What kind of late fee do you charge, and why? • One-time charge of $XXX • Small fee that starts on Day X and continues to accrue daily until Tenant pays in full • Combination of a one-time charge and then a smaller daily fee What made you choose the method you currently use? Share your pros and cons! Any ideas for how to make a late fee system more effective?

I just charge $40 to $50 that month. I don't want to charge a daily late fee to make it unmanageable for them to dig out of the hole. On the 6th rent is late. I generally file an eviction (only $40) on the 15th unless previous arrangements have been made. Nothing I dislike more than a tenant that won't communicate why they are late or when they expect to pay the rent.

I feel conflicted about late fees. I think the balance most owners (myself included) want to strike is to: a) make the late fee large enough to be a deterrent b) small enough that it doesn't create a big financial burden for the tenant. Since I am in Northern California the rent by itself is already a huge financial burden for many tenants. I have some single family homes in Vallejo, CA and I charge a $50 late fee. I've found this isn't much of a deterrent. On some more expensive property in Pacifica that I manage I charge 5% as a late fee and that seems to be more of a deterrent. In California you generally cannot charge more than 5% for a late fee as a matter of law.

Rent is due on the 1st and late on the 2nd. I use appfolio and have the system designed to charge $20/day starting on the 6th to a maximum of $100 per Iowa law. Our typical property runs $15-1600 per month so $100 is enough for our typical tenant to want to avoid but not enough to break the bank. I always reserve the right to waive the 1st late fee assuming the tenant communicates the situation in advance. I choose not to have a grace period since a decent percentage of tenants will always pay on the last day. Our owners are paid out on the 15th and I want to be sure if we have a bounced check there is enough time to collect to avoid shorting the owner their mortgage payment. 3 Day notices to Cure or Quit are posted on Day 7 after the full $100 is charged. We're in constant contact with the tenant throughout this process to ensure we don't have to get to that point. If we have to file against them we would pass that charge along to the tenants as well.

@Nathan G. I tend to give my tenants plenty of choices to give them a sense of control also. Late fee:$55 -Rent is due on the 1st. If they want to change that to the 5th like the last place they rented then it will be an additional $55 a month. (They usually end up choosing the 1st) -If they want to do split payments, 1st and 15th. It will be an additional $55 extra a month. (Never had split payments) -If rent payment is not paid two days after rent due date then the $55 late fee is added. 5-day pay or quit letter gets delivered on day 4. An additional late fee gets added every 5 days until the court date is set up for Unlawful Detainer. -Rent payment and all late fees will only be accepted in a cashiers check for the full amount due, and the next three months rent will be paid via cashiers checks.

@Nathan G. I charge $15 per day starting after the 5th day and a maximum of 10% of the monthly rent. I’ve had some tenants pay $150 extra per month for the last year.

@Nathan G. I charge a flat fee just below the maximum allowed in my state’s landlord tenant laws which is 10% in Washington. Rent is due one the 1st and late after the 5th. I use Cozy with automatic payment reminders. Rent $1200 Late fee $175 If a tenant pays late the fee is automatically charged. My thought is I want to select the best possible tenants for my units and part of that is them paying on time. If possible, I never want to have to collect a late fee. I would much rather have my tenants pay on time.

@Nathan G., Here's what my property manager does (he's also one of my mentors) ... My rent is $900, for example. If paid on or before the 1st, I get a $100 discount and I only pay $800. He collects my rent thru AppFolio via ACH. So, my rent is always on-time / early. Why does he do that? Because when a tenant goes late and he does have to take it to eviction, when it comes up in court, the judge awards him the full rent, not the discounted amount. Often times, the judge will only award the rent and not the late fees. Just wanted to put that out there ...

@David Dachtera that's a good point about offering a reduced rate for early rent instead of punishment for late rent. I charge $50 or 5% of the rent, whichever is greater. I used to charge a flat rate and then a daily increase but stopped it. Why? Because tenants would always want to argue over how much they owed. They would count the days wrong or argue that they shouldn't be charged for the day payment was received. Or they would just continue racking up late fees until evicted and I wouldn't collect any of it, anyway. I prefer hitting them one time as a deterrent for future late payments. I cringe every time I read about a Landlord enthusiastically using late fees as additional income because that's going to come back to bite them eventually.

