Check in the Mail

[Bluemoon06]

I had a tenant tell me that they mailed their rent to me and the check got lost in the mail.  I can solve the national debt.  Get all the checks that are lost in the mail and cash them.  There must be a gazillion dollars in checks lost in the mail.  Why is it that these checks never get there?  You would think that they would get there just get there late.  The person that accidentally gets these poor lost checks never forwards them on to where they were intended or tries to cash them.  Is there some great big room full of lost checks?  Where do they go?  How does the tenant always know that the check is lost in the mail?  Do they get some kind of lost in the mail alert?

[jmd_forest]

In my lease I note in writing that the tenant is responsible for ensuring the check is in my possession by the due date and delays due to problems with the US mail or any other delivery service is the responsibility of the tenant. The late fee kicks in whether the check is in the mail or not. In 8 years of landlording, I have had exactly 1 instance of problems with the US mail. They delivered a rent check to my neighbor's property and the neighbor did not hand it over for about a week. I refunded the tenant's late fee in that instance.

[javipa]

Yeah, I'm with jmd on this one.

The date on the check or the envelope is irrelevant to the date I actually receive the rent.  Rent must be in my mail box on, or before, the first day of the month.    

I get checks a week before they're due.  I also have a confiscatory, yet legal, late fee.  The late fee pretty much solves my problems, or makes it worth my time to deal with problems. 

That said, it really comes down to consistent, deliberate enforcement of the agreement.  The first time we blow it and accept rent without the late fees, the rent will then always come in late.  It's pretty much just the law of managing.

 

[Carla Hailey]

I don't rent and not a land lord either.  But what I think is the best way to prevent loosing check through mail is  to have tenants pay their rent either through bank transfer or on a credit card. There's going to be small fees for using these services but it's worth the on-time payment delivery and safety of money transfer.

[javipa]

Auto-debit is a great way to get the rent, but some clients are highly resistant to this.  I don't insist on this, and frankly getting a check is a tad easier for me to account for.  I get the checks; I tic off boxes; and deposit the checks.

Online deposits are more difficult to sift through.  The pending deposits are not the same as the completed deposit, and I've got to load up each deposit to see whom it's from.

Auto-debt does not guarantee rent, and it does not necessarily reflect an accurate payment date.  Also, the renter can have the deposit made on the first, which means I won't have it until the 3rd or 4th.  My physical deposits are credited the moment I make them.

Maybe I'm splitting hairs here, but I prefer a physical check, only because I can hold it in my hands, and maintain extremely accurate records of payments.   I will accept auto-debits if the client prefers.

This will sound horrible, but I had a tenant give me a bogus check three or four months before she destroyed my landscaping after some drunken situation at the house.  She decided the place looked ugly.  Never mind she chopped down $3000 worth of mature landscaping, because she saw snakes in them.  She moved without notice, owing me a full month's rent, with no intention of paying me. 

Meanwhile, I kept her deposit, which in no way covered the damages she caused.  A day after I discovered the house was vacant, I went to close out her file, and found the rent check she wrote me three months earlier.  Well, of course, I immediately drove down to her bank and attempted to hammer the check.  Viola, the check cleared.
 
Well, shall we say, "The fit hit the shan."  I got an angry, nasty call from the former renter threatening all sorts of things.  Evidently, the check  she wrote to her new landlord bounced, because I hammered her old check!!!  [insert evil laugh here]

I didn't say much, except that I would be sending her a settlement statement within the time permitted by law, and that her rent was all paid up, and her deposit would be used to fix the landscaping.  End of story.

If I had done the auto-debit deal, I wouldn't have gotten my money in that situation.  I didn't plan to hammer her old check, but 'there it was' begging to be cashed after the tenant tried to screw me out of a thousand bucks.  [insert another evil laugh here]

[rookieNYC]

I just recieved the last of my August rent rolls..All I hear is the checks in the mail,why they cant send wires,what happened to them that derailed my rent check getting to me on time..My residential tenants that is...My commercial tenants there is no issue...

[javipa]

I just recieved the last of my August rent rolls..All I hear is the checks in the mail,why they cant send wires,what happened to them that derailed my rent check getting to me on time..My residential tenants that is...My commercial tenants there is no issue...

You're just now getting the last of your August rents?  Do you have staggered due dates?

[rookieNYC]

No...Its the same process I go through every month..Same tenant on a high priced home actually..He has been living there for 2 years and pays very late *every month*...What do I do...He keeps the property nice,and pays ..He does not owe me a dime nor does he cost me a dime..He hasnt called me for anything other than asking me where to find AC filters for the unit..I pick my battles and he isnt worth it...

[javipa]

I understand that approach and have done it over the years myself...

