How to Deal with Tenant Late Fees and Discounts
It is certainly every real estate investor’s wish to have well-selected tenants that pay their full rent on or before its due date. No property owner wants to struggle with the tenants occupying their investment property over rent.
As a result, owners generally impose either the “carrot” approach or the “stick” approach to deal with the rent issue. The idea is straightforward. With the “stick” approach, owners penalize tenants with late fees if the tenant’s check is received, say, three to five days past its due date. With the “carrot” approach, landlords offer their tenants an “early payment discount” to encourage early payment. And in recent years, more landlords are tending to adopt the “carrot” approach. These owners claim that discounts create better tenant relations, work more effectively, and are easier to enforce.
Regardless of which method you choose, however, to gain peace of mind and financial prosperity, it is imperative that you embrace the following philosophy.
Foremost, do not permit tenants to take the discount, or avoid the late fee, unless they satisfy the respective due date requirements.
Secondly, under no circumstances must you allow tenants to get behind in their rent. Evict as soon as your lease and local ordinances allow it. It is a law of nature that tenants who can’t pay today, won’t pay tomorrow. Rent only to people who pay their rent on time, and reject all excuses.
Author: James Kobzeff, September 5th, 2008
