New Investor question about tenants & paying rent on time.

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New Investor question about tenants & paying rent on time.

James H.
Real Estate Agent · CT · Member since 2019 · 48 posts · 6 votes

Hi I purchased a triplex in a decent area with inherited tenants. I closed a few days ago and I went to the property to hand out a welcome packet. This included a welcome letter stating all the normal stuff, I informed them that rent is Due on the 1st and late on the second. I gave them all of the details they will need going forward. I included a brief form that I asked them to fill out and email back to me. They all did this promptly. One tenant wrote me to tell me that they are on disability and their check doesn't come until the 3rd of the month and that's when they can pay. The second tenant uses his social security and told me gets that check on the 3rd Tuesday of every month and that's when he can pay. 

Tenant's were inherited, all of them smoke but not in the units. Units are well kept and clean. One tenant is on a month to month lease and the other is finishing a one year lease in May. 

Both tenants pay virtually all of their own expenses and rent is low on both by perhaps $100-175 


I want them to pay on the 1st. What can I say? Can I get into trouble for demanding 1st of the month? I wan't to treat this like a business from the very start. 

What should I do?

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Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
5y
Originally posted by @James H.:

I want them to pay on the 1st. What can I say? Can I get into trouble for demanding 1st of the month? I wan't to treat this like a business from the very start. 

What should I do?

You should not become a jackass and demand they pay on the 1st. It sounds like good tenants that keep the place clean want to pay 2 days late. What is the difference for you? Be happy you have paying tenants that keep the place clean.

BTW, did you check to see if there is a grace period in the lease? What about a grace period law? Also, if the prior landlord allowed this, those tenants can very easily argue that their lease now allows rent to be paid on the 3rd. 

As with everything in life, you need to pick your battles. This one is a loser. 

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  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    5y
    Originally posted by @James H.:

    I want them to pay on the 1st. What can I say? Can I get into trouble for demanding 1st of the month? I wan't to treat this like a business from the very start. 

    What should I do?

    You should not become a jackass and demand they pay on the 1st. It sounds like good tenants that keep the place clean want to pay 2 days late. What is the difference for you? Be happy you have paying tenants that keep the place clean.

    BTW, did you check to see if there is a grace period in the lease? What about a grace period law? Also, if the prior landlord allowed this, those tenants can very easily argue that their lease now allows rent to be paid on the 3rd. 

    As with everything in life, you need to pick your battles. This one is a loser. 

    8Reply
  • James H.
    OP
    Real Estate Agent · CT · Member since 2019 · 48 posts · 6 votes
    5y

    @Greg M.

    Great thoughts Greg thanks!! Umm that's a great question! The difference for me is that I don't plan to rent to people who create their own rent due dates. Yes they have a grace period of 5 days in the current lease (previous landlord) but legally they cant be charged any late fees until the 10th of the month. Our state law does clearly state that Rent is legally due on the first and late on the second. My new lease will actually reflect current law and they will know about the grace period. The tenants are stable, this is true. However due to the fixed income they live on they can't tolerate any rent increase and I'll be unable to raise rents to even just below market value. Would you advise I keep them, renew the leases knowing they will not be able to tolerate paying market rent? 

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  • Adam Martin
    Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    If it is due on the first but no penalty until the 10th I’d say leave well enough alone they are still following rules.  Mine states sue first and penalties after the 4th.  If they pay on the 3rd it’s annoying. It still technically within the grace period.  Personally I would make an exception on the due date for someone on ssi since it’s out of their hands but consistent payment.  As far as below mkt rent though that’s another story but how do you know they can’t afford an increase.  If they have been good tenants I would gradually increase but vacancy is a killer and so can the unknown of a new tenant. 

    2Reply
  • Evan Crow
    Member since 2021 · 2 posts · 2 votes
    5y

    It sounds like they have a legitimate reason to pay late, while it's basically a power trip for you to demand they pay 2 days earlier. Note it isn't even 'late' they are proposing changing the due date for each month. 

    RE should you kick them out: no

    2Reply
  • Matt Moreland
    Realtor · Lubbock, TX · Member since 2016 · 165 posts · 155 votes
    5y

    Having seen this play out dozens of times with clients, I always say steer away from doing something that is going to unnecessarily remove a paying tenant from a property. If they are keeping the place clean, paying consistently, and trying to make it work, I would return the favor and try to be flexible if possible. It is frustrated, but better than not being paid.

    If you are trying to get them out and get the units rented up closer to market, be sure you go about it the right way so that you don't have a costly legal dispute on your hands! Always works better to let them know your intentions upfront that you will be raising rents closer to market when leases come to term since it is an investment property for you. Hope this helps.

    4Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    5y

    You have a few different issues. And you need to remember that you are in a tenant friendly state.

