billing your Tenants for Rent

9 Replies

Billing Your Tenants for Rent

RENTS DUE ON THE FIRST OF EVERY MONTH!

It took about a year for me to develop a plan. Tenants were paying their rent any time they wanted to during the rental month. Since I handled my own court cases and owned a lot of properties, I spent a lot of wasted time, typing up the Quits, the Summons and Complaints, to only have the tenants pay their rent just under the wire.

My husband would always say, well just think of it this way, we’re getting extra income. ($25.00 for late fees every month) and true we were, but I also worked on the houses, fixing them up, painting garages, handling court cases, solving tenant problems and more. And it just wasn’t worth it to me to go through all that work, worrying about whether or not a tenant would pay, whether I’d have to go to court, and if so, a lot of time preparing my case, (making copies of all their leases etc) to have them pay after I’ve typed everything up. Plus I didn’t want to be in court every single day of the month. Gosh, somewhere along the way, I needed a life!

So I made all rents due on the 1st of every month, and I would pro-rates rents in order to get all of them due on the 1st of every month. My lease agreement stated that if rent was not received in my office on or before the 1st of the month, then their rent was late and they would receive a Notice to Quit for non-payment of rent. And if rent was not received in my office on or before the 5th of the month, they would receive a late fee bill for $25.00.

So I set up QuickBooks® to automatically bill my tenants for rent that is due, 10 days before their rent was due. (I figured if my vendors send me a bill 10 days before the bill is due, then why can’t I treat rent as a bill and send it to my tenants 10 days before their rent was due). So I tried it. And, low and behold, the next month mostly all my tenant's rents were received in my office on or before the 1st.

You see I chose tenants who paid their bills on time when I qualified them for my rentals. And because most landlords haven’t done anything about rent coming in late, tenants just accepted that as being normal, not realizing that paying rent anytime during a rental month was not okay, therefore, they didn’t view the rental contract as a legal contract that actually had a due date! So when they received the bill in the mail for rent that is due, and it clearly said so on the Invoice that it was a bill, the tenants viewed it as a bill and rents came in and on time.

The few tenants who didn’t pay on or before the first and received the Notice to Quit the next day, (the 2nd of the month) would call my office and rant and rave about it. And, I would just tell them, to not worry about the Notice, it’s just to let them know that I haven’t received their rent yet. And, that it doesn’t become a legal document unless they don’t pay their rent which definitely had to be in my office on or before the 9th of the month or on the 10th I would have to file the Notice to Quit in a court of law.

I told them that in actuality it helps them to see that if they did pay their rent, that I haven’t received it yet and gives us time to find out what happened to their money. If they said they mailed it, I would ask for them to send me a copy of the check or money order.

Those tenants that got tired of receiving a Notice to Quit on the 2nd of the month, began paying their rent before the 1st because they didn’t want to receive that dastardly Notice to Quit. Therefore, it was a win-win situation. And I lived happily ever after.

Just a little tip.

Nancy Neville

The system I use is similar with a definite difference. Fortunately for me even though I am in a highly tenant friendly location I can file on any tennat that does not pay by midnight on the first and it will cost the tenant $190 every time. 

When screening applicants I make it clear that regardless of the excuse I do not tolerate late payments. If a tenant pays late more than three times I serve them with an eviction notice and follow through. In my jurisdiction we can not simply non renew a lease and therefor must evict to get rid of any tenant. Late paying tenants are bad for business and if they can not be retrained they are definatly not worth keeping.  Many landlords use the excuse of the cost of turn over in getting rid of bad tenants as a deterrent to non renewing a lease but what it really boils down to is a reluctance to have to actually manage their business.

In my situation it is extremely rare that after the first time paying a penalty of $190 that a tenant will pay late a second time. However if they do not learn they will not remain as my tenant.

Originally posted by @Thomas S. :

The system I use is similar with a definite difference. Fortunately for me even though I am in a highly tenant friendly location I can file on any tennat that does not pay by midnight on the first and it will cost the tenant $190 every time. 

