Rent by Mail - Posted by stan

Real Estate Investing Section 8
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Posted by Mike-OH on April 19, 2006 at 12:10:51:

Adam,

The number of hours per month for any given unit is very low, maybe averaging one hour per unit. Obviously, I won’t have any formal contact with many of the tenants between monthly rent pickups. Having said that, I almost always have something to do. I do this full time and try to accomplish some task everyday. Fixing things, painting (inside or out), etc can occupy some portion of every day. As I am in town doing things, I try to at least drive by each apartment building every day. I often stop long enough to be seen and walk through the common areas of the buildings. Just showing a presence really makes a difference with low income tenants.

The other thing that occurs with low income tenants is that there are a lot of illegal activities. Most are relatively minor (noise, drunk and disorderly) but at least every other month there seems to be a major issue (drugs, assaults, etc). Often this is not the tenant, but one of their friends who has moved in (in violation of the lease). I have had three incidents in the past couple of weeks. One of my Section 8 tenants was arrested for assault and criminal trespass. Another Section 8 tenant had a 18 year old child who was arrested for disorderly conduct. Another Section 8 tenant let her criminal son move in and he is causing trouble. I already gave him and his scumbag friends a warning and I will be kicking him (them) out in the next day or two (and probably having the tenant arrested for a parole violation - back to the pen for her).

Dealing with these low class tenants takes some getting used to. It can become quite intense when you first start, but gets better with a little time and experience.

As for cash flow, I insist on getting 2% of the purchase price each month in gross rent AND must have a positive cash flow that is at least 1/2 of the mortgage payment AND $200 per unit minimum.

Hope that helps.

Good Luck,

Mike

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Rent by Mail - Posted by stan

Posted by stan on April 18, 2006 at 06:41:08:

I have a pay rent by mail system set up that seems to be failing – the rent check keeps mysteriously getting lost. Any saavy solutions here to correct the by-mail option?

Thanks,

Stan

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Re: Rent by Mail - Posted by IA Jeff

Posted by IA Jeff on April 19, 2006 at 08:47:44:

I offer a discount for my tenants to sign up for automatic rent payments (ACH style). The rent is collected electronically like Chris FL said below. My bank sets them up for free. My mortgage payments and some utility bills are set up that way as well.

The nice thing about it is when a tenant doesn’t have the money in the account they not only have to pay the standard rent (no discount), they also get an overdraft from their bank…and depending how fast they clear it up, late charges from me. Rarely does anyone let that happen, but if it does happen, it only happens once.

Its the only way to go. When I sell stuff and owner finance, I require automatic payment and eventually will do away with the discount on the rent and only accept rent electronically.

Jeff

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Re: Rent by Mail - Posted by Chris in FL

Posted by Chris in FL on April 18, 2006 at 10:35:46:

Stan,
I have two solutions, and I use both personally. First, I notify applicants and all new tenants that I come by on the first to collect the rent, make sure the air filter is being changed, and make sure the property is being cared for properly. This scares off some deadbeats that don’t want to deal with a hands-on landlord. When I have a borderline tenant, I continue this policy indefinitely. Later, I can convert the good tenants, who give me no trouble with upkeep or payments, and have them mail or bring me the rent. My solid wood door with deadbolts has a mail slot, and tenants can drop off the check whether I am home or not. Some don’t want tenants to know their address - I treat my tenants with respect, have been doing this for 8 years, and have yet to have a glitch. This works out well for me because I have 8-10 houses that are within 1 mile of my home, and tenants seem to prefer that to mailing the check.
Second, I have a few tenants that I set up on EFT. The money is automatically drawn from their checking account and deposited to mine on the due date, and it doesn’t cost anything. Very convenient. I love that system, and I even pay 90% of my bills that way (beats writing checks by a long shot). Best wishes!

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Re: Rent by Mail - Posted by Mike-OH

Posted by Mike-OH on April 18, 2006 at 09:34:28:

The best way to ensure that the tenants will tear up your property is to collect the rent by mail! Absentee landlords have a LOT more problems with tenants than hands-on landlords (although they usually don’t know it until there’s a crisis). If you are in the rental business, then expect to do a little work. I collect the rent on the first 4 days of the month. Rents are due on the 1st and late at 5:01 pm on the 4th. On the morning of the 5th, I post eviction notices and three days later file the evictions with the court. NO EXCUSES WHATSOEVER!

When I collect the rent, I walk through each unit. Using this method, the tenants know that their unit will be inspected every month and they tend to keep things in better shape. IF they don’t keep the place in good shape, then I find out early and give them the boot.

Lazy Landlording = Large Losses!

