Tenant always pays late, but not late enough....

Real Estate Broker · Salem, MA · Member since 2015 · 16 posts · 9 votes

I have a tenant in my first floor unit who has been late every single payment for 11 months in a row with every excuse in the book. However, they always end up paying right before the legal timeline for eviction. Does anyone have experience with this?

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Im with @Joe Splitrock here....does it matter? The rent gets paid consistently every month but a little late, and with the late fee included. I wouldnt even bother conversing to hear the excuses, Id just keep collecting my rent. I have 1 tenant that has been late every month for 7 years. Sometimes they can get pretty far behind...but always end up catching up. I will take late but consistent any day over the ones that are non paying that will eventually need to be evicted.

Remember, even with A class rentals, you are in a business of providing a service to a population that largely is irresponsible enough that they can not buy their home home. Youve got to let some of these things roll off you, or you going to just give yourself more stress than what it's worth.

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Colby Mulry
OP
Real Estate Broker · Salem, MA · Member since 2015 · 16 posts · 9 votes
8y
thank you all for the insight into what is clearly one of the more difficult parts of owning real estate apartments. Good luck to all!
0 Reply
Karl B.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
8y
I have a tenant who's the same way. He's a good guy but is always late paying the rent. But... I love getting late fees. Every two months of late fees from him is dinner at Ruth's Chris Steak House for me. :-)
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Colby Mulry
OP
Real Estate Broker · Salem, MA · Member since 2015 · 16 posts · 9 votes
8y
@David Moore question for you....so this is my first property and closing on #2 on Friday. When I introduced Cozy to my tenants 2/3 floors replied back to me saying they refuse to use online payments and will only pay in checks.
This tenant I started the discussion about was the first to refuse any type of online payment saying they do not trust it....however they dont a problem putting a credit card into any online store....but that's besides the point.
Do I have leverage?
Colby
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Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
8y
Originally posted by @Thomas S.:

@Kevin Mingle A verbal lease is a legal lease. If you reference your state landlord tenant regulations you will see that rent is due on the first and late if not received by the landlord by midnight. Your verbal lease is established by precedence. Send your tenant a notice making it clear it is their responsibility to have the rent payment to you on the first of the month and that if they pay late again you will terminate their lease and they must move. Small time landlords rarely deal with late paying issues however once you scale up you simply can not run a efficient business chasing late paying tenants. It costs too much money/time.
You state regulations will outline the time period for notices.
What most landlords do not understand is that late payments are not the tenants fault, they have actually been trained by their landlord that late payment is acceptable. Mom and Pop/hobby landlords actually view late payments as a bonus without realising that tenants that regularly pay late will usually end up causing additional problems resulting in evictions. Guaranteed when they do decide to move the landlord will not receive their last months rent payment.
This "mom and pop" hobby landlord will make close to $200k in late fees this year.
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Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
8y
Originally posted by @Colby Mulry:

