Collecting Rent From Inherited Tenants

13 Replies

Hello everyone!

I recently closed on my first duplex that I will be house hacking. The duplex came with long term tenants (9 years) as well as the year lease they resigned shortly before I bought the house. During the first conversation, I asked how they have been paying rent. The tenants said that they usually leave a check in the mailbox. I will get back to that later. The main thing that caught my attention is when the tenant said they usually leave the check in the mailbox within the first two weeks of the month... Their reasoning was that they get paid bi-weekly. It says in the lease agreement that rent is due first of the month.

So, my first question is this: how should I approach this situation? I want the rent on the first of the month, which is when my mortgage payment is due.

Second question: how should I approach changing the way rent is collected? I would prefer to have the money deposited directly into my account. I am also interested in using an online source like Rent Redi or Cozy.

Thanks in advance for any ideas!

I would simply make those intentions known. Rent paid on time is a realistic expectation. I would also ask if this will be a problem. Then ask them for suggestions on how we can get to the point where rent is paid on time. "What can I do to help you get where I need you to be?" For a long term person like this living paycheck to paycheck I may cover the mortgage and collect the rent as usual. In my opinion they may never leave and waiting two weeks seems a small price to pay to have them essentially buy me a house. The first and most important thing I would try to do is make sure is comprehend their situation. Most likely you bought the house because their credit sucks and they couldn't. They may be caught in the loop that makes us rich, get paid, pay rent, blow the rest, pay everyone late. 

Cody,
Inheriting tenants has its goods and bads. However, with a 9 year history, YOU FOR SURE WANT TO KEEP THEM.
But you want to also get them over into doing things your way. For a starter, I'd ask them what improvements or changes they would like. And, if reasonable, do them. You might not put a new kitchen in, but could update blinds, doors, appliances, etc.
Then explain to them how your method of collecting rent might be easier for them.
Picking up a check is a PITA.
I just give my tenants 12 months of deposit slips that are coded to them, and all they do is deposit it at the bank. Most of my friends do similar. A few with a lot of properties use ACH.
However, the goal is to "save" this tenant. Tenant turn over is very expensive!

Talk to them and see what options work for payment.  Explain that the rent is due on the 1st of the month, but realistically if they are literally living pay cheque to pay cheque, perhaps it would be easier if they paid on the 1st and 15th of each month.  If they pay online or give you postdated cheques, it might be easier and mean you get paid on the first (and 15th), not the first two weeks.  Explain to them when the payments need to be made.

@Marcus Geiser I agree with you about the rent potentially coming in later being a small price for such long term tenants. I was stuck in the mindset that allowing things to slide will cause more things to slide in the long run. Thanks for your reply!

@Steve Smith Good ideas! Thanks for replying. I think I will enjoy the upsides of these tenants until there is an actual problem with rent. Could you elaborate on the deposit slip option? So you give them deposit slips that are already set up for your account? Do they deposit them at your bank?

Originally posted by @Cody Davis :

@Steve Smith Good ideas! Thanks for replying. I think I will enjoy the upsides of these tenants until there is an actual problem with rent. Could you elaborate on the deposit slip option? So you give them deposit slips that are already set up for your account? Do they deposit them at your bank?

Cody,

Yes, I give them printed deposit slips to deposit right in my bank. I code them so I can identify that property (they show up online when I check). I'll use the banks blank tickets and print them myself on my copier, adding my account number and a code for the house so I know who it's from. (yes, the bank will give me a ton of those without issue). You don't need them MICR encoded. Been doing this for 15 or 20 years... no issues and works for me. The banks I use for this are BofA and Chase. (don't like those banks, but it works)

 

@Cody Davis we train our tenants with the expectation we place on them. The previous owner trained this tenant and now you need to retrain them. That doesn't necessarily mean saying "my way or the highway". Figure out something that works for both of you.

As you already figured out, checks in the mailbox is bad news. First of all, you can't use mailboxes for anything but stamped mail according to federal law. The bigger issue is the opportunity for loss or theft, plus you don't want to be a courier service.

Good news is that they have a bank account. Using online rent payment should not be an issue. That leaves the final issue of what day do they pay. If they are used to paying on payday, it probably means they don't have a cash buffer to pay on the first of the month. That is a little scary, but it also means there is no way they ever move. People who live paycheck to paycheck get stuck in a rental property. I inherited a ten-year tenant and they lived there five more years before I sold the property and they still live there many years later. You may need to work with them on pay schedule, but that may also mean you need to charge more per month. 

@Cody Davis We recently bought a duplex with tenants. One unit has a long term tenant (5 years), the other had one month left on their lease. What we did was give them a welcome letter right after we closed that said, "welcome to ABC Properties, we're the new landlord" and we set forth expectations such as rent is due on the first, we use xyz app to collect rent so please email us your contact info ASAP so we can get you set up in our software and here's how you submit maintenance requests. Both tenants got us their email addresses and submitted their rent via the app starting the very first month.

if they have a lease that lays out how rent is to be paid they dont have  to change it.  Ask my how I know :) 

If you want to collect rent in a different manner you will need to ask them if they would like better options....  (pay via venmo, zelle, etc).....  Your next issue is you dont get to change when rent is due ...  it is in the lease.  If they are paying on the 15th are they paying early?  Some tenants do that. 

If this were me, I would talk with respect and politely to the tenants and see what they are willing to do and why they are doing it as they are. They may not be able to pay it all on the 1st so you may need to be flexible.  Just dont play hardball..   They are worth keeping it sounds like. 

Adding after reading the posts above to reiterate - The thing is, if the tenant has a lease that document rules.  The tenant doe NOT have to change how they pay rent...  they just have to change WHO they pay.  I know this as I spent money to discuss with two attorneys to try to get around it - and legally you cant. So.....  work with the tenant and if they dont want to do something different not much you can do. 

also if you want to do rent collection simply use zelle....   it gets transferred to your account immediately and n o days long wait time....  most banks use it now..... I currently use ACH but will switch over to zelle as I go.