When screening applicants I make it clear that regardless of the excuse I do not tolerate late payments. If a tenant pays late more than three times I serve them with an eviction notice and follow through. In my jurisdiction we can not simply non renew a lease and therefor must evict to get rid of any tenant. Late paying tenants are bad for business and if they can not be retrained they are definatly not worth keeping.  Many landlords use the excuse of the cost of turn over in getting rid of bad tenants as a deterrent to non renewing a lease but what it really boils down to is a reluctance to have to actually manage their business.

In my situation it is extremely rare that after the first time paying a penalty of $190 that a tenant will pay late a second time. However if they do not learn they will not remain as my tenant.

 Where are you located?

Originally posted by @Account Closed :

Billing Your Tenants for Rent

RENTS DUE ON THE FIRST OF EVERY MONTH!

It took about a year for me to develop a plan. Tenants were paying their rent any time they wanted to during the rental month. Since I handled my own court cases and owned a lot of properties, I spent a lot of wasted time, typing up the Quits, the Summons and Complaints, to only have the tenants pay their rent just under the wire.

My husband would always say, well just think of it this way, we’re getting extra income. ($25.00 for late fees every month) and true we were, but I also worked on the houses, fixing them up, painting garages, handling court cases, solving tenant problems and more. And it just wasn’t worth it to me to go through all that work, worrying about whether or not a tenant would pay, whether I’d have to go to court, and if so, a lot of time preparing my case, (making copies of all their leases etc) to have them pay after I’ve typed everything up. Plus I didn’t want to be in court every single day of the month. Gosh, somewhere along the way, I needed a life!

So I made all rents due on the 1st of every month, and I would pro-rates rents in order to get all of them due on the 1st of every month. My lease agreement stated that if rent was not received in my office on or before the 1st of the month, then their rent was late and they would receive a Notice to Quit for non-payment of rent. And if rent was not received in my office on or before the 5th of the month, they would receive a late fee bill for $25.00.

So I set up QuickBooks® to automatically bill my tenants for rent that is due, 10 days before their rent was due. (I figured if my vendors send me a bill 10 days before the bill is due, then why can’t I treat rent as a bill and send it to my tenants 10 days before their rent was due). So I tried it. And, low and behold, the next month mostly all my tenant's rents were received in my office on or before the 1st.

You see I chose tenants who paid their bills on time when I qualified them for my rentals. And because most landlords haven’t done anything about rent coming in late, tenants just accepted that as being normal, not realizing that paying rent anytime during a rental month was not okay, therefore, they didn’t view the rental contract as a legal contract that actually had a due date! So when they received the bill in the mail for rent that is due, and it clearly said so on the Invoice that it was a bill, the tenants viewed it as a bill and rents came in and on time.

The few tenants who didn’t pay on or before the first and received the Notice to Quit the next day, (the 2nd of the month) would call my office and rant and rave about it. And, I would just tell them, to not worry about the Notice, it’s just to let them know that I haven’t received their rent yet. And, that it doesn’t become a legal document unless they don’t pay their rent which definitely had to be in my office on or before the 9th of the month or on the 10th I would have to file the Notice to Quit in a court of law.

I told them that in actuality it helps them to see that if they did pay their rent, that I haven’t received it yet and gives us time to find out what happened to their money. If they said they mailed it, I would ask for them to send me a copy of the check or money order.

Those tenants that got tired of receiving a Notice to Quit on the 2nd of the month, began paying their rent before the 1st because they didn’t want to receive that dastardly Notice to Quit. Therefore, it was a win-win situation. And I lived happily ever after.

Just a little tip.

Nancy Neville

I have a slightly different way of doing things that the normal. It has been working out great for me.  I have few Section 8 tenants, and the money goes in the account on the first of the month (paid by the Housing Authority). I have given my Deposit Account number to them, and they go and physically deposit Money Order or Cash for their part. They are very diligent, as they know that being late or not paying would result in termination of their benefits by the Housing Authority. 

The ones who are not Section 8, I give them 2 options. One is straight forward. Pay on the 1st (Grace Period until 5th). On or after 6th there is late payment of 10%.  After 15th of each month there is late payment penalty of 20%.  I don't mess around with this.  If they choose Option A, this is what they have to be OK with. 