Once we've established what we'll accept, or not, that's what the tenant will abide by.  So, since we're willing to accept the rent late without penalties, then we'll always get it late and never get penalties.

Let me say that I've changed policies on weak lease agreements regarding the due dates in the past.  It's painful at first (for everyone) to adjust.  Just like it would be for any new tenant not used to following a new contract.  You will get resistance from everyone at first. 

However, after about 90 days everyone 'gets it' and just pays on time, as if that was the expectation from the beginning.  However, again, it does require reconditioning of the client's habits.  The secret in going forward is to maintain control by remaining completely consistent.

One reason it's good to have a manager between you and the tenant, is that the manager can blame you for being such a meanie about enforcing the contract.  Evidently, you are handling this account directly.  This puts you at a disadvantage, as you've got nobody to blame for the rules. 

Worse, you've convinced your tenant that you're a liar and an unreliable owner, because your contract says the rent is due by a certain date with certain penalties, and yet you ignore them when they don't keep their end of the bargain.  Meantime, your client doesn't regard you as a nice landlord.  He thinks you're dishonest, and a boob, to boot.  He probably doesn't believe a thing you say, because you don't keep your word about things you actually put in writing.  When he vacates, he'll expect you to bend over and give him everything he asks for ...and if not, he'll threaten you legally or personally, because he suspects you can be bullied.

This is from personal experience trying to be nice to nice tenants.

Just saying...

P.S.

I won't tell you about the lady who pays her rent ON TIME, and just billed me for $200 worth of 'up your butt' 'bee vacuuming' of a rose bush in her front yard.  Never mind her rent is $200 below market, and I take care of everything she's ever asked of me.  Screw you, is the response I get, when I can't just drop everything on a Saturday evening and check out her bee infestation on the spot.  So, she calls a pest control company instead without giving me a chance to both see what's the matter, and make my own (cheaper) wasp removal procedure.

Don't be a stooge and accept late rents without charging penalties, or fail to enforce what you've agreed to, because you're afraid of your tenant for Pete's sake.  This puts you in an indefensible position with zero credibility when it's time to talk turkey.  This guy won't move just because you enforce the contract, you can bet on that. 

[rookieNYC]

As long as the check comes...On a monthly basis I have over 20+ individuals to collect from..Whether its my rent rolls,hard money loans,business leases etc..I go through this every month and its part of the business..I do agree that landlords should abide by their leases and so should the tenant..I can give you countless examples that go on with me but these are people I do good business with..I have one Hard Money Loan that the client has paid an aggregious amount of interest for 2+ years..He is *always* late but I dont penalize,threaten,quote his terms..I know the check is coming and he knows I have the power to foreclose on him ,which I wont do unless forced too..There has to be some amount of flexibility when dealing with a large income producing operation..I can understand the person who has one or two tenants but it changes as it grows..I highly doubt there are people here that have a large amount of tenants,collecting to do and every check has arrived by the 3rd of the month...In theory its a great idea to penalize them,threaten them etc...Point being if this person has a solid pay history why rock the boat...All I care about is if the money arrives and it does every month..Pick your battles....

[javipa]

rookieNYC,

You've got to do what you feel comfortable with. 

From my standpoint, it's not profitable or advisable to be sloppy with the management of my income property.  This includes collecting on my notes receivables on my seller financed homes.  I set and maintain limits on when I need to have my money.  There are specific reasons for this as you see in a moment.  Meantime, this is a business for me, not a hobby, or an inter-family operation where we let any old thing slide. 

I think you'll find that as you get bigger, it will be ever more important to dispassionately administrate your notes receivable, and every part of your business, otherwise, things become/remain personal, if not unmanageable at some point. 

With some 200 accounts receivable I could not possibly babysit even 25 late payers.  That would eat up so much of my time it would be ridiculous.  I sure wouldn't be posting here. 

One reason I want my rents and notes in by the 1st (or actually the first business day after), is that I need to know asap whom is going to be a problem for me.  People bail on me ...refuse to pay ...get in trouble and I need to know right now, so that I can address the problem, before it becomes a problem for me.  Another reason why I am this fussy? 

I'm servicing underlying financing that is NOT IN MY NAME.  Other people's credit is on the line.  If, say, 25 of my clients decide to pay late on the 15th instead of on the first, I would have to cover 25 mortgage payments out of my back pocket before the 10th.  I can't really afford that kind of indulgence and sloppy business practice.  That's something like $60,000 I would have to cough up just to cover my basic operation on just 25 contracts!  Forget that!  Heaven forbid that happens two months in a row.   

Meantime, this is all avoidable by addressing the due dates professionally (and courteously, of course), but also consistently.

Now, I can see when/if you own the notes that you're not the least concerned about servicing underlying mortgages.  You can be as generous and flexible as you want/need to be in when you get your money.  That's the beauty of lending your own money!   