@Nathan G., we charge $25 if rent has not been received by the 5th. Typically we pro-rate rent but, if not, we do a plus-5 days approach. For us, it is easy to calculate and easy for tenants to grasp. We have been fortunate with good tenants, very rarely do we have a late rent payment.

What kind of late fee do you charge?

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What kind of late fee do you charge?

Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

What kind of late fee do you charge, and why?

One-time charge of $XXX
Small fee that starts on Day X and continues to accrue daily until Tenant pays in full
Combination of a one-time charge and then a smaller daily fee

What made you choose the method you currently use? Share your pros and cons!

Any ideas for how to make a late fee system more effective?

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Vincent Gable

Member since 2019 · 32 posts · 26 votes

i charge $25 a day after the 3rd of the month. while it may seem high its a good deterant to people who would try to pay late. i had guy just this month say he was gonna be a week late. i tell him thanks for communicating but we dont take partial payments and i explain the late fee again. he called back and tried to give 500 for his late fees. i told him if he couldnt figure it out his 600 rent could end up being 1250 for that month. the next day he payed off his late rent which ended up being 950.

you have to be fair but firm. i explain the late fee before i let them sign the lease and AGAIN if they want to pay late. people are not upset when they are charged a fee, they are upset when they dont know WHY they are paying a fee. just be upfront and fair; it has worked for me and i get the feeling he wont be late any more.

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
6y
I just charge $40 to $50 that month.
I don't want to charge a daily late fee to make it unmanageable for them to dig out of the hole.
On the 6th rent is late. I generally file an eviction (only $40) on the 15th unless previous arrangements have been made.
Nothing I dislike more than a tenant that won't communicate why they are late or when they expect to pay the rent.
3 Reply
Jacob Sampson
Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
6y
This is an interesting topic. For me rent is due on the first late after the 5th. I charge $25 on the 6th and $5 a day after that. I can't remember how I landed on that. It seems to work OK.
As far as making the system more effective it would depend on what the owners goal is.
1. The goal could be to discourage tenants from paying late.
2. The goal could be to charge just enough so that the tenants are willing to pay a few days late and the owner makes a slightly greater net income.
I'm sure there could be other goals but those seem like the most likely. I lean more towards number 2. At the end of most years about 1% of my gross income is from late fees.
1 Reply
Vincent Gable
Member since 2019 · 32 posts · 26 votes
6y
i charge $25 a day after the 3rd of the month. while it may seem high its a good deterant to people who would try to pay late. i had guy just this month say he was gonna be a week late. i tell him thanks for communicating but we dont take partial payments and i explain the late fee again. he called back and tried to give 500 for his late fees. i told him if he couldnt figure it out his 600 rent could end up being 1250 for that month. the next day he payed off his late rent which ended up being 950.

