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Real Estate Articles
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| Twelve
Street Smart Reasons NOT to Get Your Rent On the First |
| by Louis
Brown |
|
Satisfied Customer |
| As a
landlord the last thing you want to have
happen is to end up in court. But when you
have tenants that do not pay and won't leave
on their own, you have no choice but to take
them to court.
When my turn in front of the judge came,
I was scared out of my mind. He didn't
say a word, he just sat there and kept
reading your documents. After what
seemed to me like an eternity he looked up
and said, "Did you do this?" I
couldn't say a word and just weakly smiled,
thinking, "I'm going to jail." He
looked back down at the paperwork and said
with a smile, "This is good..."
The judge found in my favor and
everything worked out fine. All thanks
to you and the airtight paper work in your
property management program.
Thank you very much,
Dan Swaney
President, J. Cashin Investment Group
Atlanta, GA
|
When I started in this buy/hold/rent/get rich business
over twenty years ago, I collected rent like everyone
else did…on the first of the month. Rent was due on the
first, late on the fifth. After a few years, I started
to realize that this did not make a lot of sense. Some
residents had lots of demands on their first of the
month check. I also realized I was not depending on the
rent checks to be in the bank on the first in order to
pay the mortgages. This meant I was fronting the money
for the mortgage payment instead of the property paying
for itself.
From a landlord’s viewpoint, if someone’s rental
agreement expired on the first, the tenant rarely moved
before then. As most residents had to be out of their
existing residence by the first, most did not want to
take the chance that my resident who was moving would be
out by the first or that the unit would be ready.
Usually this resulted in losing some or all of a month’s
rent in the interim while it was made ready and a new
resident was found or the first of the month came around
again.
After this happened to me several times, I started to
analyze this first of the month business and I came up
with a way to make life easier for me and for my tenants
who have too many demands on that first of the month
check. What I came up with was having the rent due on
the 25th of the month. My rental month runs from the
25th to the 25th. This gives me five to six days to get
the rent in the bank before the mortgage payment is due.
That is just the beginning of the benefits of collecting
rent on the 25th. Following is a list of twelve GREAT
reasons not to get paid on the first:
1. Get paid from the middle of the month check,
not the first of the month check when everything else is
due, too. This means less competition for the money
available to pay bills.
2. Get 5 to 6 extra days to market the unit after
a move-out, thereby catching someone who hasn’t made a
decision or has something go wrong with the deal they
made with someone else…or their new unit won’t be ready
and they have to move NOW.
3. Get 5 to 6 days extra to make the unit ready
for the tenant who has to be out of their present rental
by the 1st.
4. Pick up at least 5 extra days’ rent. If your
new tenant wants to move in on the 1st, you say “ All
our contracts begin on the 25th” and lead them gently
into the realization that they pay not only for the time
they live in the unit but for the time the landlord has
the property off the market waiting for them to move
in…and if they do not wish to pay, then they run the
risk of someone more acceptable coming along and putting
in an application to move in that very day!
5. Get a tighter time frame to negotiate begin
date of rental agreements. The applicant always wants to
start on the very latest date possible to save money
while the landlord wants to begin the agreement as
quickly as possible to make more money or stop the loss
of money due to vacancy as fast as possible. For
example: the landlord makes a statement like “there’s
always overlap in this business” puts the tenant in the
right frame of mind to negotiate days. The landlord
might say “ today’s the first. You want to move in on
the first of next month, but all our contracts begin on
the 25th. The owners won’t allow me to take the property
off the market and lose 25 days. Maybe we can meet
somewhere in the middle. Let’s start on the 10th. That
will give you plenty of time to move small things, get
utilities on, etc. Is that fair?” Effectively you’ve
negotiated down to one-third of the month versus what
they wanted.
6. Get more “float” on your money. Most mortgage
payments are due on the first, but are not considered
late until after the 15th. If you collect your rent on
the 25th, presuming you make your mortgage payments from
rents collected, that gives you 5 to 20 days of “float”
on your money. If you do this, though, always have
back-up plan like a credit line with a checkbook.
7. Find out sooner that you have a collection
problem. When rents are due on the 25th, you’ll know by
the 26th that “Houston…we have a problem.” Now you’ll
have 5-6 days to arrange other funds to make your
mortgage payment if it will take that long to collect.
8. Get to the courthouse ahead of everyone else.
I teach that you should begin your eviction proceedings
as quickly as possible, but no later than five days
after the rent is due. This gives you time for any state
required notice period and wait/see if their promise to
pay happens before you file. On the day when everyone
else is just collecting and discovering problems, you
are at the courthouse filing your eviction proceedings.
The line is pretty short.
9. Get your eviction lawsuit served quicker. When
you file on the first, the Sheriff or Marshall is not as
busy and can get your proceeding served quicker because
they are not as overloaded.
10. Get to the judge quicker. Since you got your
eviction served early, the court calendar is not as
crowded, so, in many cases, you’ll get on the calendar
quicker and the court may not have as many cases if you
get that far.
11. Get them out quicker. If you have to go all
the way to a set out of the tenant from the property, it
may work in your favor that the Sheriff’s or Marshall’s
schedule is not as crowded, thereby speeding up the
timing of your actual set out. Because you are 5-6 days
ahead of the landlord herd handling their collection
problems by dispossessory or eviction action, you are
actually ahead of the time of month when there are lots
of evictions scheduled to be handled by the appropriate
law enforcement agency.
12. Get your property back to market ahead of
everyone else. It may work out that you’ll have your
property back and ready to rent sooner than others who
wait until the 1st to collect rent because of the extra
time you give yourself by collecting rent on the 25th.
You therefore lessen the competition you’ll have in
renting your unit.
So now you know why I am sold on the idea of collecting
rent on or before the 25th. Some folks ask, “hey, if the
25th is good, the 15th could be better. “ Maybe that
would work better for you. We collect all rents on the
25th because that’s what I started over 16 years ago. I
haven’t found a good reason to change that date. Yet
another reason why we collect and proceed on rental
collections between the 25th and the 1st is that our
loan collections are due on the 1st. Private loans,
Agreement for Deeds (Land Contract), owner financing
mortgages, small loans, etc. are all due on the 1st so
it balances out the work load of collections and allows
us to focus. Let me know if this works for you. |
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Copyright 2004 Street Smart Systems
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