Collecting Rent is Getting More Complicated
Not long ago I proclaimed that: ‘Rent day is my new favourite day‘. I may now have to recant. Since then I have two more tenants start falling behind in their rent. The first tenant owes me a monthly rent of $650 and has been pretty much behind from the start. Though, she has been very good at keeping me in the loop and getting rent up to date within about 7 days. She’s a great tenant and for that I’ll happily work with her to ensure she can manage her cash-flow and maintain her rent to me.
The second tenant first went into arrears last month. She owes a monthly rent of $675. Unlike my first tenant she did not notify me that she did not have enough money and I didn’t learn of it until the cheque was returned NSF. On that occasion she claimed to not know it bounced nor that she did not have enough money in the bank to make the payment. Although I was suspicious, I waived my usual $25 late-payment fee and told her to let me know in advance if she was going to be short in the future. That way I could hold her cheque and not have to go through the hassle of collecting the rent all over again.
On the second of this month I received a text message (yeah, you heard me right, a text message) from this tenant asking me if I could hold her rent. I was not happy. First of all I had already deposited all the rent money, and second, text messaging is not a reliable way to work out a late rental payment with your landlord. I’ve never texted with her before. The next day I called and not so politely informed her that it was unacceptable to text me the day after rent is due asking for a reprieve. This time I’m holding her to my $25 late fee and I’m now expecting this money on March 12th via Interac Money Transfer. We’ll see.
Finally, I noticed a third cheque returned in the amount of $55. This is from a tenant who has the first $620 of her rent paid by the provincial assistance program (that’s a nicer way of saying welfare), the remainder of her rent is paid by post-dated cheques. This is the first time she has been in arrears and I know have to chase her down and start the collection process. The trouble here is that I want her to know I’m serious about collecting rent on time, without being too ‘mean’. I think its important to have a good relationship with your tenants, have them respect you, and ultimately want to pay you rather than have them hiding from you when it comes time to collect rent. That being said, if you’re too nice and you give them too much leeway you can find yourself unable to enforce rules or collect your rent at all.
Now, your probably wondering how I manage to meet my mortgage, insurance, and operating expenses while I’ve got tenants behind on rent? I can afford to have one tenant behind and still make all my payments without dipping into my own pocket. I cannot afford to have three tenants in arrears for an entire month. I’ve mitigated this risk by staggering my mortgage payments out over the month. I have one payment on the first, another on the seventh, and my last on the 20th. I can afford to have only one tenant in arrears past the 20th, otherwise I have to make up the shortfall in cash-flow myself. Of course, I never let my tenants know that I am set up this way.
You’ll find that it can be pricy to have your payments pushed back into the month because you need to cover the additional interest expense incurred over the days you delayed payment. It will, however, be worth it if you don’t have to take the money out of your own pocket.
Update:
I have received my $650 from my regularly late, but reliable tenant and she’s now up to date. I have received $500 of the now $700 due from my ‘texting’ tenant. This time I was informed about the short-fall via email. Hmm, I guess she doesn’t like the phone. I’m now expecting the balance on Thursday.
