If You Fail to Plan, You Plan to Lose Money


“Charge and Enforce Your Late Fees”

That’s the first bit of advice that most seasoned investors will share with you if you’re looking to keep rentals or buy notes. Your late fees are a secondary source of income, but more importantly, they assist you in enforcing your agreements by adding and maintaining consistency.

Why are most investors ok with not enforcing fees?

Think about this: If you are late on your car loan, is it at the discretion of the person processing your payment to waive or charge that late fee? No, it’s in the agreement and you are held to the agreement you made with the car company.  Bottom line: Enforce your fees!

Now, this is not a post about just collecting late fees; Jason Hanson did an excellent job covering late fees last year. My goal is to help you develop a consistent and solid plan of action that’s easy to follow when a payment goes from being late to being delinquent. A consistent plan protects you and helps you enforce your agreements. A payment due on January 1st is late on January 4th. That same payment is delinquent February 1st, and should now be handled differently than simply charging a late fee.

A Few Items to Consider when Dealing with Delinquent Note Payments

Develop your plan ahead of time: Write down the steps to your action plan before you are in the situation. Know what steps you will take when someone is 15 days, 30 days, or 60 days late. Each day that slips by can move your note closer to a forfeiture proceeding. When you have a plan ahead of time, and stick to it, you are increasing the value of your note.

Communication: Keep the lines of communication open with your buyer. We mail out 15 day notices, and when required, send 30 day notices before handing the contract over to an attorney. The more often you communicate with the buyer and remind them of the terms of the agreement they signed,  the smoother the remainder of the process will be on both sides and the better off you will be as the investor.

Know your state laws: How does your state handle proceedings with delinquent contracts? Is it forfeiture, foreclosure, or a judgment? Each state handles contracts a little differently, so it is best to understand state law before buying a note or selling on contract to avoid any unnecessary surprises.

Enforce your contract: We cannot expect buyers to walk in and say I am 30 days late, let’s get started with the legal proceedings. We have to expect exactly the opposite, meaning we need to simply follow the contract agreement that was signed at the point of sale.

Late payments always create more work for those collecting. As a note holder, you have to treat your note collection process as a business, complete with policies and procedures. Putting these tips into action will help create more consistent cash flow for you and make your contracts more marketable.

Photo: Jonathan Hutchinson

About Author

Kevin Kaczmarek is President of Capital Blueprints, LLC. Serving a national and international client base, Kevin helps clients achieve their personal goals for long-term stability and solid financial growth through Self Directed IRA Investments and individualized Passive Income Strategies.


  1. Bill Patterson on

    If you set that expectation the first time a payment is late, you will see a lot less late payments. If you ignore the fees, I’ll bet you see a lot more late payments.

  2. This month one of my noteholders sent me an email telling me they couldn’t pay until the 20th (it was due on the 1st). I replied that they would owe a $35 late charge. They emailed me later that day saying they had mailed the payment (and they did).

    So, I agree, charge your late fees!

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