Rental Property Investor · MN · Member since 2020 · 16 posts · 8 votes
First bigger pockets forum post so thanks in advanced for any advice!
I purchased a 3 unit about a month ago and have turned over 1 unit, will be turning over another Jan 1. Rents were significantly under market so I am turning over in order to raise rents. The last tenant is month to month and would like to stay even with the rent increase however she is putting up quite the fight about how she pays rent. I told her by Jan 1 2021 we will no longer accept check or money order - Only credit/debit or ACH through our Managment software. Her argument is the fees she will incur by paying with these methods. Do I eat the fees just for this 1 tenant just to keep them happy? My only thing is I want to be consistent and keep a firm hand on my properties. (ie. where does the softness end) I almost feel like saying this is how it is matter of fact. I am also requiring the signing of a new 1 yr lease to incorporate rent increase, late fees etc. Am I asking for trouble with this tenant or do I tell them we won’t be renewing their lease?
@Tyler Kortz this is only my opinion, so hear it for what it’s worth and ignore it if you don’t like it. I know a lot of people on bigger pockets talk a big game and tell us how hard they are and rule their tenants! (Exaggeration) but, that is not how this game is played. Real estate is about relationships and you will make it further through developing those even with your tenants. We run less than a 3% vacancy annually with the majority of our units and units we manage for others in challenging C areas, but it’s because we treat our tenants right! We provide them with as many options to pay rent as possible with our Buildium software being our preferred method through credit card or ACH. But they can also drop their rent to our office, they can mail it to our office, they can pay through various retail branches. For gods sake, if they want to send it through a freaking messenger pigeon, I’ll take it.
Your being a bit stubborn and in my opinion setting yourself up for failure long term. If she is paying tenant and not a problem, give her the ability to pay rent how she needs to as there are so many options. If she’s going to bring you a money order, she can take that same money order and deposit it in your bank account
Arguing over not taking a money order is a waste of time and counter productive. I think I read your increase correctly and it works out to like over 2k extra a year? If that’s the case, and you won’t spend that turning the unit and evicting, then stand your ground, but remember what your sworn testimony to the eviction judge is going to be...............judge: “sir do you affirm the tenant is delinquent in rent in accordance with their lease.” YOU: “yes your honor, they are delinquent because I refused to take their rent in the manner they wanted to give it to me after I bought their building and immediately raised their rent a few hundred dollars without making any improvements to their unit because that is the advice on bigger pockets and everyone on bigger pockets said I don’t have to take money orders if I don’t want to and tenants will get in line if I send them a firm letter and stand my ground”
@Karl B. I have told them that the only payment method we will accept is credit/debit or ACH via RentRedi app. So they do charge small feels for the withdrawal.
Hey @Tyler Kortz, since you're increasing rent, have you thought about increasing the rent ever so slightly more to cover the transaction fees? You could technically take on the transaction fees for the tenant's online payments, but that rent increase will give you that money back. Could be a win-win so the tenant feels like they are not paying those transaction fees, giving them one less thing to complain about, but you're still receiving rent payments online.
What is the transaction fee? Probably pretty tiny....
How much is it going to cost you in turnover? Turnover kills profit..... its a bad decision to force turnover just to see a few $$ more each month....... don't force a turnover for $5 in fees each month for one tenant....
Sometimes people fail to realize that forcing a turnover, doing a big renovation and having a vacancy during that turnover just to make a couple of hundred more in rent each month doesn't often pencil out as a great financial decision. Spending thousands in vacancy, renovation and all the other cost during turnover can take YEARS to break even with getting the rent to "market". Those cost will invariably come..... you will eventually have to renovate......you will have vacancy...... but why force it to be NOW, for no real reason? Over $5 in fees a month for one tenant?
How "under market" are these units and what's the turnover and renovation going to cost you?
Are you getting rid of the check and MO due to the hassle of having to collect or deposit them? If so, make the agreement contingent on the tenant taking them directly to the bank for deposit. Or is this a bookkeeping issue since you want it all automated through your software?
