How Do You Collect Rent? Will My Idea Work?
OK. I have to collect rent from approx 15 families per monthn (mostly single homes). I have problems with tenants not being present at the agreed time, giving me half of what I am supposed to get, sad stories, etc.
I want to open an account at a local bank with many locations and have them deposit their rent into the savings account (different rent amounts for each property). If the rent is not there by the 2nd or so, I give them a 3-day notice, after the 6th or so, I file eviction ($100) Without going into too much detail, I have the late fees, reimbursement of court fees, etc. all worked out.
I have also tried having them send the rent payments to a PO box and still I get excuses.
My question is, I believe the bank thing will work but does anyone foresee and problems. I had a roommate write checks under my name a few years ago and at the places she wrote the checks, she HAD to have had an ID with her picture and my name. I am just afraid that some smart tenant might find a way to access that money. Of course I will be making withdrawals quickly but I just am still nervous. Maybe this is turning into a question for the legal forum.
Anyone have any ideas about the above or ways on how to collect rent (besides a management company).
I have seen others say they would not want to give out their acct # to so many people.
If you like the bank idea how about a different savings account for each tenant?
BTW many states require you to keep the deposit in a special account so perhaps you could kill 2 birds with one stone.
Others have said they prefer to go to the apt so they can invite themselves in to look at the apt. But then of course you are back to the problem of having to set up the time to do it.
The problem of not seeing the apt each month could be solved by stating in the lease that the 5th day of each month between 12 noon and 4PM you will be entering the apt to change the air filter. Don't know if this is legal or not just an idea.
Look into direct deposit and also read this article
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=179
I like your account idea but I am to lazy for that.
Consider this...services exist that will let you charge a credit card.
Advantage: no more bounced checks.
Disadvantage: 2-3% charge from the CC company
I do a direct deposit from their account into mine. If the deposit is in the account before the 1st, they get a 5% rent reduction.
This way, the bank does all the work. No fee for this and they don't get access to my accounts.
Quote:
On 2003-12-09 14:31, PassingThru wrote:
I do a direct deposit from their account into mine. If the deposit is in the account before the 1st, they get a 5% rent reduction.
This way, the bank does all the work. No fee for this and they don't get access to my accounts. <IMG SRC="images/forum/smilies/icon_biggrin.gif">
How do YOU set up the direct deposits?
Thanks
Mike
My leases say that the rent has to be in MY OFFICE by 1PM the last day of the month. It also states that the tenant is responsible for getting it there. If it is not there I notice the tenant by posting on his door THAT DAY ( at least the first few times). I am very fair but very firm. I also give a discount of $50 for following about twelve rules. One of those rules is paying on time.
You will go crazy if you collect the rent yourself.
Gregg
[addsig]
There are many different ways. Play around until you find one that you're happy with. Here are a few thoughts
1. Be strict with late fees and evictions (begin eviction process on the 6th and make sure they know that you will and that you're serious. Be ready and willing to follow through if you say this.
2. Lockbox companies (check out www.Paymentservicenetwork.com). They can do rents over the telephone, online, credit card, ACH, direct deposit, or one time bill pay.
3. Talk to your bank about direct deposit.
4. Have them wire the money to you
5. You may accept mailed payments, etc UNTIL they have a late payment come in and after that you'll have to bill their credit card (at their expense) unless they have cash (or cash equivalant) in your hand by the (Date) of each month.
Let us know what works best
I don't know what your time is worth or what your vacancy allowance is, but let's assume you have 15 single family homes and you get $500 a month for rent. Again, humor me in the numbers.
If you hire a property management company at 8% you pay $600 per month. They do the advertising, they screen tenants to your criteria, they collect rent and evict if your tenants don't pay.
First and foremost, if someone came to my home and took $500 bucks from me, I'd be pissed. You need to feel the same way if they don't pay timely rent.
By the way, the $600 per month management fee is about $3.50 per hour based on a 40 hour work week. I would hope your time is more valuable than that! Take yourself out of the equation and hire a property management company.
Gary
Hey,
A couple different terms are being thrown around here, so I am not sure if we are all talking about the same thing, but as I see it there are only two ways the tenant can pay (excluding you going to their house):
A) ACH
B) Check to an address
ACH is where your bank sends a file to their bank to debit their account for the rent. In my experience, tenants do NOT like the idea of someone taking money out of their account. If you can get them to agree to it, it is the best way possible.
If the tenant sends a check to a P.O.Box, an office or directly to the your bank, what difference does it make???? Why are they going to be on time more often with one way or another???
If I understand what you want to do, the tenant would send a check, with your deposit slip, to the bank. You would have one account for all deposit. Giving your bank details to a tenant is a BAD idea. Period. Giving them the details to the one account all the money goes to, is a REALLY BAD idea.
