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During the lease signing, when you get to the part that says how much the monthly rent is, this is a good time to collect the money for the first month’s rent. You should have already received the tenant’s security deposit (in the form of the “deposit to hold” when they were approved), so typically, this is when you would collect the first month’s rent.
If a tenant moves in in the middle of the month, I don’t prorate the amount they pay for that first month. Instead, I prorate the second month to match the first. In other words, every tenant pays a full month’s rent when they move in, but when the time comes to pay the rent on the first of the following month, they will pay only for the amount of days they lived in the home the previous month. For example, if the rent is $1,200 per month, and they move in on January 10, they will pay a full $1,200 for rent when they move in but only $800 on February 1.
One final note on the rent, only accept rent in certified funds, such as a money order or a cashier’s check. Don’t take cash, and don’t accept personal checks, especially for the first month’s rent. You do not want to move a tenant in and find out weeks later that the check was bad, forcing you to evict. This is a wise policy to have all around in your relationship with your tenants: certified funds only.
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3 Ways for Tenants to Pay Rent
As for rent payments in the future, I recommend not picking up the rent in person, because this will only train the tenant to expect you each month. For my rentals, I used to mail monthly statements to the tenant, and they mailed their certified funds to my post-office box. However, over time, I grew tired of the “my check is lost in the mail” story, so I switched to giving tenants three different options:
- PayNearMe.com or PayLease.com: These similar services allow tenants without bank accounts to pay at local businesses like Wal-Mart or 7-11. Currently, the tenant must pay a small fee ($4) for this service, but it is generally free (or low cost) to the landlord.
- Dwolla: Similar to PayPal, tenants can use Dwolla to pay rent directly from their checking account for free. This was a little bit cumbersome to get set up, but once I got it going the process works pretty great. The only trouble I’ve had is that some banks don’t work with Dwolla (usually small community banks) so prepared for such an instance.
- Intuit Payment Network: Intuit, the company behind TurboTax (to learn more about TurboTax, click here) and QuickBooks, offers a payment solution that is extremely easy to use and that allows tenants to pay their rent directly from their checking account. Currently, payments are just $.50 each and we use this when the tenant’s bank doesn’t work with Dwolla.
Many landlords have different techniques for collecting rent, so be sure to check out the BiggerPockets Forums for more suggestions and ideas from other experienced property owners. Ultimately, you may change or adapt your style as you learn more and grow, or as technology advances.
How do you have your tenants pay rent?
Let me know about your system with a comment!