you have to be fair but firm. i explain the late fee before i let them sign the lease and AGAIN if they want to pay late. people are not upset when they are charged a fee, they are upset when they dont know WHY they are paying a fee. just be upfront and fair; it has worked for me and i get the feeling he wont be late any more.
3 Reply
Michael Bush
Rental Property Investor · Black Mountain, NC · Member since 2019 · 16 posts · 13 votes
6y
$10 a day
1 Reply
Joshua KempPro Member
Rental Property Investor · San Angelo, TX · Member since 2019 · 18 posts · 17 votes
6y
@Nathan G.
Hey Nathan G. I charge a flat fee 5% or $50, whichever is greater, not to exceed 10% of monthly rent on the 10th day late. Then eviction notice to follow if I have not been contacted by the tenant to setup payment options. I have not had to setup eviction yet, so I cannot speak on that matter. I do believe, however, it is important to stick to the contract when it comes to late fees. I have heard stories, and I do listen to them, but we can arrange for payment, to include the late fee as soon as possible. I want to be fair but firm.
Secondly, all that being said: I believe that, in Texas, you can charge up to 12% after 2 days late in a residential (4 units or less) and 10% after 2 days late in commercial (5+ units), but don’t quote me on that.
1 Reply
Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6y
@Nathan Gesner
I charge a 5% late fee if rent has not been received by the 5th on the 6th. Rent is due on the 1st. If rent plus the late has not been received by the 20th an additional 5% of rent is due for an additional late fee. I have not had to apply the additional 5% on the 20th. The initial 5% late fee for not paying by the 5th of the month is a standard late fee through the local MLS lease. It works pretty well to collect rent.
1 Reply
Maya Roberts
Rental Property Investor · Sunnyvale, CA · Member since 2019 · 60 posts · 40 votes
6y
@Nathan Gesner, we charge $25 if rent has not been received by the 5th. Typically we pro-rate rent but, if not, we do a plus-5 days approach.
For us, it is easy to calculate and easy for tenants to grasp. We have been fortunate with good tenants, very rarely do we have a late rent payment.
1 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
6y
@Nathan Gesner,
Here's what my property manager does (he's also one of my mentors) ...
My rent is $900, for example. If paid on or before the 1st, I get a $100 discount and I only pay $800. He collects my rent thru AppFolio via ACH. So, my rent is always on-time / early.
Why does he do that?
Because when a tenant goes late and he does have to take it to eviction, when it comes up in court, the judge awards him the full rent, not the discounted amount.
Often times, the judge will only award the rent and not the late fees.
Just wanted to put that out there ...
1 Reply
Nathan GesnerBusiness Member
Moderator
OP
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
@David Dachtera that's a good point about offering a reduced rate for early rent instead of punishment for late rent.
I charge $50 or 5% of the rent, whichever is greater.
I used to charge a flat rate and then a daily increase but stopped it. Why? Because tenants would always want to argue over how much they owed. They would count the days wrong or argue that they shouldn't be charged for the day payment was received. Or they would just continue racking up late fees until evicted and I wouldn't collect any of it, anyway.
I prefer hitting them one time as a deterrent for future late payments. I cringe every time I read about a Landlord enthusiastically using late fees as additional income because that's going to come back to bite them eventually.
The DIY Landlord Book4.7248 Reviews
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1 Reply
Dustin Kooy
Investor · Bradley, IL · Member since 2014 · 10 posts · 1 vote
6y
@Nathan G. I charge $15 per day starting after the 5th day and a maximum of 10% of the monthly rent. I’ve had some tenants pay $150 extra per month for the last year.
1 Reply
Jacob D ItzenheiserPro Member
Rental Property Investor · Dallesport, WA · Member since 2017 · 9 posts · 7 votes
6y
@Nathan G.
I charge a flat fee just below the maximum allowed in my state’s landlord tenant laws which is 10% in Washington.
Rent is due one the 1st and late after the 5th. I use Cozy with automatic payment reminders.
Rent $1200
Late fee $175
If a tenant pays late the fee is automatically charged. My thought is I want to select the best possible tenants for my units and part of that is them paying on time. If possible, I never want to have to collect a late fee. I would much rather have my tenants pay on time.
1 Reply
Joshua Benjamins
Lender · Virginia Beach, VA · Member since 2018 · 49 posts · 38 votes
6y
@Nathan G. I tend to give my tenants plenty of choices to give them a sense of control also. Late fee:$55
-Rent is due on the 1st. If they want to change that to the 5th like the last place they rented then it will be an additional $55 a month. (They usually end up choosing the 1st)
-If they want to do split payments, 1st and 15th. It will be an additional $55 extra a month. (Never had split payments)
-If rent payment is not paid two days after rent due date then the $55 late fee is added. 5-day pay or quit letter gets delivered on day 4. An additional late fee gets added every 5 days until the court date is set up for Unlawful Detainer.
-Rent payment and all late fees will only be accepted in a cashiers check for the full amount due, and the next three months rent will be paid via cashiers checks.
1 Reply
Carlos Carbajal
Property Manager · San Francisco, CA · Member since 2017 · 74 posts · 71 votes
6y
I feel conflicted about late fees.
I think the balance most owners (myself included) want to strike is to:
a) make the late fee large enough to be a deterrent
b) small enough that it doesn't create a big financial burden for the tenant.
Since I am in Northern California the rent by itself is already a huge financial burden for many tenants.
I have some single family homes in Vallejo, CA and I charge a $50 late fee. I've found this isn't much of a deterrent.
On some more expensive property in Pacifica that I manage I charge 5% as a late fee and that seems to be more of a deterrent.
In California you generally cannot charge more than 5% for a late fee as a matter of law.
2 Reply
Michael Peters
Member since 2019 · 215 posts · 122 votes
6y
Rent is due on the 1st and late on the 2nd. I use appfolio and have the system designed to charge $20/day starting on the 6th to a maximum of $100 per Iowa law. Our typical property runs $15-1600 per month so $100 is enough for our typical tenant to want to avoid but not enough to break the bank. I always reserve the right to waive the 1st late fee assuming the tenant communicates the situation in advance.
I choose not to have a grace period since a decent percentage of tenants will always pay on the last day. Our owners are paid out on the 15th and I want to be sure if we have a bounced check there is enough time to collect to avoid shorting the owner their mortgage payment.
3 Day notices to Cure or Quit are posted on Day 7 after the full $100 is charged. We're in constant contact with the tenant throughout this process to ensure we don't have to get to that point. If we have to file against them we would pass that charge along to the tenants as well.
2 Reply
Jerry W.Pro Member
Moderator
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
3y
I set my rent to be due on the first and late after the fifth. Late fees range from $10 to $15 per day after the fifth depending upon how much the monthly rent is. While this is legal in my state it might not be in most states. The point is to train the tenants to pay on time. I often waive the first late fee but explain they will pay it next time. This is probably a bad idea, but I feel it is the right thing for me. I am horrible about charging late fees, but it has really helped make tenants pay on time. My contract says you will be evicted after the 15th unless satisfactory arrangements have been made. I rarely evict on the 15th if the person has been in contact and is working at it. I have also found if they miss 2 consecutive rent payments they will never get caught up. I unfortunately often know my tenants personally as it is a small town. This is probably the area that I struggle the most with.
0 Reply
Nate Sanow
Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
3y
Either $50 or $100, but TBH if occasional I waive it. I make sure they know that … and try to use it to incentivize being on time. I actually tried doing a small pay early discount to avoid this but that didn’t really work.
0 Reply
Adrian N.
Rental Property Investor · Colorado Springs, CO · Member since 2015 · 50 posts · 19 votes
3y