@Dave Spooner I have thought about taking care of the fees however have had no conflict with any of the other tenants. I feel to cover my self, if I start taking on this tenants fees I need to take on the other tenants fees as well. At the same time considering this tenants has been in the property for 5 years I feel they may have developed bad habits. So I don’t know that I mind a turnover. (Maybe the wrong thinking?$
@Ned J. You’re right the fees are very small like Michael states below. Rents for my 2 bedrooms were 500 I re leased 1 for 750 and the other will be turned over Jan 1 and I plan to list it for 850. The 1 bedroom I am talking about is rented for 475 and I did send them notice of rent increase to 600. I don’t have a problem with the other tenants and the fees and I feel if we incur 1 tenants fees legally we should incur all tenants fees to avoid discrimination?
@Michael Breisch this tenant has been in the building 5 yrs so I feel they have bad habits and maybe a entitled attitude. I am raising rents to 600 from 475 so yes I could incur the fees but I feel to avoid a law suit over discrimination I would have to incur all tenants fees which no one else has complained about them.
Ask your bank to help you with ACH withdrawals. I take rent ANY way I can get it especially from my apartment buildings. I have a drop box on-site in apartment buildings but I always accept Venmo, Zelle, Cash, Check, Money Order, Apple Pay, but all of my single family homes are required to be on ACH withdrawl.
If you don’t renew her lease you have cleaning cost, listing costs, and it’s a bad time of year, during a pandemic... it could sit vacant... it’s going to cost you more money getting rid of her and you run a lot of risks by doing so. Take her money how she wants to give it to you, it’s better than her losing her job, a new tenant who stiffs you all together, a tenant you have to evict. If someone tells me they have money for me, I’ll get in my car and DRIVE to them.
@Tyler Kortz I think you are being a little stubborn on this one brotha, why tarnish a relationship w the person living in your home over a few bucks? Just eat it. Or build it into the rent. If it’s to late to build it in, eat it.
I wouldn't. I'd send her my lease (which specifies how rent may be paid) and tell her she'll need to sign it and return it by xxx date. If she objects to any of the provisions I'd tell her my lawyers wrote my lease to protect me and the lease is non-negotiable.
What you do for one, you must do for all. If ever caught with special favors, you can get in a lot of trouble. Depending on your tenant type, not sure how much fees are but my PM doesn’t accept cash. They only accept MO or checks or electronic transfers. MO cost tenants money and they have to stand in line at the store.
Since you are doing a new lease or an amendment to the existing one for the rent to increase to $600, if I were in your shoes, I would just make the rent $600 and state that they are to pay $599 to my account and they are to pay the $1 fee to the App totaling $600. End of the problem for just a $1 a month.
Sometimes renters are hard to train. The new ones will be hard to train, as will the old ones. It is very rare you will get a tenant that is trained to everything you want. The tenant you are having trouble over is trained in the most important thing. The tenant pays the rent and has for FIVE years. The tenant will pay more rent to stay, agreed to the price increase. That tenant is trained with the most important thing. And since you did not say the apartment was a pigsty, I would think that the tenant is trained in the second most important thing-taking care of the apartment.
If you throw that tenant out to win this battle you will be loosing the cash flow war in the end. Think big, not petty. Not all inherited tenants are bad, and some are much better than the norm.
Does she pay rent on time the way she pays now? If so, just let her pay the way she is used to paying. I sort of get her point unless she’s not paying on time then do what you feel you need to do to right the ship.
@Ned J. In your opinion is it better to rent an apartment “as is” rather than renovate and charge more for rent? I’m having a turnover soon, tenant is leaving and I’m not sure whether to renovate the apartment in order to get $200 more in rent or leave it as is for the new tenant 🤔 I’m thinking of spending between $5k to $8k in Reno.
@Tyler Kortz Ive had this issue as well and my big thing was that I didn’t want to be picking up rent and I don’t like “it’s in the mail” as a reason the rent is late.
In addition to the other suggestions, check out Schedule My Rent. You set up a lease online and tenants can pay in cash at Moneygram (I think) locations and the money gets transferred to you.
PayNearMe is a bother similar option but I think it’s more expensive.