    1) The fact that you cannot charge a late fee until the 10th of the month removes from your hands the negotiation over the tenant paying the rent on the 1st or 3rd. Yes, state law says that rent is late on the 2nd. So what, there is no penalty until the 10th. Are they technically in violation of the lease? Yes, but good luck getting anyone to care. 

    2) Rent increases are always nice, but have you considered the cost of those increases? There is a turnover cost with each unit. In order to re-rent the unit, will you need to paint it, replace carpet, update appliances, etc? How long will it be vacant between tenants? $100 more rent a month may sound great, but if it's going to cost you a months rent and $1000 in updating, it may not be worth it. And most importantly, you never know what your new tenants are going to be like. 

    Without knowing the rent level, it is hard to say what to do. If they are $100 below market and their rent is $800/month, that is very different from being $100 below market and their rent is $1600/month. 

    0Reply
  • James H.
    OP
    Real Estate Agent · CT · Member since 2019 · 48 posts · 6 votes
    5y

    @Greg M.

    Wow thank you for this wisdom.. I’ve never done any of this before, if you go off books sold by BP like I’ve been doing-you may think allowing rent to ever be “late” is tantamount to failure as a landlord. I appreciate the dose of reality. You made an excellent point about getting anyone to care about the “late” rent. Those are great points about turnover cost. I would hope I would have at least an idea about what the new tenants will be like, but then again from what I’ve been told far, no screening can ever be perfect period. So it’s a 2 bed apartment that’s renting for $900 per month it has a washer and dryer. The local comps over the last 6 months support a price of $1,200 for that unit. That being said it’s just an “educated” guess. I could likely rent it for $1,100 without any problem. The second unit is a one bedroom, it’s updated like the 2 bedroom, it’s modern and efficient. He is paying $600 per month. My market comps support a price of $750 minimum. (He’s the guy who told us his pay date “changes” due to his social security.) 

    His lease is up in May. Upstairs unit is month to month and there’s me, living in the other one bedroom.

    Total current rents for the two units are $1500

    I’m living in the third.

    Mortgage, taxes, insurance are $1,750

    I know these are not great numbers but I wanted to at least start somewhere.

    My plan has been to not raise rents at all until the pandemic is more or less behind us, even then maybe one raise rents incrementally. Thoughts?

    1Reply
  • James H.
    OP
    Real Estate Agent · CT · Member since 2019 · 48 posts · 6 votes
    5y

    @Matt Moreland


    Thank you so much for the advice Matt!

    0Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    5y

    @James H.  The laws in your state don't appear to "clearly state that rent is legally due on the first and late on the second".  They just seem to state that tenants generally have a nine-day grace period after the due date (whatever date that is in the lease) passes during which landlords may not start legal proceedings to evict the tenant or charge a late fee.  It doesn't seem to say anything about when it's "late".  

    Here's a couple sources where you can read more on this if you're interested:

    Connecticut Office of Legislative Research: Late Rent Grace Period and Fees

    State of Connecticut Judicial Branch Superior Court: Rights and Responsibilities of Landlords and Tenants in Connecticut

    Regardless though, in my experience, while us landlords may generally focus on due dates, most tenants focus on a different date.  And that date is when does the grace period end and the late fees begin.  So your tenant may see nothing wrong with paying you on the 3rd if the late fee can't kick in until the 10th. 

    When you think about it, it's not really that different from how your mortgage payments work.  Your mortgage payment is likely due on the first, but a late fee doesn't kick in until usually at least the 15th.  (I'm sure your mortgage company would prefer you pay on the 1st though.)

    Ultimately, I agree with the others who said to let this one go.  If you have a tenant who needs to pay on the 3rd because that's when they get their check, and their unit is "well kept and clean", then I'd be totally fine with it.  It's certainly not a battle worth fighting.

    1Reply
  • Rick Pozos
    Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
    5y

    Hey @James H. I think you get the idea already about not being such a hard a$$.

    I noticed that you said you were going to live there also?? That would be even more reason to not demand things. If the tenants get to know you, hopefully they will like you. People never want to disappoint people that they like. I have a feeling that they will be paying you as soon as they get the money. Play it by ear, wait and see what happens. Smile, be friendly and life will be grand.

    If all else fails, play the cello at 2am every night until they move out!! LOL

    1Reply
  • Mat O'Grady
    Investor · North Stonington, CT · Member since 2014 · 393 posts · 228 votes
    5y

    @James H. Hey James welcome to the business of real estate. It sounds like you are really motivated to do this right. As you stated, in CT you have a 9 day grace period so you cannot charge a late for or start eviction until the 11th of the month. Before the moratorium, my evictions usually took an average of 3 months. One was much longer and one was 2 months. During the moratorium, who knows how long it would take for the evictions to go through and I'm not sure you can even evict for lapse of time. I know that they need to be 6 months behind in rent to evict for non payment. All that being said, I wouldn't push hard on increasing rents or demanding they pay on the 1st. It sounds like both of your tenants are receptive to you taking over the property and they informed you why they cannot pay by the first. I would tell them that I understand that rent needs to be later than the 1st and I would follow up with them on the day they said they can pay by. I would do what I can to prevent any of them getting angry and deciding not to pay. That being said, I would let the May lease expire and go month to month. Keep them both on month to month and when the eviction moratorium expires, give them the option to pay a higher rent or move out in 30 to 60 days. This gives them time to think about their choice and find another place. If you really need to increase the rents now, you could offer to improve something in their unit and raise the rent in exchange. 

