Late Payments

[StreetsofSilver]

<div class="bbWrapper">I have a house that is located in a warzone. It cashflows great. It went vacant back in November, so I screened tenants. Not one applicant passed the background check. So I went with the only tenants that I found that actually have a job and had the least criminal history. Rent is due on the 5th. Rent is $700/month with a $50 late fee.<br /> <br /> December: Tenant calls me on the 5th and tells me that he cannot pay me until the 10th. He says that he will pay the late fee. On the 10th, he hands me $700 and tells me that he will have the $50 late charge to me in 2 weeks. I tell him that I will waive the late fee just this month since it is the holidays and it is his first month.<br /> <br /> January: Tenant calls me on the 5th and tells me that he cannot pay me until the 16th. He says that he will pay the $50 late charge.<br /> <br /> I already sent out the first letter. (I believe that I must send 3 letters before I can evict). It just states that the rent is overdue and must be payed with the late fee. <br /> <br /> What if the tenant just hands me the $700 and not the $50 late charge? Would you accept just the $700 or would you continue with the eviction process and not take it?<br /> <br /> What is your system for handling late payments? Thanks</div>

 

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[snowbank]

<div class="bbWrapper">Depends how much &quot;cashflows great&quot; is? If you&#039;re making a lot off them I&#039;d keep it occupied and not sweat the late fee too much.<br /> <br /> However, I just had a tenant leave one of my houses before their lease was up with no notice because they couldn&#039;t pay anymore, and they were a constant pay late people who I kept letting them slide on the late fees. If I had put my foot down early maybe I&#039;d get some late fees, but at some point I&#039;d still have the vacancy. You&#039;ve just gotta weigh your risk reward. If you are a hard a$$ about collecting the late fee obv. the chance they don&#039;t pay you at all goes up, but the chance you collect a late fee goes up as well.</div>

 

[Runum]

<div class="bbWrapper">Laws vary state to state. The courts around here don&#039;t do a good job of enforcing late fees. Also, here, if you take ANY money toward the rent, you can&#039;t evict. Yep, that means 1/2 payments, no eviction. Like Snowbank said, you have to weigh the risks for yourself.:cheers:</div>

 

[Inphinity]

<div class="bbWrapper">Given you had, from the sounds of it, a tough time finding a tenant, it might be worth waiting it out with this one. At the end of the day, even if they&#039;re late with payments, as long as they&#039;re making them, that&#039;s a lot better than having the place empty, plus the time &amp; cost to ifnd a new tenant. That&#039;d be my stance anyway. If they&#039;re completely missing payments, then maybe start looking at options.</div>

 

[GettingThere]

<div class="bbWrapper">I&#039;d keep &#039;em in there. If they are paying in full (minus late fees), that&#039;s acceptable IMO if: A) they are notifying you, B) you don&#039;t have to fight with them about it. There are lots of rentals available and more tenants popping up every day looking for super cheap rents because they know many owners are hurting.<br /> <br /> You could just shuffle $700 (one time) out of your own pocket in to the mix to avoid the late fees...correct?<br /> <br /> For example, you pay Feb. payment out-of-pocket and on-time, while they send you a check on the 16th...use this Feb. check to pay March, March to pay April, and so on all on-time...on their last payment, you&#039;ll get your $700 back. <br /> <br /> My $.02<br /> <br /> - John</div>

 

[NoMoneyDown]

<div class="bbWrapper">As bad as it sounds, I would find another tenant. If it&#039;s cash flowing really good, lower the rent and find a better tenant. As it has already happened the first two months, it will no doubt continue to happen. As a fellow landlord told me early on, &quot;Will your mortgage company wave the late fees if your payment is late?&quot; Your tenant is setting a precedence that will only continue - and so are you. Tenants are like children - they like to test your boundaries.<br /> <br /> BTW, it sounds like you became a &quot;motivated landlord&quot;. I did this one time and learned my lesson. It&#039;s sometimes better to cash flow negative (for a short while) than to have a troublesome tenant.</div>

 

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[CVentures1B12]

<div class="bbWrapper">I agree with NoMoneyDown.<br /> <br /> I plan on having a late fee to charge also, but daily. Something like &quot;Due on the 5th with a $30 late fee if paid after the 5th. If not paid by the 10th, then $30 plus $10 each day.&quot;<br /> <br /> Not sure what you guys think about this, but there is a &quot;grace period&quot; of five days for them to get it in with only 30 dollar late fee...but much more after that could REALLY add up. Kind of an incentive for them to get it in early.<br /> <br /> I also really like the &quot;Rent of $675 is due on the 5th of each month; however if paid anytime before the 5th, it is $650&quot; or something like that...<br /> <br /> Let me know if these are absurd...but they seem like a win/win to me.</div>

 

[MJ DeMarco]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="NoMoneyDown" data-source="post: 76359" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=76359" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-76359">NoMoneyDown said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Tenants are like children - they like to test your boundaries. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> Great take ... this can be said for the clients of any business. Some will test your boundaries. I had clients like that all the time ... they&#039;d test, if I caved (and often did) next month, it was something more, and more, and more. Lines need to be drawn and defended.</div>

