OfflineDo you own rental properties? If so, you are learning the importance of having your rents collected as quickly as possible.
The typical rental contract allows for a grace period of 3 to 7 days after the first. For example, if the rent is $700 and due on the first, the contract may allow for a 5 day grace period before the rents are due. Typically a late fee is attached to anything that is paid after this grace period.
Why not try this? Set the rent at $800 and give a $100 discount for paying on or before the first. Have late fees beging accumulating on the second.
You are still going to get your $700. You will be getting it on the first and not the fifth to the seventh. Your cash flow position will be strengthened.
Good luck and happy investing.
Roy Voeks
Official RE Coach
This is a good strategy which I have used. With my tenants, I charged $750 and gave a $50 discount if paid by the 3rd. There is a downside, however. It can be a little more difficult to find tenants since your "rent" will be over market. In the lease agreement, you will want to state that this is a discount and not a late fee. Leasing laws regulate late fees but not discounts.
Roy,
Great way to handle rentals. I can see the advantage of giving them the motivation to pay ontime every month. Now does that price give them a discounted rental. Meaning when you advertize do you advertize the discounted price or the full price? I can see some people not wanting to even look because you may be too expensive. Please elaborate on this strategy a little more so we can follow exactly how you have been successful with this.
I think everyone will benefit with your strategy
Thanks
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If you advertise your rents at the discounted rate alone you do cause some problems. Advertise exactly what you have. An example is for the rents to be advertised at "$750 but a discount of $100 may be taken if paid on the first." Be up front. You want people straight with you. Be straight in your ads. It does work.
Roy Voeks
Official RE Coach
... a 12.5% increased amount($800 per month down to $700) to tenants when comps are renting at $ 700 per month?
Just wanted you to know that your input/suggestions and history are very helpful...helping me to think outside the box.
Thanks
This is a very interesting concept. I have never heard of using this tactic before.
Karen
"You're never too old to be what you were meant to be!"
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If the market rate is $700 and you are advertising "800 per month with a $100 discount if paid by the 3rd", renters are going to see that the rent is actually $700.
The primary motivation behind this approach is to get around any legal restrictions on charging late fees. Additionally, you are adding motivation for tenants to pay on time. They feel like they are "earning" $100 per month rather than getting charged a fee if they pay late. This motivational technique (though simple) really works.