@David Moore question for you....so this is my first property and closing on #2 on Friday. When I introduced Cozy to my tenants 2/3 floors replied back to me saying they refuse to use online payments and will only pay in checks.
This tenant I started the discussion about was the first to refuse any type of online payment saying they do not trust it....however they dont a problem putting a credit card into any online store....but that's besides the point.
Do I have leverage?
Colby
Not for EXISTING tenants in a lease. When you do a new lease, it should spell out how you accept payments. We 10000000% do not accept cash and we don't even accept money orders. It's pay online only. It's 2018 for f's sake. For those tenants that don't have a bank account or CC to pay, we have systems setup where they can pay at a CVS or Ace Cash Express (or 711). They basically give them cash and a QR code, and the money is auto (and instantly) applied to their ledger in our system.
Yeah, I can deal with late people. But the hell I'm not going to deal with people paying with paper like it's the 1800's. For a similar reason I don't allow any printers or faxes at our offices. All leases must be signed online. Apps online. Work requests online, etc.
Think of everything you do as a function of scale. Can you do what you do now if you had 100 units? 1000 units? 10,000 units? When I bought my first 8 unit I ran it as if I had 1000 in terms of systems and process. That helped me run smoothly as I grew to 1000+ units.
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Fan Bi
Investor · Boston, MA · Member since 2016 · 91 posts · 45 votes
8y
@Colby Mulry Do you mind me asking what part of Rhode Island the property is in?
We've got a number of multis in Providence, Pawtucket and Central Falls, but all would fall in the C neighborhood category and we've had a rough go of it. It's a constant struggle between the small, short-term cost of late payment vs the much bigger cost of tenant turnover.
0 Reply
Ryan Heywood
St. Helena, CA · Member since 2016 · 147 posts · 59 votes
8y
Thanks for the insights Cody L. I like your paperless policy, especially starting it from day one. I’m going to keep that in mind.
0 Reply
Jonathan Soto
Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes
8y
Hang in there, the lease is up around the corner. start planning how you will market the apartment and if any repairs are needed during turn around. make sure you provide proper information as per the state that you are not renewing the lease. they are many folks on the market who pay on time, monthly late payments are unacceptable.
Don't let this discourage you for the next investment, screen them thoroughly before selecting.
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David Moore
Investor · Crystal, MN · Member since 2013 · 486 posts · 277 votes
8y
@Colby Mulry
I can only share my experience. I had a tenant last year that told me 'no' to Cozy as well. She whined, moped, etc, for a couple months. I was thinking....I've got the wrong tenant...crap. She paid late. I hit her with the 8% late fee. She wanted to pay with money orders. I said no, she must pay with Cozy. It didn't take her long to realize that trying to argue the policy was futile. Now she pays with a loadable credit card. It is not my responsibility to solve her little financial issues. I own apartments...I have enough on my plate.
If they won't play ball, be tough on them. All business. Tell them if the payment is not in your possession at midnight of the first, hit 'em for 8%. Do it enough, and they will learn. It is their problem to get you the payment. Show them how it is in their best interests to pay via Cozy.
1 Reply
James Allen
Lender · Los Angeles, CA · Member since 2015 · 184 posts · 92 votes
8y
As long as they keep paying you before the eviction deadline , you can either do one of two things depending on what you are looking for.
1. Don't renew them when the end of the lease comes up and replace them with another tenant.
2. Renew them and enjoy the extra income from the late payments.
On the positive, they've at least shown they pay every month but I understand if you're looking for passivity, option #2 may not be your ideal choice.
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Casey Sung
Rental Property Investor · Queens, NY · Member since 2018 · 36 posts · 20 votes
8y
@Colby Mulry this likely won't help your current situation but it might help alleviate future issues. I build in a reward and penalty in my lease. If the tenant pays on time or early, they get a discount. If they pay late, they pay full rent plus late fee. The spread can be substantial to both tenant and landlord. My tenant has never been late. The discount is built into my cashflow. But then I only have one rental property at the moment. Hope this helps.
1 Reply
Loren Wallace Sr
Flipper/Rehabber · Houston, TX · Member since 2018 · 4 posts · 0 votes
8y
@Colby Mulry If they are paying, why worry? The first time they don't pay at all after the pattern thats already set of late paying that's when you you take action. They may have a job that pays at odd times.
0 Reply
Jonathan Woelfle
Lender · Tacoma, WA · Member since 2018 · 20 posts · 8 votes
8y
So I agree with the idea of just not renewing them. I think it is the best and easiest answer. That said they pay their bills. Not on time, but the pay them. How are they as a tenant otherwise? I ask because another solution would be to up the late fee. They could have just done the math and realized it made more sense to them to pay late than on time. Make it make less sense or more sense for you. We get caught up in our properties. Get tied emotionally to them. Take the emotion out. Do that Math and see where that math starts making sense for you to deal with this hassle of them paying late.
1 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
8y
Originally posted by @Loren Wallace Sr:
@Colby Mulry If they are paying, why worry? The first time they don't pay at all after the pattern thats already set of late paying that's when you you take action. They may have a job that pays at odd times.
I'm all for late payers (see my previous comments) but I never understood why my rent payments have to be tied to when they get paid. I'll have people tell me they can only pay every other week (vs. monthly) because that's how they're paid. I feel terrible that the grew up with zero financial guidance from parents. My mortgage is due on the 1st, period. The bank doesn't care when I'm paid, how I'm paid or even IF I'm paid.
The problem is too many people budget for 100% of their income. If I was paid on the 10th and rent was due on the first, I'd save away 10% of my rent for 10 months till I got one month ahead. Then when I paid on the 10th it would actually be paying 20 days early. I'd continue to save away 10-20% till I had 6 months of buffer in case SHTF. SOme people are living way too close to the financial edge. And I'm not coming at this as someone that grew up with a silver spoon. I worked for years at $4.25/hr. Biked to work till I could buy a scooter, then started waiting tables to make a bit more till I could afford a car. Then did computer consulting till I got a real gig. Then bought a home, some rental property, left real job, etc.
3 Reply
Loren Wallace Sr
Flipper/Rehabber · Houston, TX · Member since 2018 · 4 posts · 0 votes
8y
Sounds, like a plan. You. Just answered your own question. There is no right or wrong answer, only what works for you. Hope it all works out.
0 Reply
Ron Parasole
Property Manager · Scranton, PA · Member since 2018 · 12 posts · 8 votes
8y
@Colby Mulry We can evict however its worded in the lease. We use a 5 day grace period. Afterwards we can file.
0 Reply
Gloria Saunders
Member since 2018 · 2 posts · 1 vote
8y
I agree with @Kyle Schlosser
1 Reply
Account Closed
Property Manager · Northeast Indiana · Member since 2013 · 46 posts · 38 votes
8y
Originally posted by @Thomas S.:

