Tenant paying rent with cash - issue or not?

Rental Property Investor · Pulaski, VA · Member since 2016 · 70 posts · 31 votes

For about two years now, one of our tenants has been paying for rent in cash. I am almost certain nothing illegal is being done to obtain this cash - they are in a band and receive tips for that and his wife is a waitress and gets tips. He works at the same place as my husband so no extra effort is being made to go to the house and retrieve the rent.

I've always heard not to accept cash but we are having no issues over it. Is there something I'm missing and at what point would I need to insist they use a different method?

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Sylvia B.

Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes

I can't believe how many of you are afraid of cash! Ridiculous!

Count it, give the tenant a receipt, and be thankful it can't bounce or be subject to a chargeback. If you are worried about counterfeits, get a counterfeit detection pen and use it. Sheesh!

And yes, Roger, I would accept gold coins if they were offered. Or silver.

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Jack Medford
Investor · Nipomo, CA · Member since 2014 · 366 posts · 401 votes
7y
I wouldn't have an issue with this, especially since you know the source of the cash. As a previous waiter myself, I can attest to the fact that cash just piles up and it can be a pain to have to get into the bank to deposit it all or worse, have to hide it in your house somewhere and worry about a break in.
As you've mentioned, they've been doing this for two years. I think a different rule applies to your situation: If it ain't broke, don't fix it.
8 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Virginia Jones I don't see an issue with this, but our attorney here in CT has always recommended that if we accept rent payments in cash to always give the tenant a receipt for the rent payment.
This way if things go south for any reason and you end up in court you have a paper trail of receipts.
11 Reply
Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
7y
No problem with cash in your situation only because you do not have to pick it up. In most situations where tenants pay in cash the landlord must spend his time and money to pick it up. That is unacceptable and the reason landlords should never allow cash payments.
It is also mandatory that the landlord and tenant sign something confirming they have paid each month. Both the tenant and landlord must have a copy of this receipt. This protects both parties from false claims.
5 Reply
Account Closed
Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes
7y
Since cash businesses don't leave a paper trail, they tend to get audited more. If the crooks ever find out you have a large amount of cash in your possession, you might get held up. Brokerage firms do not deal in cash (only checks) for this reason and because of the anti-money laundering laws put into place in the 1980s. My landlord does not accept cash under any circumstances and posts a sign in the rental office saying so.
Many stores and banks accepting cash run all bills through machines to determine if any of them are counterfeit (and call the police if they find any). My credit union was collecting food and money to donate to a food pantry and ran my $20 bill through such a machine (the money was OK) before they gave me a big smile and thanked me for my donation.
For more insights about the challenges of dealing with cash, study the cannabis industry. Since weed is illegal at the Federal level, banks (which are connected to the Federal Reserve in some fashion) won't deal with companies in the weed business. Participants are forced to deal in cash and can't even accept credit or debit cards.
3 Reply
Robert Biggerstaff
Contractor · Pensacola, FL · Member since 2018 · 303 posts · 240 votes
7y
Say thank you and smile
5 Reply
Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y
Cash is King , and it doesnt bounce when you deposit it
8 Reply
Joseph ODonovanPro Member
Property Manager · Ridley, PA · Member since 2017 · 427 posts · 449 votes
7y
@Virginia Jones I have 1 tenant who pays in cash and I have absolutely no problem with it as he delivers it to my office every month. As long as you don't have to go out of your way picking it up, I think it's fine. Cash is King!
3 Reply
Account Closed
Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes
7y
Every Federal Reserve Note in my wallet has the following words: This note is legal tender for all debts, public and private
But private businesses can develop their own policies regarding cash unless state law mandates otherwise. For example, the barter economy is based on the exchange of goods and services for goods and services. In the aftermath of Financial Crisis of 2008, people were expecting Financial Armageddon and we would return to our ancient ways of not using fiat currency ("not worth a continental"). Any landlords out there accepting gold coins? Cryptocurrency? Pigs and chickens? Bottles of whiskey?
1 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
No issues. Give a receipt every time and immediately so you have documentation of payment.
The DIY Landlord Book4.7244 Reviews
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2 Reply
John Barrows
Real Estate Broker · Auburn, WA · Member since 2015 · 151 posts · 106 votes
7y
@Virginia Jones
You could have an illegal immigrant or a person wanted for crimes? He could also be working the drug trade... be careful and manage your property with a firm hand... CASH, in my experience has been something illegal is going on.... I’ve seen it to many times!
1 Reply
Almaz Hayet
Member since 2019 · 25 posts · 8 votes
7y
@Virginia Jones you have a problem when a problem arises. I would ask for a Money Order. Cash not accepted in my world, and I would also make a photo copy of the Money Order. Document document....
0 Reply
Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
7y
I had one inherited tenant that would pay cash every month into a lock box. Too many risks unless it is delivered or picked up and counted out in person. Since we are an hour away he buys an MO instead and mails it. Much better way to do business.
2 Reply
Sylvia B.
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
7y
I can't believe how many of you are afraid of cash! Ridiculous!
Count it, give the tenant a receipt, and be thankful it can't bounce or be subject to a chargeback. If you are worried about counterfeits, get a counterfeit detection pen and use it. Sheesh!
And yes, Roger, I would accept gold coins if they were offered. Or silver.
13 Reply
Almaz Hayet
Member since 2019 · 25 posts · 8 votes
7y
