Discount For Paying On Time?

Does anyone think a discount for paying before the 4th is a good thing to do? If I would give discounts, are the discounts deductable for taxes? Then after the 4th what would be a good late fee to charge? Just wondering if discounts would be a good idea or not. Thanks.

Comments(14)

  • lp125th May, 2004

    i think that the tenants that are good w their finances they will pay ontime no need to offer any discounts. i would target the ones that have been late. i would offer a monthly discount payable one lump sum on the day they move out. if during their tenancy they are late then all discount credits are lost. you may also require an automatic draft from their bank account as part of your discount program.

    as far as getting a write off on the discount , its fairly simple. you collect x amount dollars every year your expenses are y amount dollars your profit or loss is z amount dollars. you pay/ dont pay tax on profit/loss.

  • Bruce25th May, 2004

    Hey,

    Does your mortgage company offer you a discount if you pay on time???? Does VISA...does the car note...does the phone company????

    That should answer the question.

  • reneeschultz25th May, 2004

    Okay, I understand. The only reason I was asking because on the Carleton Sheet's rental form, he offers a discount. So wanted to know if it was a good idea or not.

  • DaveT25th May, 2004

    If it makes you feel better, then do it. Your tenants will appreciate it, but probably won't pay the full amount if they are late.

    I don't offer discounts, never need to. Rents are due on the 1st, late on the 6th. In addition to incurring a 5% late fee, my management company serves notice on the 6th.

  • reneeschultz25th May, 2004

    I think I have decided to do the no discount. I will stick with just the late fees. Thanks for the advice.

  • dwheroux25th May, 2004

    Renee,

    I offer discounts with great success. I have owned properties for over 15 years and I've had 1 late payment. The lease my tenants signs states the rental amount as $35 higher than our agreed upon price. So if we agreed on $750, the lease states $785. Also in the lease is an addendum for the discount. If paid by the 1st of the month, they pay $750. If received between 2nd and 5th day of month, they pay the stated lease amount of $785. After the 5th is when I tack on late charges of $5 per day. The one time I had a late payment, I received the stated lease amount ot $785, no questions asked, no haggling for late fees, etc.

  • reneeschultz25th May, 2004

    Thanks for the information. I still may consider this. I was thinking that I want at least 475 for rent and that I would just put in the agreement that with the discount it would be 475 and if late it would be 500. So I still may consider this as I thought it woud be a good incentive for the renters. So many decisions but I am still learning.

  • active_re_investor25th May, 2004

    It has been a while but when I was managing directly I definitely offered a discount for on-time payment. The contract was higher then I was expecting so the discounted amount was the full rent.

    It provides a positive incentive. This is a good thing.

    I still have a late penalty.

    Concerning any discount and late fees you need to be 'reasonable' in extra charges. Make sure your agreements are clear the amount are not too high. A judge will kick out late charges that are 'unreasonable'. This can mess up an eviction in some cases.

    John
    [addsig]

  • curtbixel25th May, 2004

    I have a rental discount for payment that arrives two days ahead of time. We have 9 units and the rent almost always arrives by the 28th.

    We simply increase the rent by 25 dollars per month, then give a 25 dollar monthly discount.

    As part of the discount, the tenants are also required to fill out a form that where they indicate that they have checked their smoke detectors, fire extinguishers, and furnace filters once during the month. Finally, they are asked to list any urgently needed repairs.

    I really don't know how much legal protection we would get in a fire by having tenants signatures on forms stating that they have checked the batteries in the smoke detectors, but it can't hurt.

    Anyway, the rental discount idea has been a winner for us.

    You cannot, however, make the discount too big or it will just be considered an unreasonable late fee. This can cause problems in court.

  • InActive_Account25th May, 2004

    I like the idea of having them fill out the forms. At least it keeps the maintenance stuff in the forefront of their minds (maybe!). Do you send the forms out with a bill every month? Is that something you created on your own or did you buy/download it?

  • Belltrail25th May, 2004

    I give a $50. discount if paid by 5 pm on the due date. (My due dates are the 25th).
    This is in exchange for the tenant doing minor repairs and paying on time. I charge above market rent and then with the discount it is at market rent. Works good for us.

  • davmille26th May, 2004

    Many of the above comments were actually very confusing to me. One person mentioned giving a discount if the payment arrived before the 1st which I would guess is the closest thing to a real discount. However, I'm not sure what it really accomplishes. It simply moves the date the rent is due back a couple of days. Some are saying that they will give a discount if before the 6th, but they say the rent they agree on is the discounted rate not what they list on the lease. This would seem to indicate that they are advertising the discounted rate, but listing a higher price on the lease. I would think that most tenants would look at this as a late fee which it actually is, not to mention the fact that it could be construed as deceptive advertising. Maybe I'm too simple minded, but I think it is simply best to state the rent you expect along with the necessary late fees if they don't abide by the contract. That method has worked for decades, and is accepted as reasonable by both landlords and tenants. Just my two cents.

  • HOLLERatG26th May, 2004

    Some say it has improved their payment receipt times in 90% of tenants.

    Set a target rent that provides you with cash flow after PITI, add %10. That's your Standard rent price. Give a 5 day window for the Early Bird 10% discount with a daily 1% penalty for lateness.

    Even if they are early, you still get your number (generally 1% of home's value). If they are merely on time, you get a sweet little bonus to throw into the kitty.
    [addsig]

  • davmille26th May, 2004

    These ideas are interesting and I would not say that they could not work. However, I have learned the hard way to base my behavior on large scale scientific studies whenever possible, and not on anecdotal evidence. It is obvious that large enterprises who have the resources and numbers to study what works with their customers, use penalties, not perks, to get people to pay on time. Again, I'm am not saying discounts haven't worked for some people. I am simply mentioning behavior that I have observed large companies doing who have entire departments devoted to collecting money and avoiding late payments. Fear, whether good or bad, is a potent motivator.

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