Collecting Rent
What process have you found to be the best for collecting rent? Pre-paid envelopes with direct deposit to bank? Deposit Tickets for bank? Check to business address? Monthly collection at the door? (This may be a very remedial question but since I've never done it, I really need help)?
rmontre,
Are we talking SFH, or Multi-Units?
Under no curcumstances should you leave envelopes. The first time you do, you are going to get "Well, it must have got lost in the mail." and then "Well we dont have another $1000.00 to give you because the post office screwed up, so we will have to wait until they find it." Yeah right.
If it is a SFH and close enough to get to, GO YOURSELF. If it is a large multi-unit, you could have someone do it for you if you like. The biggest thing is if you start trusting other people too much, as a landlord, you are more than likely going to get bitten in the a**.
My $0.02
J.
It is a SFH. Thanks. that's what I was thinking. We do have a part-time agent working for us who can collect the rent. We were also thinking of doing an inpection every other month during these collection times.?.
Yes, inspections are critical. You can spot potential problems before they arise. Not necessarily with the tenants, but with the building as well.
Good Investing,
Jesse
Thanks for your input. It is great to bounce things off of those who have more experience than I!
We recently started applying a discount for payments that are received on-time. For example we have 2 units rented at $1350.00/mo. If the tenant pays before the 1st we allow them to deduct $50.00 making the rent $1300.00, which is what we intended to collect in the first place. We just started doing this about 2 years ago and it has worked great!!
Repoman <IMG SRC="images/forum/smilies/icon_biggrin.gif"> [ Edited by RepoMan on Date 08/04/2003 ]
i would call then come by sometimes ive even given back 30 to 50 cash for good faith never take a tenant for granted trust me after all there in your house.
Hey,
Everyone does things different, but I think the idea of picking a rent check up at the property is a bad idea.
If you have 10 houses are you going to drive around on the 1st and pick up checks?
And if you think this is going to help with deadbeat tenants, you are dead wrong. The same people that tell you it got lost in the mail, are now not going to open the door.
"I wasn't home man. You said 3:00, not 2:00. I am going on vacation next week, so come back on the 10th"
The best way I have found is to give the tenant 12 pre-addressed STAMPED envelopes, when they sign the lease. If you want to be creative mark in the bottom left corner the month they are due. The address is for your company not the bank.
I don't think giving a tenant your bank details is a good idea either.
I have a little packet of information I give the tenants: 12 envelopes, phone numbers of utilities, frig magnet of my phone number, etc.
I think I like the idea of pre-printed, stamped envelopes and we are actually leaning toward this. Although we have a person who will oversee management of the properties while we work at our full-time professions, I prefer for them to use their efforts for managing the maintenance of the properties, showing, sales, etc. The manager can then deal with a "problem" tenant and pickup a rent check only as necessary. Right now we only have four properties but our plan is to continue adding to the list as often as reasonably possible.
I don't own any multi's and all my leases are hand picked (I can see the propty that way) or hand deliver. I have an associate who has a "closet" office at his Multi with a slot for the "rent" in the wall. that goes to a safe box all his rent is money orders so the dates are printed to see who is late and who isn't. Late pays get a notice and copy of MO stating late fees are due by X date. Late fees are not negotiable and can cause immediate evict as in terms of his lease agreement. Also check with for local Apt renters national association and join the membership. There is a lot of help there and legal "court respected" documents to use.
On the subject of inspections, my wife and I drop by the units once a month to "replace the air filter" and "spray for bugs" of couse we do those things (dirty air filter is the #1 cause of AC probs) but we take the chance to survey the property. Offer up lots of praise for a house well kept, and address any concerns.
We are not big fans of picking up the money, that's just time and gas money that makes your rental worth less. If you can't be sure you'll get your money without driving by, that's a problem. Get a postoffice box and handout pre-stamped, pre-addressed envelopes.
Hope this helps
I've set up my tenants for automatic debit from their checking account every month and the funds are direct deposited into my checking account.
If you have any questions about how to set it up contact me through my profile and I can give you more information.
Thanks,
Jack Krupey
I really think I like the automatic debit idea.
We give tenants our money market deposit acct# so they can deposit on time. It's worked the best of any technique so far (haven't tried the direct debit...which sounds cool also!!)
We have online banking, so we can check to see who's paid when we want! No running around..no lies to listen to...no frustration. If they don't pay by the 10th, or don't call us, we file for an eviction.
We do a fall and a spring inspection. We send out neat "fall" designed postcards/ "spring" designed postcards to tell them we are servicing theirr heat or a/c...whichever season and we do the inspection at the same time. Perfect timing to see what's going on. Then just send a letter to them stating what needs to be addressed.
