Early rent discounts and Late fees
I was reading an older post and someone mentioned they give their tenants a discount for paying before the due date (which by the way I think is an excellent incentive for them to pay on time and I am probably going to offer this also), and people also spoke of not charging a late fee until the nth day. Of course all of this will be noted in the lease so it is known by all.
After all that small talk my question or concern is if you tell the tenant in the lease that they will not be charged a late fee (and they are not taking advantage of the discount) until the nth day of the month is this going to entice them to use the "GRACE PERIOD" and know that they are not getting charged more until then so really their rent doesn't have to be there on the first.
I realize this is a question that doesn't just have a yes or no answer, I just thought that maybe some of you may have experienced this or know someone that has.
I am in the process of obtaining my first few rentals now and I am doing all of my homework now so everything will be in place.
Thanks in advance for your input.
dnmfish,
If your rental cash flow and your cash reserves make you live so close to the edge that you must depend upon on-time rents every month to meet your obligations, then a rent discount might make sense.
Otherwise, I sincerely believe that a renter will not be too impressed with a small discount. Of course, your renters will take advantage of it if you offer a discount, but I would guess that most don't need to. After all, if a tenant does not have the money in the bank to pay a $700 monthly rent, he will not magically find $675 to preserve the rent discouunt.
I use a short grace period. Rents are due on the first and late after the fifth of the month. I have no need to offer a discount just to get rent money two days earlier. After the 5-day grace period, the late fee is an additional 5%. By the way, check you local landlord tenant laws to see if there is a minimum grace period prescribed for your rent collections.
Back to your question, I would never waive a late fee in my lease. Offer the early payment discount if you must, charge the full rent during your grace period, but always add a late fee when the rent is paid late.
Hey,
I see a lot of sample leases that contain the discounted rent option ($25 or whatever). I guess that works for some people, but I have never used it. I understand that there are lots of tenants that would do anything to save $25, so maybe your rent payments would be on time. BUT, I think you would have more problems with it then solutions. You would receive it on the 4th, with the discount removed, because the tenant would claim they had mailed it on the 29th. Nothing but headaches.
Give tenants until the 5th (or whatever the law says) to pay before you charge a late fee.
ALWAYS charge a late fee, when the rent is late. Also, do not charge a flat fee, it should increase with each late day. Otherwise, they will not pay until the last possible moment.
Put together a letter to send to the tenants when the rent is late. Advising them the rent is late, and what the fee is for each day until YOU RECEIVE the rent. It should also be spelled out in your lease. Check the local laws, as to what the legal limit you can charge.