I suppose it boils down to what makes you comfortable. I personally will not take any cash unless it is a special circumstance that happened that particular month maybe? I rather be safe than sorry, and I definitely will not take any gold coins, or any other forms of payment. My lease states what form of payments I accept, and states ‘No Cash’.
1 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
i usually get cash . This is common business in low income areas . Many would not like this arrangement on here but it works great and I have no problem whatsoever in fact I prefer it . Ben Franklin doesn’t bounce or take time to clear
9 Reply
Account Closed
Eastern Michigan · Member since 2018 · 83 posts · 144 votes
7y
we will make a photocopy of the cash and have the tenant sign it as a part of the receipt.
0 Reply
Heath M.
Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
7y
I'd be good with cash but I'd give them a receipt for each payment and keep the carbon copy.
I use cash instead of a debit card a lot. Always makes me laugh how some people struggle with giving the correct change. Or when I pay $11 for something that's $5.50 and they try to give me the dollar back and I have to explain that I want a 5 dollar bill and the coins instead of 4 ones and the change...lol
6 Reply
Ronald Gladden
New to Real Estate · Hollywood, FL · Member since 2008 · 35 posts · 16 votes
7y
Cash is king! Sounds like you are confident in the how they obtain their income, if so sustain your current collection process. If you don't I would have a discussion with the tenant about whether they can issue payment in another form and be prepared to change your policy for all current/future tenants? I personally have not been able to pay cash any where I rented. I would have similar concerns. Fair callout.
0 Reply
Mary James
Willits, CA · Member since 2017 · 6 posts · 1 vote
7y
@Matthew Paul
Except when it Does Bounce- like some of the counterfeit bills going around nowadays... There’s no insurance that covers stupidity... if you accept cash, you should at a minimum-have and use at least a bankers pen/ counterfeit color-changing pen...
0 Reply
Deanna O.
Rental Property Investor · San Diego, CA · Member since 2010 · 377 posts · 314 votes
7y
Since you have a pretty good idea where the cash comes from (your husband works at the same place) I'd say not an issue, depending on the amount. I might feel a bit unsafe receiving thousands of $ on a predictable schedule if a lot of people knew about it. It also sort of depends on the kind of place your husband works in (ie dive bar with a high staff turnover in a sketchy part of town, vs suburban sports bar that has had the same staff for 15 years). If they swap $ for receipt not waving wads of cash around & you have a safe place to keep it in at home before it gets deposited (promptly) in the bank it seems like it should be pretty low risk. Your risk of getting a bad bill from your tenant is about the same as your husband's risk of getting a bad bill as a tip -- probably not worth worrying about.
0 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
We have always encouraged people to pay with money order or online. We really made an effort to eliminate cash.
0 Reply
Parker BorofskyPro Member
Lender · Knoxville, TN · Member since 2018 · 54 posts · 98 votes
7y
@Virginia Jones the only point I will make from a lending standpoint is that this could be detrimental to your tenants if they wanted to buy a house and needed to show proof of paying rent. Showing proof of rent in order to purchase a home is not typical, but there are situations like no credit/low credit score/some particular programs that could require this and if they have no paper trail it could have a negative impact for them.
If you ever needed to show receipt of the rent for any reason in terms of lending, it should reasonable to assume you shouldn’t have issues with the cash deposits assuming they are consistent and around the same time of the month.
Hope that helps from a different perspective!
0 Reply
Mitch Coluzzi
Investor · Des Moines, IA · Member since 2014 · 238 posts · 230 votes
7y
@Virginia Jones there are three primary reasons for NOT accepting cash.
1) Scalability - if you get to the point of having a lot of rentals, accepting cash becomes a significant burden. Money orders and checks can be electronically deposited (or mailed), thus no need to count it, check it, and make a special trip to a bank over it.
2) Safety - rental offices are an easy target. Generally speaking your tenants all know that rent is due on a specific day. Pretty easy for other folks to realize that also! If you start getting large sums of cash in, that quickly becomes a security concern. Gas stations get robbed all the time and their average transaction is a few dollars... they have time-lock drops, vaults, and protocols. The other "safety" concern is simply fake bills. If you take in rent from more than one person, getting passed a stack of fake $5s or $10s becomes quite a pain.
3) Trackability - money orders and checks allow for very easy paper trails. Every party has a receipt and every party has a means to verify where funds came from. "Proving" you didn't receive cash can be a real pain... Last but not least, having check records also gives you a possible place to start for garnishment list should you ever need to enforce a court approved judgement.
We don't accept cash... neither should you in the long term. If you plan to grow and scale, break the bad habits now.
0 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@Virginia Jones the most important thing with cash is to keep good records. Use carbon copy receipts and deposit the cash by itself. That way you can track a receipt to a deposit - one to one. This is for your own protection.
As far as nothing illegal with cash tips - very often when people are collecting tips, they are not claiming the income on their taxes. The IRS would call that tax evasion, which is a federal crime. That is why my advice is to track all cash very carefully. As long as you keep good records, you will be fine.
As others mentioned, be careful with the cash because it can make you a robbery target.
0 Reply
Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
7y
We require cash paying tenants to get money orders through the years. In fact, I was surprised a cop paying in cash saying that’s his second job. Then he was arrested for extortion of local businesses. Guess that was his second job. Always keep documentation as some of these tenants try to rip me off claiming they paid for months they didn’t pay. One was surprised I kept copies of all his money orders.
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