 

[Runum]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="CVentures1B12" data-source="post: 76367" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=76367" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-76367">CVentures1B12 said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> I agree with NoMoneyDown.<br /> <br /> I plan on having a late fee to charge also, but daily. Something like &quot;Due on the 5th with a $30 late fee if paid after the 5th. If not paid by the 10th, then $30 plus $10 each day.&quot;<br /> <br /> Not sure what you guys think about this, but there is a &quot;grace period&quot; of five days for them to get it in with only 30 dollar late fee...but much more after that could REALLY add up. Kind of an incentive for them to get it in early.<br /> <br /> I also really like the &quot;Rent of $675 is due on the 5th of each month; however if paid anytime before the 5th, it is $650&quot; or something like that...<br /> <br /> Let me know if these are absurd...but they seem like a win/win to me. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> I do have both late fees written into my leases. I have shortened my grace days from 5 to 2. My experience has been, in most cases, the length of the grace period doesn&#039;t matter to the tenant. They will pay or they won&#039;t. You do need to check with state laws about late fees and grace periods. My late fees are $5 a day after the 3rd day and another $50 added after the 10th. However, unless you can afford to absorb any hits, there are no absolutes. Each tenant and month is a case by case judgment call.<br /> <br /> I will say that, from what I have learned, if they are ever late you will most likely lose them. Most tenants can&#039;t see past right now. If they are late this month, they will probably be late next month and the next month and so on. They will have no plan to catch up and will not make any plans to catch up. I have had only one tenant that worked extra hours to catch his rent back up and he has been with me 2 years, only late one month.:cheers:</div>

 

[TaxGuy]

<div class="bbWrapper">where do you find out state laws on late fees and how would I write it into a lease agreement for a roomshare?<br /> <br /> also SoS- do you do your own background checks or have a PM?<br /> <br /> if you do your own, what service do you use? I was using Tenantverification Services b/c it&#039;s $19.95 for criminal checks, but I guess you have to register the property in order to get credit/employment history verifications.</div>

 

[bflbob]

<div class="bbWrapper">Try e-Renter.com for tenant background &amp; credit checks.<br /> <br /> I&#039;ve had good luck with an inexpensive software program by NOLO called LeaseWriter Plus.<br /> <br /> It covers a lot of the state-by-state items, as well as providing many of the documents you&#039;ll need.</div>

 

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[NoMoneyDown]

<div class="bbWrapper"><blockquote data-attributes="" data-quote="CVentures1B12" data-source="post: 76367" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=76367" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-76367">CVentures1B12 said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> I agree with NoMoneyDown.<br /> <br /> I plan on having a late fee to charge also, but daily. Something like &quot;Due on the 5th with a $30 late fee if paid after the 5th. If not paid by the 10th, then $30 plus $10 each day.&quot;<br /> <br /> Not sure what you guys think about this, but there is a &quot;grace period&quot; of five days for them to get it in with only 30 dollar late fee...but much more after that could REALLY add up. Kind of an incentive for them to get it in early.<br /> <br /> I also really like the &quot;Rent of $675 is due on the 5th of each month; however if paid anytime before the 5th, it is $650&quot; or something like that...<br /> <br /> Let me know if these are absurd...but they seem like a win/win to me. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> I use a Lease Agreement I got from an agent a few years back, and have modified it a few times for both my own taste and when the state law has changed. I used to get fancy with grace periods, etc., but as Runum said it really doesn&#039;t matter with most tenants. Now what I say is rent is due on the 1st (unless the 1st falls on a holiday or Sunday, which then it is due on the next day). I charge a flat 1% late fee each day it is late. If I don&#039;t receive it by the 5th day, I&#039;ll send a certified/return-receipt letter and try calling them. If that doesn&#039;t do the trick, I&#039;ll send a Notice of Termination of Occupancy, which starts the ball rolling for eviction. It&#039;s at this point the tenant will either vacate the premises or call me. In the years I&#039;ve been a landlord I have yet to actually evict anyone as they&#039;ll either disappear after receiving the Notice or I&#039;ll negotiate with them to leave 2-3 days later (provided they don&#039;t do any damage, I keep their deposits, etc).</div>

 

[StreetsofSilver]

<div class="bbWrapper">Thanks for the replies. Great advice and different viewpoints.<br /> <br /> <br /> <blockquote data-attributes="" data-quote="NoMoneyDown" data-source="post: 76359" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=76359" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-76359">NoMoneyDown said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> If it&#039;s cash flowing really good, lower the rent and find a better tenant </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote> <br /> NMD, Why would you lower the rent? <br /> It cashflows (after PITI) about $370/month. The house is the &quot;Taj Mahal&quot; of the warzone. I completely rehabbed the entire house a year ago. The rent is competitive.<br /> <br /> The last tenant in this house was Section 8, so I never had this problem. If I do evict the tenant, then I am definitely going to consider renting to another Sec. 8 tenant. They do thorough background checks and the govmt. pays on the 1st every month.<br /> <br /> Ugh, I really do not want to go to court for an eviction. I hear the judges are mean to the landlords and always take the tenants side. :smxD:</div>