DO NOT EVER give a tenant information about your bank account. You are only asking for trouble.
For those who do not believe this is true, please give me your bank account number and bank.
ClearNow is a service that costs about $14 per month for the first tenant but less than $1 for each additional tenant for direct deposit. I don't think the site will allow me to post url's yet, so private message me if this doesn't post. The site for ClearNow is ClearNow (dot com)
None of my tenants were interested in direct deposit (although I have only low-end renters that don't even have a checking account most of the time) Currently I have them mail the rent. In the state of California, the rent is considered paid by the postmark date. That can be good, but lately it has taken the mail 4-5 days to get to me and the property is less than 30 minutes away! I am installing a drop box in the laundry room next month. The company I have that does tenant screening/evictions for me has a service for $20 month where you can have the rent dropped off at their office. (Our tenants do not know where we live. Call me overly paranoid, but as I said before, I rent only to low-end renters and, well, like I said, call my overly paranoid....)
By the way, I NEVER accept partial payment of rent. It's either all or nothing.
I am not a lawyer. But here is some more advice why you should you have an all or nothing policy for collecting rent. Because once you accept part of the payment at the begining of the month and the rest at the end of the month this will make it difficult to evict that tenant. The court will say well you let them pay part at the begining and part at the end so we the court don't see any problem for letting this continue on.
Just my 2 cents.
great thread, i am looking at a 12 room boarding house where the tenants pay weekly and have been wondering about the best procedure for collecting from them.
Thanks so much for all the ideas and the articles/websites!!
I will have to find a way to do house inspections once the running around is not done anymore.
I know I don't want them to know where I live. I am looking to begin an LLC where they will deal only with the business name and only need to know my first name.
I like many of the ideas but they require bank accounts and computer knowledge. My renters (mostly low end) don't have computers and I think they keep bank accounts open only to cash their checks, not really to keep money in them.
I am working part-time already to let me be my own property manager so I really do not want to hire anyone.
Most methods allow the tenants money to end up in my account. I will offer them foremost the choices where their $ go directly into my real account and they don't know my acct number. For the others, they will have to deposit into a known account number and I will have to do frequent transfers/withdrawals to minimize fraud.
Thanks again!
Quote:
On 2003-12-10 07:44, Bruce wrote:
For those who do not believe this is true, please give me your bank account number and bank.
LOL, that's funny!
iglooman
Quote:
On 2003-12-10 07:44, Bruce wrote:
For those who do not believe this is true, please give me your bank account number and bank.
Every time you give a person a check they have ALL of your bank info.
johni554,
Just to add to the fray. My situation is similar to yours, except I live about 100 miles away from my properties. I collect my rents by mail. Many of my tenants are also low income and do not have checking accounts. Many pay by money order. Rents are due on the 1st and late after the 5th. I allow late arrivals for envelopes post marked by the 1st. Late fees are imposed. My leases state the that any other expense outstanding (including late fees) are payed off before rent credit is given for any payment so that if they refuse to pay late fee, the next payment will have a rent deficiency in the amount equal to the late fee. This way I can evict for lack of rent payment.
This has worked reasonably well. Occasionally, I have a tenant who wants a war of wills as to when they pay rent. The first three day notice usually cures them since my lease states they must pay for the three day notice.
Hey Mike,
That is a good point, but totally irrelevant. The way I do business a tenant gives me a check; I don't give the tenant a check.
First post here just started lurking. I am relatively new to the whole landlord thing but did soe homework and came up with something that works for me.......
I have 5 rental homes in CA and because of local laws I adjust the rent price to $50 more than what I expect to get..... and then discount for a timely rent so for a duplex I have I get $900 per unit if it is paid for before the 3rd (in my posession) They only have to pay $850. If not they have until the 8th but must pay the full $900....if later than that there are dditional late rent fees...problem here is if they end up being evicted the courts will not usually give you any late fees in a decision but they will give you the full amount (in this case $900) it has been working I go to the post office on the third and the checks are there.....When we market we play with the ads and say something like 3bdr 2 bath $850 a month after discounts....no one has complained yet..they think we are giving them a deal.......
This thread seems to be straying off topic. It started with the proposition that the tenants would deposit their rents directly into the landlord's bank account.
While, there may be a concern with timely rents, the central question is whether it is a good idea to give your tenants your bank account information.
I would say yes, but only if your bank will set up your account as a "lock box". In this way, only deposits can be accepted but withdrawals will be prohibited. At the end of the day, the bank "sweeps" the lock box account and transfers all the deposits to your personal or business account.