Good tenants are not born they are trained by professional landlords.
This is beautiful.
0 Reply
Alejandro Chavarria
Rental Property Investor · Allen, TX · Member since 2018 · 4 posts · 0 votes
8y
@Colby Mulry Eviction is costly and time consuming. My recommendation is to continue getting their late payment with late fees until the end of the contract. No more renewal of lease contract. Always document communication with tenants through emails and comply with the timelines about informing them. Don‘t desperate! This is part of the Business...
0 Reply
Javier Sanmiguel
St Paul, MN · Member since 2016 · 38 posts · 12 votes
8y
Maybe switch 'em over to a month to month lease when it's up and like others have suggested raise the rent and add an incentive discount for on time & or online payments.
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Daniel Blackford
Specialist · New Smyrna Beach, FL · Member since 2016 · 20 posts · 14 votes
8y
Is there a genuine opportunity to create loyalty here? Perhaps a conversation with the Tenant along the lines of "why do you like to pay late fees". Perhaps it is that there is "not enough money at the end of the month and they are struggling with options. You could offer to renew their lease with a "inconvenience increase" in rent and/or with a slight discount if they pay by the first and/or significantly increase the late fee penalty if they pay late. The good news is that you have a tenant who pays....even better a little extra when late.
1 Reply
Jaime Moore
Real Estate Broker · Rushville, IN · Member since 2015 · 7 posts · 1 vote
8y
I have a 10% penalty and have tenants who have paid $60 extra a month for years bc they don't budget to have it by the 1st. I also implement, rent discounts instead of a late fee. For instance, rent is $650 a month, if paid by the 1st, rent is discounted to $600. Give them the choice. Eviction will cost along with unit turnover; flooring, paint. Budget for the late payment and enjoy the extra income! If he does't bulk at paying it, don't sweat the small stuff, he isn't. Consistency isn't a bad thing.
1 Reply
Brian S.
Rental Property Investor · Bellefonte, PA · Member since 2018 · 73 posts · 30 votes
8y
@Joshua Saunders thanks for sharing! I just started using cozy but my tenants haven’t taken advantage of ACH payments.
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Peter StewartBusiness Member
Real Estate Broker · Indianapolis, IN · Member since 2018 · 160 posts · 168 votes
8y
I had the same thing happen. For 10 months straight rent was 1-2 weeks late. Often paid in 2 installments. Drove me nuts, but, at the end of the month, the money was there, so I let it ride...UNTIL, they stopped paying. So, I evicted them and won a damages hearing for back rent, back late fees, and damages (they left the unit trashed).
So, I agree with everyone else on here - don't renew them when the lease is up. The bad behavior on payment will most likely only get worse. Give them an inch they take a mile.
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Rachel Sharp
Real Estate Agent · Northeast Ohio · Member since 2018 · 35 posts · 15 votes
8y
@Colby Mulry I rent out a SFH on a month to month basis and for the last 2 years my tenant has paid late (7-10 days late) and also pays a late fee of $100. That’s $1200/year extra income!! I recently increased their rent by $100 and they agreed. Kinda hoping they would pay on time now. 2 mo the in and still late. Now it’s an extra $2400 year. Some people just pay late. Keep the tenant, but know you’ll always get paid late!!
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