The problem of getting rents paid early, or at all in some cases, is an age-old problem for landlords, but there are at least two solutions. Every landlord has heard unbelievable stories of why tenants can't pay their rent on time and many seem to be willing to pay a penalty instead of just paying on time.
Some landlords might view these late payers as a benefit because they are actually getting more rents that they planned on when they rented the apartment. However, the next step is for the tenant to pay later and later and eventually stop paying. This leads to an eviction which ultimately costs more than the few extra dollars of late payments the landlord received.
The cost of filing an eviction varies greatly from state-to-state but can easily be from $190 to $500+, and this does not include attorneys' fees. A shrewd landlord will process his own eviction notice and process the case himself through the court system. This works well, especially with practice, until the tenant gets himself an attorney who only represents tenants and who "murders" the landlord in court. Many states allow the tenant to be paid many times their monthly rent plus attorneys' fees if the court rules in their favor. If you haven't heard this already, "Tenants have more rights than landlords", so be careful out there!
So let's look at the problem and two possible solutions. First, the landlord should heed the warning signs of late payments - something is wrong and it may be resolved short-term, but the end result will likely be an eviction. If the tenant is always paying late, work out a bi-weekly or weekly payment plan so the tenant pays as he goes. This generally keeps him from spending his money as quickly as he gets it, and it will give the landlord an early warning signal if there is trouble in paradise. This method actually takes a great deal of stress off the tenant because he doesn't have as much time to be irresponsible as when he only pays every 30+ days.
The other option to get the tenant to pay timely is to give him a discount for paying early. This is a more common practice when investors do lease options, but the rent payment concept is identical. With a lease option, the tenant gets a credit at closing of the purchase of the property for paying timely, or early every month - if he exercises his purchase option AND he has paid timely every month. This money is actually given as a reduction in the purchase price or as a seller credit at closing.
However, when a landlord gives a tenant a rent credit or reduction, the funds come off the amount of the rent due each month. For example, if the rent you want is $850 and due on the first of each month, then your discount program should charge $900 with a $50 discount for early payment, but only if the tenant pays by the 25th of the previous month. If the tenant pays by the fifth of the month the rent is due, he loses his discounted rent completely and starts paying $900 for the rest of his lease. Most tenants like the idea of saving the money more than they worry about paying a late fee or a higher rent.
If you find that an incentive program isn't working and the tenants are paying late, try re-working their payment frequency because they may have a problem with when and how often their employer pays them. If this re-scheduled payment plan isn't working, start serving them with eviction notices as soon as the rent is one day late. Above all else, get any new payment program in writing because the tenant should be evicted if he violates the new terms of the lease addendum and should be evicted.
Dave Dinkel has been a real estate investor since 1975. Dave's focus in the past few years is educating the public in a manner that doesn't' amount to paying for a master's degree. Dave's recent contribution to this end is his e-course called "48 Ways to Create a Massive Buyers List" which can be seen at http://www.MakingaBuyersList.com
Article Source: http://EzineArticles.com/?expert=Dave_Dinkel
Tuesday, 15 June 2010
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