Landlords: How To Make Extra Rental Income with Late Rent Payments


I’m a pretty strict landlord. When I first meet potential tenants I literally tell them not to fill out the application if they don’t plan on paying their rent on time or if they won’t treat the house with care, because my company will evict them in a heartbeat.

There have been a few times when I’ve told this to people who were about to grab an application, and they looked at me with a hesitant look and said they needed to think more if they wanted the property — which is exactly what I want. If a person is honest and plans to pay rent on time they won’t care that I’m strict with on-time payment.

However, as strict as I am, I will admit that I relax a little after a tenant has been with me for a number of years. For example, the first 12 months that a tenant is with me they must pay the rent by the 5th of the month. After the 5th they owe a late feel, plus I also begin the eviction process by sending them a Pay Rent or Quit Notice. I don’t care who the tenant is or what there excuse is, I immediately start eviction after the 5th.

But once a tenant has passed the 12 month mark I will be a little more flexible.

After all, after the 12 month mark if the tenant has been a pain in the butt I wouldn’t have given them another lease in the first place.

For instance, right now I have a townhouse with a tenant who’s lived in it for three years. Over the first two years, the tenant always paid rent on time and was a dream tenant. Unfortunately, about a year ago she ran into some financial troubles and wasn’t able to pay the rent on time any longer.

This woman called me ahead of time and told me that she would not be able to pay rent until the 15th of the month. Since she’s been with me for two years, I told her that it was okay, that she needed to remember to include the late fee, but if I didn’t get the rent by the 15th I would start the eviction process.

I got my rent on time along with the late fee, which happens to be $85 for this particular property. And ever since then, this woman has constantly paid late. She always emails me ahead of time and explains what’s going on and is always apologetic. And every time I get the email I explain to her about the late fee and that I will evict if I don’t get my money by the 15th.

So far I have not had any problems, and for the past several months I’ve gotten to collect $85 on top of what I already get from the tenant. But here’s the thing: Being flexible with a tenant is a very fine line to walk. Only you know how much leeway you can give to a tenant and obviously every tenant is different.

However, I would make sure that when you do give a tenant a little extra time to pay, you always enforce the late fee and that you always start eviction by the 15th or whatever the time of the month you decide is the latest they can pay you.

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Photo: Duane Brown

About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.


  1. Jason,
    I agree 100% with your first year approach. Being strict and enforcing the rules is mandatory. That said, and this is where I’ll getinto a little trouble… Each circumstance is different, and sometimes it’s not about an extra few bucks a month. My specific example is an older couple that retired whilein the property, they were previously great tenants the previous couple years. They started paying late and getting socked with hundreds of dollars in late fees did not help. After much discussion with the property management company, their social security check was deposited the third Wednesday, this was the prime cause for the late rent. We worked it out, no late fees, they are good tenants, we will be starting our seventh year early 2012. They have a few extra bucks, I don’t have release and evection fees, worries ifthey have the added money for the late fees.

    Sometime, doing a good deed is rewarded.

    I am, however in a fortunate position. This is not my bread and butter, only a passive investing hobby, perhaps my opinion would changeis I needed every penny to feed my family.


  2. You start the eviction process immediately after the 5th if payment isn’t received? I consider myself to be pretty strict, as well. But I think that is pretty early to start the eviction process. I definitely will issue a fine and a warning, but usually wait until the 10th to start any eviction processes.

  3. *Sigh*…. I really should have taken this advice sooner. I’ve been far too lax with one of my tenants, and now I’m having quite the time with the eviction process. In all likelihood, had I stuck firmly with the late fee (and begun eviction sooner so she knew I wasn’t playing around), I wouldn’t be in this mess now. Lesson learned!

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