I have 12 units. 2 send the $$ to the PO Box like their supposed to. 3 bring it to the car lot. And 7 I get to see around the 1st of the month as I collect and chat with them for a while. Sometimes I have to go back on the following friday if they're short of funds. I don't know why they can't seem to have it ready on the first.... It comes the same time... every month.
[addsig]
I have a tenant who has no checking account and pays cash. Tried the stop by and pick it up, she was always gone and it was tag your it. I asked her how she cashes her work check. She has a savings account at my bank. We set it up that she cashes her check and puts rent in a savings account I have set up in that bank. I go online and transfer it out right after it hits. She can not with draw or have access to my account. With that said she has rented this place for 15 years and I am the 3rd owner she has seen. I have gotten very use to her and how she handles money.
ClearNow, Inc. (www.ClearNow.com) is one of several companies that can set a landlord up so that they are collecting rent via an automatic debit of a tenant's bank account.
Since I first posted this topic, I found out that the bank where we have our "free" business checking account also offers "free" direct deposit (ACH) transfers for their business clients! Check your bank, they may offer this same service a a very low cost.
I have the rent sent to me with a money order or certified check. In the lease I put that they must send the mail certified so that I must sign for it. Therefore if it wasn't certified mail, I considered it not sent at all. Therefore we're both protected. My property is in Indiana, but I live in Cali, so it's risky.
I would not go from door to door. After all, that would defeat the purpose of investing. 'To free up your time". Look down the road at the bigger picture. You need a system that will run effectively when you have a hoard of rental properties. Direct deposit is an option, but unless you have a way of tracking, which I'm sure it can be done, I would have in the rental agreement that you only accept guaranteed funds, not cash. I would also rent out $50 higher than you plan too, then mark it down $50 for on time rental payment. This will be a good incentive for them to make those payments on time. Also, send reminders a few weeks early, and I would have a chart showing how much they are saviing by paying on time. ie. 1 month = $50, 6 months = $300, 1 Year = $600, 3 Years = 1800, 5 Year = You Save $3000. ... Sell them on paying early.
Years ago I owned a two family, lived in ****Must Reach Senior Investor status before posting URL's***hen the wife said she wanted a single and I was trying to run a truck at the same time. I wasn't around alot and lost the ****Must Reach Senior Investor status before posting URL's***w fast forward 10 yrs. Passing papers on a three family this week, I'm a COMPANY DRIVER, NOT OWNER OPERATOR, I will definitley be an on site manager property is 15 min. from home. travel fees are a bus expense
Hey,
All my houses are lower middle class (750-950 a month), so maybe my results are different than your's...
1) ACH---I think ACH is a GREAT idea, but tenants do NOT like it. Money leaves their account without their control, they can't play the float game, etc, etc, etc. Getting set up at your bank is easy...good luck getting the tenants to agree to it.
2) Rent Reductions---I tried the $50 rent reduction and it is nothing but headaches!! The tenant is still late, but now you get a check for $50 less and get to argue every month.
3) Giving out Bank Information--Several people have mentioned having tenants send cheques directly to the bank for deposit. I can't figure out a way to do this WITHOUT the tenant having your bank account information. I can not think of a worst idea. Once someone has your bank account name and number, all kinds of bad things can happen.
IMHO, the BEST idea is to have the tenant send a check or money order to you. The rent is due on the 1st; you give the tenant until the 5th (this maybe the law in your area) and then you send them a letter and call them.
If you have good tenants it really doesn't matter what method you use. On the other hand if you have bad tenants no method is going to get you the rent any faster (or at all). I've had my share of deadbeat tenants and have offered to pickup the rent on the first (or even the 10th) in order to stimulate payment. Do your tenant research on the front end and you'll see that with good tenants the rent will arrive at your PO Box (don't give out your home address) on the first of each month.
Quote:
On 2003-10-27 07:30, Bruce wrote:
Hey,
All my houses are lower middle class (750-950 a month), so maybe my results are different than your's...
1) ACH---I think ACH is a GREAT idea, but tenants do NOT like it. Money leaves their account without their control, they can't play the float game, etc, etc, etc. Getting set up at your bank is easy...good luck getting the tenants to agree to it.
Well, if your not letting your tenets play the "float game" it actually is easier for them. I wouldn't setup an direct deposit, rather setup for them to deposit at the bank.
Quote:
2) Rent Reductions---I tried the $50 rent reduction and it is nothing but headaches!! The tenant is still late, but now you get a check for $50 less and get to argue every month.
No arguements. Start the eviction process. When the sheriff knocks on the door on Saturday, they'll wake up and see you mean business. I always tell my tenets that I'm the best landlord and I'm looking for the best tenets. I haven't got time for people who don't pay.