@Nathan Gesner the ONLY answer should be what local laws allow. I charge $35, but my local laws allow for landlords to charge $35 as a late fee, plus an additional $5/day it is still late. We can also add an additional 18% if the lease ends up being terminated due to non-payment of rent.
Been at this since 2013, I find $35 is enough, but in other states I charge more. My rule has always been to charge the max allowed. Sends the message it is serious to be late, but I do not go past that. No need to add to it every day. I would rather do cash for keys than go that route.
0 Reply
Adrian N.
Rental Property Investor · Colorado Springs, CO · Member since 2015 · 50 posts · 19 votes
3y
Also, to add on to what Nate Sanow said I don't have late rents anymore. I have a drawing at Christmas time for a free tv. To be eligible you can't have been late from Jan-Nov. It costs me like $400 to get a huge tv at Costco, but it makes a huge difference to the tenants.
0 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
One time charge of $100 and $10 per day after that. I have one tenant that pays one day late every time.
0 Reply
Kar Sun
Member since 2021 · 388 posts · 277 votes
3y
My late fee is $100 and I never had to charge that fee. It starts on day 6th. My state allows 10% late fee. I am way below 10%
0 Reply
Kar Sun
Member since 2021 · 388 posts · 277 votes
3y
Quote from @Eliott Elias:

One time charge of $100 and $10 per day after that. I have one tenant that pays one day late every time.

If it is that consistent it might have something to do with how he gets paid by his employer. If you would be interested to continue his tenancy otherwise I would look at his paycheck schedule try to work something out. $100 is a lot to pay for people in lower income brackets.
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