If you don't have a lock box account, then I would say don't give your tenants your bank account information.
Hey Dave,
Wow, this is starting to get a little more advanced!
In a nutshell, Lockbox processing is a service the bank offers where individuals send their checks to a central address (a P.O.Box usually), the bank picks up the checks, opens the envelopes, scans (images the checks), provides information on who paid what (reconcilation) and then moves the money to your account. The person sending the check does not use a deposit slip or have any information about the bank.
This is for large volume check processing, i.e. 5000+ checks a month. A good example would be the Phone Bill.
This is not for low volume processing. The costs are prohibitive.
So if your bank does offer an account where only deposit are accepted, someone still has to do a reconcilation on this account. And that is not going to be for free.
Bottom line:
1) Your tenants are not going to pay any faster
2) There are serious security issues
3) There are costs to these services.
I would stick with the tenants sending a check to a P.O.Box
Thanks Bruce,
I was aware that lock box processing is available, but not fully informed about the details of the processing. Thank you for providing a little detail behind the mechanics of the service.
We offer new tenants a choice initially, goes something like this:
"Mr. Tenant, the rent is $700 per month due on the first, or $600 per month if you allow us to direct-deposit from your checking account. Which would you prefer?"
For $100 difference, this usually encourages the tenant to allow us direct depost via ClearNow(dot com). If not, we will take a risk for an extra $100.
Seems to work.
What great timing!!!!!!!!!!! I was planning on doing the bank thing and having the tenants take the money to the bank because I don't live full time in the place where the property is. I always want to be cautious and I'm definitely not trusting. Also at this point don't have enough property to hire a management company.
If the tenants don't have bank accounts of any kind, and are low income folks without computer skills, do you still worry about giving out the bank account number????????
My checking account number is on the bottom of every check that I write. Been writing checking for 40 years and no problems yet.
Forgot to meantion, I have a friend who says that his tenants deposit the rent via the ATM machine. I have never done this and do not use ATMs, so I do not know the exact procedure.
My tenants must send me the rent via postal mail. Late is when it is received in my PO box (I live in FL). I write in my lease that they can send the rent in early and it will not be deposited until the 1st. All my mortgage payments are autodeducted from my checking account around the 10th, so having rent on the 1st is not an emergency.
I have seen leases that allow the tenants to buy insurance on the letter up to the amount of the rent and the fee can be deducted from the rent. This eliminates many stories.
Quote:We offer new tenants a choice initially, goes something like this:
"Mr. Tenant, the rent is $700 per month due on the first, or $600 per month if you allow us to direct-deposit from your checking account. Which would you prefer?"I think dragnet is really referring to an automatic draft from the tenant's checking account.
I collect my own rents. I put tennants phone numbers or cell#s into my cell. I can call them when I'm at their front door and get let in or find out the what's going on with the rent. I also have them leave it in an envelope on the refrigerator if they won't be home. I accept cash or checks, but cash the checks at their bank within a day to make sure their good.
I hope this helps.
I have an acquantance that allowed tenants to make payment directly to his bank account. It worked great for a while. Then they started getting behind / not making payments. When he filed to evict, they would go to bank and make a small deposit. Since he accepted payment (what bank will not accept a deposit on your behalf?!) He would have to start the process all over again.
It got to the point he finally closed the account to end the game. It was so crazy, the bank would STILL accept deposits, and re-open his account! It was very frustrating for him.
I only have 4 properties, currently I give my tenants 12 self stamped color coded envelopes to mail the rent in. Oh yeah I don't do checks money orders only. If post marked by the 5th of the month they are not late, after that late fees apply
Hey people,
I give my tenants till the 10th to have the money in my hand. Seems like I give them too much time, but I will correct that in the future. My tenants send me the money via mail (checks). I haven't had to charge any late fees or do any evictions yet. I screened my tenants so I know they wouldn't be flakes. I don't want them to have my account number either, I am concerned about cashing their checks into my account, won't they get the returned(cashed) check with my account numbers on it? .....So should I cash it out somewhere else?
Robert Kiyosaki says to offer them something with a percived high value that you can get cheap when they pay on time over a set period of time. for example:
Pay on time (according to all your rules) for 1 year you get a free DVD
Pay on time for 2 years you get a free $50 gift card at Wal-Mart
Use things like personal CD players, DVDs, CDs, Cameras, Tvs, DVD players, You know the stuff people like.
so each year (or something) It would be totally worth the $50 or so you spend on the reward to have on time payments for a year or 2. If theyv've been in your house for 4 years never late wouldn't it be worth the $200 for a really nice gift? you didn't spend money advertising, preping for new renters, or chasing rent payments. I think that is worth a lot.
[addsig]