Mike

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Direct Rent Deposits… - Posted by Randy (SD)

Posted by Randy (SD) on April 18, 2006 at 09:30:22:

ClearNow is the easiest way to collect rent, read about it here: Direct Rent Deposits

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Re: Rent by Mail - Posted by Luke Hoppel

Posted by Luke Hoppel on April 18, 2006 at 07:07:59:

One solution that I personally love and think is the best solution is to have the tenant deposit the check into your bank account. You can set up a seperate bank account for this if there is a bank nearby your rental unit.
If you have multiple units ensure you offset the rent by $1 so you can tell which tenant has paid and who has not.
This way there are no “lost” checks.

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Re: Rent by Mail - Posted by Anne_ND

Posted by Anne_ND on April 18, 2006 at 07:04:11:

Stan,

Am I correct that you are the person collecting the rent? If so, then this isn’t your problem, it’s the tenant’s problem to get the check to you in time.

Your problem is enforcing the lease. If that check is late, start evicting them (have them served with a pay-or-quit notice), that will get their attention and they will get you the check if getting you the check is, in fact, their intention.

Have a strong lease and enforce it. A few tenants will try to test you in the first few months, but if you respond strongly, they will get in line, or you’ll get rid of them.

Good luck,

Anne

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Re: Rent by Mail - Posted by Mike-OH

Posted by Mike-OH on April 18, 2006 at 17:09:35:

I definitely don’t want the tenants knowing my home address or home phone number. We even took our name out of the phone book. In the past year, we bought a couple of apartment buildings that were full of crack dealers. When you’re personally responsible for several crackers doing jail time and many others being homeless, you don’t want your home address out there in public. Low income rentals are quite a bit different from nice middle class rentals. More profitable, but even more hands-on.

Mike

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I disagree - Posted by Anne_ND

Posted by Anne_ND on April 18, 2006 at 10:33:22:

Mike,

I think the best way to ensure that tenants will tear up a place is to forget to screen, rather than to collect rent by mail. I have two big objections to your very hands-on approach: 1) too much like work and 2) as a woman I am not going to show up at anyone’s home by myself and ask for money, especially if they aren’t willing to part with it.

My rents are due on the first. Tenants get a $50 discount for paying by the 1st, otherwise they pay full rent and a daily fee for every day after the first.

I also happen to believe that when I rent out houses, the tenants have a right to privacy. I’m not going to show up and walk through their house once a month, that borders on harrassment in my opinion.

I’ve been renting since 1999 and haven’t had a problem with getting rents by mail. In fact, many of my tenants pay me a few weeks or months early and I hold their checks for them so they don’t have to worry about being late.

I prefer to call it smart landlording, not lazy landlording.

Anne

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Re: Rent by Mail - Posted by matx

Posted by matx on April 20, 2006 at 20:52:59:

We like it, too. Most of our tenants (including thouse out of state) deposit the rents directly into our bank accounts. They deposit cash instead of checks, though. Some of our tenants also pay via PayPal. We don’t accept checks either by mail or in person.

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Re: Any landlords with online pay? - Posted by Larry K - AL

Posted by Larry K - AL on April 18, 2006 at 08:35:47:

I was curious how many landlords req’d rent by mail. Im a relatively new landlord (3 yrs) but growing. I require payments mailed but I am surprised at the number of landlords that go house to house on the first of the month. My reasoning is the power co, phone co, gas co., auto loan bank, mortgage co, etc dont go door to door so why should I. I agree with Anne, its all about putting it in the lease, making it clear up front, and enforcing it. An online payment system would be nice, but may not be worth the money, and I dont know how many would use it.

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Re: Rent by Mail - Posted by Chris in FL

Posted by Chris in FL on April 19, 2006 at 07:30:10:

Mike,
I agree 100%… I certainly wouldn’t want to give out my address under those circumstances. I do single family homes, and screen hard for tenants that I can trust. If I had to deal with one crack dealer one time I would probably change my mode of operation. Also, I was just sharing the way I collect my rents, and not necessarily recommending it (I did note most landlords prefer not to have their home address known, and assume the reasons are obvious). Thanks for sharing…

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Re: I disagree - Posted by Frank Chin

Posted by Frank Chin on April 18, 2006 at 17:52:04:

Anne:

For my 3 family, I got a “rent box”, actually a mailbox mounted on the wall of the lobby where tenants deposit their rent checks, and my wife goes by to pick it up monthly. We don’t bother the tenants unless the check is NOT in the box.

Its a routine we’ve followed for over 20 years.

As to SFH’s, as much as I screen, still got the “the check is in the mail” excuse time to time for some tenants. The current tenants are quite responsible, and one SFH tenant in particular mail us the checks to arrive a few days before the first, and they are good enough to send us a monthly commnentary on the place with the check, and often include an invite to come by for coffee and donuts, and the wife in fact bought our little girl over to show her off.

