For the most part, investing in rental houses can be an exciting and rewarding investment. Not only can you make a nice profit, but you can also develop some real strong relationships with your tenants. The only potential snag in investing, operating, and managing rental houses is not being able to collect rent on a timely basis. With mortgages due on a certain date, any late payments (and certainly non-payments) can really affect your bottom line. Here are some suggestions to help you deal with those potentially late rental house payments. Charge late fees Make sure your rental house contracts stipulate that you will charge late fees (i.e. 1 – 5% of rental amount) each and every time that the rent is five or more days past due. For instance, if rent ($1000) is due on the 1st of each month and you receive payment on the 7th, then the late fee should be at least $10 (at 1%). If you’re contract states a 5% fine, then you’ll be collecting $50 extra that month. If, however, your contract does not stipulate that any late fees are due for late payments, then you have no recourse other than starting the eviction process. Take off late fees from the security deposit
Again, ensure that your rental house agreements state that you will deduct any late fee payments from the security deposit. That might motivate your tenants to pay on time since a few late payments can really add up. If a tenant is late on a payment, just make sure to note on the next rent bill that you plan to deduct the late fees from the security deposit. Apply late fees against the next month’s bill
Another option to ensure timely payment for your rental houses is to first apply any late fees against next month’s rent. The remaining outstanding rent can then be subject to a “pay rent or quit” notice, where you can evict the tenant within a certain amount of time for nonpayment. For example, if the monthly rent is $800 and the late fees add up to $50, then the “pay rent or quit” notice would amount to $50 (the amount of rent still due after you receive that month’s rent payment and apply it to the late fees). With this notice, you’ll tenant will know that you mean business. |