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Yes, you want to run it like a business, but these are inherited tenants. You probably want a "No Smoking" policy, but it's too late for that. You should accept the deviation as long as they are good tenants paying market rent.

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  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    5y

    The worst thing you can do is have a good situation then go in and mess it up for no good reason. Will it really mess you up that bad if you get it on the second or third? When you are a landlord the last thing you want to do is have your tenants dislike you. This is a business and they are the customers you need to work with you to keep your business operating. There are major expenses associated with tenant turn over and if not getting your money on the 1st is going to aggregate you, you are in for a vast and very multi tiered rude awakening. There is so so so much more to come my friend. 

    2Reply
  • Carlos Gonzalez
    Investor · Phoenix, AZ · Member since 2015 · 346 posts · 170 votes
    5y

    @James H.

    Let them pay on the 3rd. All apartment complexes do this. You’re obviously new and don’t know this. Like the 1st comment says. Don’t be a jackass you have great tenants.

    1Reply
  • Jill Iwanski
    Rental Property Investor · Marshfield, WI · Member since 2019 · 18 posts · 37 votes
    5y

    If they are receiving government payments then they receive a pay raise every year. Look up COLA and base your rent increases on the amount of a pay raise they receive. We specialize in 55 and older so most of our tenants live on social security. The COLA for 2021 is 1.6%. If you max out that every year it won’t take long to get the units up to market rents.

    1Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    5y

    @James H.

    My rents are late if they are not paid by the 5th. The late fees are pretty steep like 10% of the rent. If they pay you before the 5th like clockwork, that is very good.

    Swanny

    0Reply
  • Brianne Leichliter
    Rental Property Investor · Cincinnati, OH · Member since 2019 · 59 posts · 77 votes
    5y

    @James H.

    I know you want your rent on the first, but for those on any type of assistance, that is virtually impossible. They are living paycheck to paycheck just to survive.

    You should keep one to two months of reserves to pay your mortgages on time and expect that couple day delay. It does not hurt you as a landlord to have tenants pay two days late, but making demands of tenants who cannot change their circumstance will quickly give you a bad reputation.

    I have tenants with these exact same situations. They are not lying. This is how government payments work.

    If they are clean and good tenants outside of paying two days late, your best move is to accommodate to save face with the tenants.

    If you want to chat, feel free to send me a message. I can help coach you through some strategies if you’re interested.

    1Reply
  • Kimberly Carver
    Member since 2020 · 119 posts · 56 votes
    5y

    @James H. I am in the middle of the BP rental management book and they allow until the 5th, specifically stating tenants on social security as the reason for doing so, since all SS is paid on the 3rd

    0Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    5y

    I'm with those that say don't rock the boat with the inherited tenants unless you want a bunch of vacancy. Here in Georgia (a landlord friendly state) we can charge late fees the day after the rent due date but most have a five day grace period. So our rents are due on the first and late after the 5th. Most pay on the 4th or 5th. Our late fees are +$75.00 on the 6th and an additional $10 every day after that until it's paid. A late fee schedule with some bite in it helps getting rents on time. If you can cash flow the property at the current rents, you can give notice of an increase that is tiered. eg, we gave a notice of about 2.5 months that the rent was going to go up by xx amount and then 6 months after that it was going to go up another xx amount. This gives plenty of time for them to be prepared and they may even look around and discover they can't find a better deal.

    0Reply
  • Jill Iwanski
    Rental Property Investor · Marshfield, WI · Member since 2019 · 18 posts · 37 votes
    5y

    Social security is paid twice a month. Some people are paid on the 3rd and others are paid on the 15th. I’m not sure how the feds decide who is paid when but we have tenants that get paid on the 15th. Our history shows that tenants that get paid on the 3rd will always pay rent on the 4th and the tenants that get paid on the 15th will pay rent by the 1st. We don’t collect rent until the 5th of the month and anybody that pays by the 5th is considered to be paid on time. Once we realized how the feds work and how tenants pay our life got a lot easier not expecting rent on the 1st. We just slid our systems 4 days to expect rent on the 5th. We even went as far as to move all our mortgage payments to after the 10th of the month to ensure the cash was in the bank. You’ll just need to figure out what works for you and your tenants.

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