Option B is much better for most people. They provide my Bank Account to their payroll. The employer splits the check into 2 parts. I get paid every 2 weeks. Part of their paycheck directly gets deposited in my account.  This way, I also know how responsible they are. If they have a stable job, and can hold a stable job, there shouldn't be any changes to their payroll all that often.  Them paying me every 2 weeks allows me to get 26 payments for 1 year. I keep the extra 2 payments.. If they choose this option, its spelled out in the lease that there will be 26 payments.  The extra 2 payments is my premium for waiting 2 weeks to get fully paid. 

I don't want to do all these creating invoice and all.  Too much work. I'd rather take the money at the source... From their employer.. 

Its amazing how this works.. They never see the money, so they will never spend/ waste it. 

I believe in carrot and stick.

Pay on the 1st take $50 off your rent. 

Pay on the 1st - 5th  pay regular rent

Pay after whatever max penalty possible.

I can’t imagine not making rents payable on the first. And prorate if they move into property in middle of a month. And I charge the max penalty allowable under state laws.

I’m not as nice to my tenants. They have 3 days after the first to pay. Then they are charged 25 dollars a day. All late fees and costs occurred during the late rent will be paid first then their rent. It makes their lives hell when their rent is late and isn’t paid in full. Other than that I try my hardest to fix everything and help them out when I can. But there is a mutual understanding: Do right by me and I’ll do right by you.

I’m glad you found a system that works for you. I tell all my tenants at lease signing that I do not excuse late fees for any reason. In the State of Connecticut, I cannot charge a late fee until the 11th of the month since my rents are due on the 1st. I charge $100 on the 11th and $10 every day after that until rent is paid in full. I start the eviction process on the 1st of the following month.

@Account Closed So you mail them a bill every month? Every tenant? You print invoices, stuff, address, and stamp envelopes, and get them in the mail to arrive by the 20th of the month, and that is less work than you were doing before?

And when you mail your Notice to Quit do they actually receive it on the 2nd, or is that when you send it? 

Mail in my rural area is very unreliable since the USPS instituted a "brilliant" plan to "save" money a couple of years ago. Before the improvements I could hand a letter to the clerk in the post office and they would postmark it and put it with the local mail for delivery the next day. Now all mail must go to the regional sorting center 75 miles away. From there, the truck takes it past our town to the post office at the next town, 10 miles away, where it is given to a rural carrier to bring back to our town for delivery. A letter mailed on Monday will not be delivered before Wednesday, and more likely Friday.

If I want the tenant to receive a notice of the 2nd, I have to hand deliver it or mail it no later tan the 30th.

Hello Sylvia:

I am a true believer in making money and making money comes in many forms.  Monetary and "TIME". 

My method is all about "Training" my tenants.  Teaching them that a Lease Agreement is a legal contract with a start date and an end date and actually has a rental due date. 

It was nice receiving $25 each month for late fees, but the time I spent on supplies to prepare for the eviction process, e.g., The Notice to Quit, the Summons and Complaint and then having to go to court, and the filing fee's involved, etc., was costing me more in TIME (and money for forms) than the cost of a postage stamp or an envelope.  (In today's world you can send them a bill via E-mail in QuickBooks, so no stamps or envelope needed anymore if your tenants have a computer, and I don't know of any tenant who doesn't.  

I chose tenants who paid their bills on time.  So it wasn't like I was training them to pay their bills on time, but to actually show them and get them to recognize that their rent does actually have a  due date.  That is what is lacking in our Industry today, we don't treat it as a business.

Therefore, the cost of postage meant nothing to me or to put the bill in an envelope and send it out. 

Success in this business depends on how much of yourself you are willing to put into the company.  Everyone seems to look for the easiest way to do things, which usually ends up being a no-win situation when it comes to proving your case in a court of law.  

Your question about the MAIL SERVICE in your area sounds as bad as mine.  When we receive our mail who knows.  Many complaints filed against our post office but nobody seems to care.

To get around this problem I starting using STAMPS.COM.  Let me tell you, this online postage program keeps a record of not only the date you purchased the stamp but also the time you bought the stamp, along with the address you sent the mail to.   When I needed evidence that I sent something to a tenant, I printed out my Stamp History and gave it to the Judge,  and that always made them look at me in high regard because I always had evidence to back up everything I did, and my little helper was STAMPS.COM 

I hope this has answered your question.  It was a logical one and I'm glad you asked it so I may share my reasonings with others who may have also had the same thoughts. 

Nancy Neville