@Tyler Kortz this is only my opinion, so hear it for what it’s worth and ignore it if you don’t like it. I know a lot of people on bigger pockets talk a big game and tell us how hard they are and rule their tenants! (Exaggeration) but, that is not how this game is played. Real estate is about relationships and you will make it further through developing those even with your tenants. We run less than a 3% vacancy annually with the majority of our units and units we manage for others in challenging C areas, but it’s because we treat our tenants right! We provide them with as many options to pay rent as possible with our Buildium software being our preferred method through credit card or ACH. But they can also drop their rent to our office, they can mail it to our office, they can pay through various retail branches. For gods sake, if they want to send it through a freaking messenger pigeon, I’ll take it.
Your being a bit stubborn and in my opinion setting yourself up for failure long term. If she is paying tenant and not a problem, give her the ability to pay rent how she needs to as there are so many options. If she’s going to bring you a money order, she can take that same money order and deposit it in your bank account
Arguing over not taking a money order is a waste of time and counter productive. I think I read your increase correctly and it works out to like over 2k extra a year? If that’s the case, and you won’t spend that turning the unit and evicting, then stand your ground, but remember what your sworn testimony to the eviction judge is going to be...............judge: “sir do you affirm the tenant is delinquent in rent in accordance with their lease.” YOU: “yes your honor, they are delinquent because I refused to take their rent in the manner they wanted to give it to me after I bought their building and immediately raised their rent a few hundred dollars without making any improvements to their unit because that is the advice on bigger pockets and everyone on bigger pockets said I don’t have to take money orders if I don’t want to and tenants will get in line if I send them a firm letter and stand my ground”
First bigger pockets forum post so thanks in advanced for any advice!
I purchased a 3 unit about a month ago and have turned over 1 unit, will be turning over another Jan 1. Rents were significantly under market so I am turning over in order to raise rents. The last tenant is month to month and would like to stay even with the rent increase however she is putting up quite the fight about how she pays rent. I told her by Jan 1 2021 we will no longer accept check or money order - Only credit/debit or ACH through our Managment software. Her argument is the fees she will incur by paying with these methods. Do I eat the fees just for this 1 tenant just to keep them happy? My only thing is I want to be consistent and keep a firm hand on my properties. (ie. where does the softness end) I almost feel like saying this is how it is matter of fact. I am also requiring the signing of a new 1 yr lease to incorporate rent increase, late fees etc. Am I asking for trouble with this tenant or do I tell them we won’t be renewing their lease?
Thanks!
I have a local property manager who likewise does not accept cash or checks directly. His software is Appfolio. He takes rent via ACH. Tenants can also pay rent at 7-11 Stores / gas stations as well as Casey's General Store gas stations and other locations.
Hope this helps.
Let me switch hats here for a moment. I'll take off my REI hat and put on my motivational speaker hat.
As soon as you start talking about changing others you've pretty much lost the battle. Businesses - even rental property ownership - succeed by adapting to their customers. Any customer who finds that a business is not willing to continue on established terms should be expected to find another, more accomodating business with which to partner.
@Todd Pultz I agree. When we bought our building with inherited tenants, we chose a local bank that they could walk a few blocks to to deposit rent. Then they can use any method of payment (ach, check, cash), just gotta get it to the bank. A few of the tenants dont have bank accounts.
Congratulations on your purchase. I personally would kill to have a 5 year tenant and by the fact that they are staying with such a large rent increase and willing to sign a 1 year lease says a lot about how long they plan to stay. On one hand a money order is more than a dollar so this software is actually saving her money so this could be spun as a positive. On the other you are causing a lot of grief to both them to yourself for $12 a year, if this $12 is a cash flow killer for your year you bought the wrong property. As someone else said tell them the rent is 599 and they pay the dollar and call it a day. My big question is the time you have spent on this worth $12. Also there are a lot of free platforms out there, what was special about the one you selected vs. the free ones. Currently I am using Zillow but plan on switching to Zelle in the future so I don't have to wait for the money, the 5 days isn't a killer to me but it is annoying to wait for the deposit and Zelle has no clawback.
If you give a moose a muffin, it will ask for some jam. You know how the rest goes. This is a business relationship, the tenant is not your friend. Keep it professional, not personal. There is no reason she cannot send you payment via your preferred method.
@Alexander Szikla This thinking is appropriate sometimes, but in this case the moose has already endured an avalanche. Give it a tiny bit of jam for the trouble.