Quote:
3) Giving out Bank Information--Several people have mentioned having tenants send cheques directly to the bank for deposit. I can't figure out a way to do this WITHOUT the tenant having your bank account information. I can not think of a worst idea. Once someone has your bank account name and number, all kinds of bad things can happen.
Separate accounts for each tenet. Besides, your account information is on every check and every swipe of the card.
Quote:
IMHO, the BEST idea is to have the tenant send a check or money order to you. The rent is due on the 1st; you give the tenant until the 5th (this maybe the law in your area) and then you send them a letter and call them.
I hate the idea of a tenet having my home address. I have a P.O. Box for necessity but otherwise I will not except money by mail. Too much of a chance of the money getting "lost". If they deposit the money into the bank, I have instant feedback online. I can immediately move the money for the tenet account to the main account.
all of these ideas are great but we all have our own issues. Me, I have tenants who pay on the first of the month because I tell them up front that I'm not renting to them because I'm a nice guy but because I'm in business. In business you have assets and liabilities. If they are a liability I'll unload them as fast as I can, keep the security deposit I collected up front as well as the last months rent and then sue them for each month they didn't pay. Each tenant has a five day grace period after that all gloves are off.
I used to have in my office where I sold pre paid telephone service and I made my deposits at a local national bank. The company had it setup where when I made my deposit the company knew within 30 that a deposit was made and which affiliate made the deposit. Long story short, I am sure that any bank if it is big enough, and wants the business should be able to help you set this up where the funds are deposited and there are not outbound transactions allowed unless initiated by Telephone company.
Most of my rentals are 100 miles from where I live. My leases state that rents are due on the 1st and late after the 5th. I sentd a letter to my tenants after purchasing the property that if there is a postmark on the 1st , I will allow any arrival time and not charge a late fee. If I get to the 10th of the month with no rent I inform the tenant of a late fee that will be refunded if the check arrives. Also, my leases have the tenant pay for any 3 day notices which I can use as additional incentive to pay on time. This has worked reasonably well so far.
Regards,
Ed
You can also set up an electronic funds withdrawl from their bank acct. It may cost you 10-20 a month, but all they have to do is make sure the money is in there. No one needs to pick up the checks, or nothing gets lost in the mail.
Just an idea.
Hey SavvyYoungster,
Float is the time between when a check is written and the time it clears the bank. It is an unavoidable process, regardless if the check is sent to you or directly sent to the bank for deposit. I think all tenants are aware of this 3-4 day lag and use it to their advantage. This is one of the reason (though the tenant may not state it directly) that tenants do NOT like ACH.
Establishing a bank account for each tenant is a novel idea, but a cumbersome process if you have more than a handful of properties. Plus what are the costs associated with all of these accounts? I fail to see any advantage in this idea.
Maybe your business is different than mine, but I RECEIVE checks from tenants, not the other way around. So tenants do NOT get my bank details.
I have repeatedly recommended getting a P.O.Box, so I wholeheartedly agree with you.
We have a centeralized location in town....(My office). They can mail it to the office or they can bring it by. Our Rent is due no Later than 5pm on the 25th of each month.
If its late they lose the discount for that month. If its a lease option they lose not only the discounted rent plus there monthly option credit.
On the 26th We call for rent to be delivered that day or visit the property in person which is a collection fee.
On the 27th if not there we file a 3 day notice and start the paperwork for eviction.
Now I must say that I have not had any problems doing an eviction. When we do the lease or lease option agreements we spend about an hour and a half with each tenant. We have disclosures that say you must pay to stay.
Sure its a long meeting but the training is important. Some tenants test the 1st month. But as soon as they see that you mean business its easy from their on.
Now do we collect on December 25th? No....we expect them to pay on the 24th
Hi rmontre
I have had rentals for many years now.
First, you need to screen carefully and choose good tenants. Then there shouldn't be any "float" problems.
Secondly, I put in my Lease that the rent should be mailed by no later than the 29th of the preceding month to ensure that it arrived on or before 1st of the month. Rent is late after the 3rd and late charges of $15.00 per day accrue. Additionally, they receive a Three Day Notice on the 4th of the month.
Sometimes a tenant will test you, but once they see you mean business they will use the float technique with their other debts, not you.
Best of luck to you
Quote:
On 2003-10-25 21:36, monopoly wrote:
I have the rent sent to me with a money order or certified check. In the lease I put that they must send the mail certified so that I must sign for it. Therefore if it wasn't certified mail, I considered it not sent at all. Therefore we're both protected. My property is in Indiana, but I live in Cali, so it's risky.