Alot of people I have dealt with don’t have a checking account and I don’t buy in war zones or Section 8 areas. But then again with 8.25% interest rates, why would anyone over 30 years old who isn’t new to town be renting a property in the first place. The vast majority of the time it is because they are broke, have low income, or have credit problems. There are a few exceptions, but not many. With this great economy my goal as a landlord is to find someone that doesn’t have too many of those problems.
In recent days I’ve become interested in duplexes / quadplexes as a vehicle to financial independence. Personality wise, I realize it takes a certain ‘type’ of person to deal with tenant management headaches and the excuses that come along with no / late payments and such.
My question is, how many of you are implementing some sort arrangement where you are automatically deducting the monthly rent payments from your tenant’s checking / savings account (with their prior approval). I would think this would be an excellent technique to minimize the no payment / late payment headaches. I was thinking that perhaps, as part of the lease, you could make it known to your tenant that you would deduct, say $$15.00 - 25.00, off of the monthly rent if they allow automatic deductions.
Are any of you implementing this? If not, do you think it’s a good idea?
It’s call Discount rent. When you place your ad or let them know that the rent is $895 but a $25 dollar discount is available (I also give them another 25 if they don’t bother me with small stuff. In my town there is a way to not to ever unclog a toilet for about $27 dollars a month and they have a 24hr number. But I digress…) In my lease it’s states that if the payment is automatically deposited in my account then no later then Dec 15th (just before Christmas), I will refund them 25 dollars for the months that it was automatically sent to my account. My wife said that one tenant cried she was so happy to get the check. The $25 dollars is refunded for all of the months in one lump sum. This keeps me from (1) discriminating against someone who would say that I gave preference because I qualified someone at the discount rate and the other at the full rate and (2) make sure that they can afford the higher payment.
Believe it or not my biggest problem was with my bank. They will not let you go in and get the money out of the tenant’s account (pull). It is possibe for you to get the tenant to sign a form that will allow them to have their bank send it to your bank(push). In order to do this you have to give them your routing and account number. My bank tried to scare me that by giving them this number they could reverse the transactions and take money out of my account. While this is technically possible, it’s not probable. (Trust me, I am a computer programmer at the largest commercial credit card processor in the world, in the banking industry (Credit Card Fraud, as a matter of fact). But, I told them that I would move the money out of this business account over in to my personal account. I suspect the real reason is that I am doing a transaction and they can’t charge me for it. Hee-Hee
Go to your bank to get the right information. For some reason, my bank didn’t use it’s address to tell the other bank where to send the money, it used a PO Box.
Re: Question to landlords… - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on March 22, 2000 at 12:02:27:
From personal experience, the best way to reduce/eliminate late/no payment is to qualify the tenant up front. Check their credit. Check their references. Visit them at their current residence. Do all you can do to assure yourself that they will pay on time.
I would use the automatic deduction for convenience sake. If the money is not in the bank, there is no way to get it. Automatic payment or not. You will simply get a notice that the auto pay didn’t work this month. The auto pay is great to eliminate mailing delays and such. I would suggest that you get with your tenant and set up a schedule. Some tenants may find it more convenient to pay every two weeks instead of once a month. Think about it, if you are first in line when the paycheck hits the bank, you are more likely to get paid.
The majority of my tenant troubles do not come from late/no payments. You have to be willing to deal with many other problems. You may have to evict someone. They may trash your property in the meantime. You may have to paint a unit each time a new tenant moves in. You need to have a certain tolerance for these things, or they will drive you nuts. Some landlords just don’t like these things and quit. Only you know if you can handle it.
One last item : If you are depending on your tenants to make each and every payment on time, at some point, you will loose your shirt. Never buy a property without it having adequate cash flow. I have seen too many of my friends get into landlording without getting accurate numbers regarding vacancies and maintenance. Or they budget nothing for maintenance. Make sure you don’t fall into that trap.
This was one great idea that I credit to Jeffery Taylor(Mr. Landlord). I also took him up on the idea that this is now my “standard” method of collection. If the tenants want to pay by check or money order, there is a $25 “processing fee”! The only problem I have run into is that many of my tenants do not have checking accounts, so they must open an account to benefit. I am using a piece of software that will create the checks for me at no charge per item. Ends up being a lot cheaper than paying per draft as some services do. The software is located at http://www.advancemeants.com/. You can download a trial version from that site as well.
Thanks for the response. I suppose not having a checking account would be a problem. It’s hard for me to imagine why somebody wouldn’t have a checking account.