But some years back, I did have a bunch of young girls renting the same place, and rent checks routinely get lost in the mail. As they all work (in the beginning), and we since we don’t want to be too intrusive, we call up the night before or the morning of our coming by to pick up the rent check, and ask them to put it into their mailbox out front. Both the tenant and we got the keys to the mailbox, so we pick it up any time during the day. But it also gives us an opportunity to take a look see at the exterior upkeep.

We thought its a good idea to come by, take a look at the place now and then, get to know the neighbors. Neighbors, I find, treat absentee landlords they never see quite differently from those they see, have the phone numbers for, and able to shake hands with.

They’re far quicker to call “code enforcement” on absentee landlords they never see. The theory is these “absentee money grubbers” are just out for the money and deserve no mercy, and its only right that code enforecement kicks their behind.

On the other hand, by knowing the neighbors, they can give you the scoop on your tenants, good or bad, get the latest neighborhood gossip etc., and its information you can’t otherwise get.

Frank Chin

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Re: Any landlords with online pay? - Posted by matx

Posted by matx on April 20, 2006 at 20:58:57:

Some of our tenants pay rents via PayPal–works great with out-of-state properties (we manage them on our own). Our lease allows rent payments only via PayPal or direcly depositing (not ACH) into our bank accounts.

Our target market is Internet-savyy professionals, office and service workers so PayPal works well with them. (We find most of our tenants online and most of our communications with them is done by e-mail). It probably won’t work with lower-income tenants.

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I get my rent by mail - Posted by Rob Ricker

Posted by Rob Ricker on April 19, 2006 at 02:31:43:

If I did it any other way, I’d go insane. I do occasionally pick up rent from a couple of my guys that pay cash though. One pays me $2,300 a month, so I don’t mind too much :slight_smile:

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Re: I disagree - Posted by Anne_ND

Posted by Anne_ND on April 18, 2006 at 18:29:31:

Hi Frank,

I agree with you about absentee landlords. The thing is, although I get my rent in the mail, I’m hardly absentee.

My tenants are mostly professional people with pets, and my screening process includes me meeting the pets and fawning over the nice doggies or kittens. I have tenants whose dogs I walk regularly (because I’m close by) and whose cats I have taken care of for weeks at a time. New tenants get toys for the animals and a gift card to PetCo. My tenants often call me for things like referrals to vets or good restaurants.

In addition, when a tornado or blizzard comes through town (alas, with remarkable frequency) I call everyone to make sure they’re in the basement and not sleeping through the tornado sirens.

My business plan does not call for me to be so involved in my tenants’ lives, but it organically evolved that way with some of my tenants. I really like dogs and cats, and they really like me. In a market where no one else will rent to pet-owners, I go the extra mile for my tenants. My first tenants, who stayed for three years, used to invite me over when they fed their boa constrictor once a month, and they invited us to their wedding.

I just don’t happen to believe in collecting rent in person.

I’ll see you in ATL in a few weeks,

Anne

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Two Different Worlds - Posted by Mike-OH

Posted by Mike-OH on April 19, 2006 at 05:24:07:

Anne,

I also have a niche market in tenants with pets. Of course, I charge extra rent and security deposit for pets and therefore it’s a good profit generator.

We obviously come from two completely different places. In my area, there are no professionals renting. Professionals own their own homes. We have some lower middle-income tenants renting SFHs and a lot of no-income (other than my government handout) tenants that have absolutely no desire to work. These folks are one step from being homeless and many are of questionable character. In these low income tenants, we screen for previous evictions, utility shutoffs, and criminal history. I keep our relationship strictly professional. I am not their friend and wouldn’t even consider going over for a social visit.

I know 2 women who are full-time landlords and who manage properties here in Ohio. One manages about 50 units and the other oversees 1,100 units. Both carry handguns, as do many of the male landlords that I know. Being the landlord of low-income housing can be dangerous, because you encounter druggies, criminals, and generally bad people on a daily basis. I have personally been threatened several times this past year and I take my safety very seriously.

Most of my apartment building tenants do not have checking accounts. I pick up the rent as soon as they get their government check or it is spent on something else (and I promptly evict them). These people deal strictly in cash. They live in town because they don’t have cars. Many of these people live in filth because they want to. They rarely clean and have dirty dishes and uneaten food everywhere. Roaches and mice are common due to their filthy lifestyles.

That’s the glamerous world of low-income landlording in my area. That’s why I pick up the rent in person and inspect every unit every month. BTW, we only do month-to-month leases, so that we can quickly get rid of the tenants if they don’t work out.

Mike

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Re: Two Different Worlds - Posted by Adam-MI

Posted by Adam-MI on April 19, 2006 at 06:47:24:

Mike,

My area has a very similar market that I am considering tapping into. It seems like a lot of work, however the cash flow would be very good. How many hours per month, on average, would you say goes into each unit? Also, what kind of cash flow percentages do you get on your common low-income rentals? Just trying to decide if this is a good route to take. I know this is off topic a little, so you can email me privately if you prefer.

Thanks,
Adam