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?
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.
What if your renter gets tipped with a counterfeit bill and passes it to you (unknowingly). Then you go deposit it, you’ll get stopped at the bank. Will your renter explain it to the police and replace the bill with a good one? Or would they say that’s not the bill they gave you? It could be innocent between you & renter but you’d have some explaining to do. And you’d be out some money. I say protect yourself. They can stop at a post office (or a bank/ credit union, etc) and get a money order on their way to pay the rent.
@Sylvia B. I agree. Some people on here sound rediculous. Cash will never bounce!!! Im sure the rent per month is 1000’s of dollars. They are waiters, who receive cash. What is the issue?? Drug dealing, immigrant?? Smh.
Why would it matter? You are under no legal obligation to know where if that cash is generated legally or not or if they are paying their taxes correctly or not.
Last I checked, cash is still legal tender. As long as they bring it to me, idc about cash vs check/money order. Remember Cash/Money Orders don't bounce.
I've noticed before that some people have "interesting" ideas about money. Before retiring, Hubby and I owned and operated a rare coin store. We sold collectible coins and precious metals. Many people prefer to use cash when making purchases at that type of store and the way they handled it could be, well, almost entertaining.
One lady brought 2 boxes full of ones that she had saved from tips for 25 years -- almost $7000. Another guy had set aside cases of rolled nickels -- $3000 worth. Some people would nervously wait until there were no other customers in the store to bring out $400/500 in cash to pay for their purchase. Others would casually drop a paper bag of $8000/9000 on the desk as if it were a twenty.
Like many with multiple tenants I have one that pays his rent in cash. It goes straight into my wallet for petty cash. I don't remember whether I claim it or not :)
I hate cash and I seldom ever use it for anything. I have one tenant that doesn’t have a checking account, and she pays with a money order every month.
In the world we live in today, money orders can be counterfeit and most of the cash you handle is probably drug money. I've read where the average person's computer keyboard and mouse have more germs per square inch than their toilet seats.
Do you wear latex gloves when you collect the rent and enter the information into your accounting software? <just kidding>
First, don't let your imagination create a problem. Counterfeit? Cash from crime? Just be happy your rent is paid on time. The only reason I do not "allow" cash payments is that I don't want to make appointments with tenants to collect the rent, and then drive to the bank to deposit the rent. My lease states if they pay in cash, or I have to physically collect the rent, then it is a $25 "convenience fee". I certainly wouldn't refuse the money, but it is an inconvenience.
I read of stories where landlords collecting their rent in cash are targeted, see:
BTW, the killers later turned out to be friends of this couple's maid that works for them a few days a week, and knows they collect rent in cash, and keeps it in their home.
I heard another story from my mother in law, who's friends with an elderly women landlord. They both owned paid off triplexes and rents are a big source of income. Her friend had a chatty tenant, befriended her, paid his rent in cash, and at the time, for two years. And this tenant tells her that one of the benefits of being paid in cash is that you don't have to report it. And the lady told the tenant, "you're right, I don't report it".
Then suddenly, after two years, this tenant tells his landlord that he'll report her to the IRS for not reporting rent paid in cash. This elderly women spoke to my mother in law and ask her what to do. I wasn't involved in it, but the guy wanted a year in free rent to not report her, and the frightened women finally gave him a few thousand dollars in cash just to get rid of him.
I'm mentioning this as many cash paying tenants tell me I don't have to report the rent, and I always tell them, I always report the rent received whether you pay in cash or not. I then tell them cash for me is a great inconvenience, and I will rent to them only if they buy money orders and pay rent that way.
A cash paying tenant did try to rip me off. On some money orders he writes down the month and year he was paying for, and some not. Some months are paid in cash when his wife is sick and tells me they don't have time to buy money orders. Then one year he fell behind a bit, paid his July rent, didn't pay August, then in Sept gave me a money order that says Sept rent. Told him he didn't pay Aug and he said he did. At that point, he was with me for 35 months, and dug up copies of 34 money orders and rent receipts I got. So I told him, I got evidence of you paying 34 months of rent, and you're here 35 months. I gave him copies of the 34 money orders and receipts and told him if he can furnish a copy of the missing money order, please do so. He came back a week later and said "guess you're right, I didn't pay August."
With all of this, potential robbers, extortionists, conman, confused tenants, why would I ask for trouble and select people who pay in cash?
I heard another story from my mother in law, who's friends with an elderly women landlord. They both owned paid off triplexes and rents are a big source of income. Her friend had a chatty tenant, befriended her, paid his rent in cash, and at the time, for two years. And this tenant tells her that one of the benefits of being paid in cash is that you don't have to report it. And the lady told the tenant, "you're right, I don't report it".
Then suddenly, after two years, this tenant tells his landlord that he'll report her to the IRS for not reporting rent paid in cash. This elderly women spoke to my mother in law and ask her what to do. I wasn't involved in it, but the guy wanted a year in free rent to not report her, and the frightened women finally gave him a few thousand dollars in cash just to get rid of him.
People who commit tax evasion should learn to keep their mouths shut.
I’m sure for some folks who do cash only find they can accidentally forget to claim the income .it is essential that You must keep good accurate records yourself because there’s no trail .if you didn’t claim all that money it could be very lucrative and profitable for you . I have heard of several local old landlords doing this their entire career
I knew someone whose new landlord insisted on being paid in cash. The money had to be left in an envelop on the counter the day the rent was due and the landlord would stop by to pick it up while my friend was at work. My friend didn't like doing this and found a new place to live. I don't know if my friend turned in her former landlord to the IRS. I've read where the IRS gets its best tax fraud tips from former employees and former spouses.
@Virginia Jones It is difficult to have a bank lend on cash payments because you need to have proof that funds are being deposited into your account. I did hear about a program through 7/11 where they deposit cash at that location and it goes direct into your account similar to Venmo. Re-financing would be the biggest problem with accepting cash.