You can set/enforce the terms as you like.  As long as you've only got you to worry about, then let'em pay late.  That's fabulous when you can be that indulgent of sloppy payers.  And I'm not being sarcastic... It takes the pressure off.
 
Meanwhile, for the rest who have mortgages to cover, we can't afford to be that indulgent.  This is a different animal for us.
     

[rookieNYC]

I dont consider someone a sloppy payer considering their pay history is perfect...And yes I manage *my own* portfolio...If %90 of my notes,mortgages,leases etc are paid on time why do I have to play cowboy for the few that are more than week late ?...It makes zero sense...Sending out letters and threatening people gives me stress and I dont need it...In the end they all pay...Residential tenants are the worst possible way to make money,and I have little tolerance for being a residential landlord...I would rather have the properties as owner financed deals...Residential tenants are not my cup of tea...I would elaborate further but I dont want to insult the masses..

A residential landlord is probably one of the most stressful,fruitless investments I can think of...You have no collateral on the person whatsoever..Atleast in a commercial property there is a threat of the person losing their place of business..A residential tenant has nothing to lose...Better being a property manager than a residential landlord...Get your commission and still wear the thiefs hat all the while having zero financial responsibility...The only sucker in the equation is the moron who bought the property in the attempt to *cashflow* it...The only reason I have anything residential is because Ive taken back the properties from HML's....I would *never* willingly invest in a residential income property again...Ive been down that road and its a BS business...Sandwich money...So while I appreciate your *unsarcastic* advice I will keep doing it my way..

[javipa]

Okay, well now you've changed the subject from whether to insist on being paid on time to what kind of investing is a fruitless, waste of time.

There's a million ways to make money; some easier and some harder.  However, you are exactly correct in saying that dealing with residential customers is/can be a challenge by comparison with commercial customers, yes.  However, anything's a challenge if we don't adhere to consistent systems.  Hopefully enough people will believe your opinion and will decide not to compete with me for residential, income property.  I can only hope.

To illustrate the challenge you've mentioned, when we were first buying single families for investment we were the worst managers on earth.  We didn't screen tenants properly, or at all; we just got small deposits, hoped the rent would come in on time, and hoped the deadbeats would move without evictions (which most did by skipping on us in the middle of night).  Frankly, skips are so much better than deadbeat squatters, but I digress. 

Meanwhile, we sued for eviction, chased deadbeats and (drum roll, please), kept doing the same stupid things over and over.  We were insane in the way Einstein once described those who do the same thing over and over, but expected different results.

Well, there's a point at which it's not worth investing that way anymore.  It is fruitless, if not so frustrating you want to put a gun in your mouth...

Thankfully, nobody shot themselves, but we did experience a crisis in the family that required us to make a complete change, for the better, in the way we managed our properties.  We had a couple dozen alligator properties where we simply could not absorb late payments, much less no payments.

And this is when we learned (were forced) to establish a system of guidelines that flattened out our erratic management approach like magic and both stabilized and increased our income stream.  What was this system?

It was collecting rents on time for starters.  However, before we could insist on that, we had to require our renters to have skin in the game ...with huge deposits and threats of confiscatory late fees ...if they decided to pay late.  After that, we were quite happy to accept late payments, as long as they included the late fee and penalties to fatten up our Claim Jumper budget. 

"Unfortunately," our tenants learn fast, so my Claim Jumper budget isn't all that fat. 

However, after we got our acts together regarding management practices, the 'headaches' we endured all but disappeared, and acquiring more property was now a exciting objective rather than a threat to our financial security. 

I have no idea here, but it sounds to me like people bug you and the less exposure you have with them the better.  That's fine, if that's the case.  But, saying that residential investing is fruitless is a stretch. 

My uncle purchased 200 single family income properties in Northern California over ten years, and amassed a $15M equity nest egg for himself.  Now, if he had known better (and had more money to start with), he may have amassed $15M in commercial in half the time, with the same effort, I don't know. 

But for most of us residential investing is profitable, and certainly not fruitless, and something we can get our minds around easily. 

I'm speaking as both an owner/investor of several mid-sized apartment buildings and not just a few duplexes ...and as a seller financier of single family properties. 

I'm not really trying to argue with you, just clarify.
 

Make lots of money!

[rookieNYC]

I have no idea here, but it sounds to me like people bug you and the less exposure you have with them the better.  That's fine, if that's the case.  But, saying that residential investing is fruitless is a stretch. 

My uncle purchased 200 single family income properties in Northern California over ten years, and amassed a $15M equity nest egg for himself.  Now, if he had known better (and had more money to start with), he may have amassed $15M in commercial in half the time, with the same effort, I don't know. 

But for most of us residential investing is profitable, and certainly not fruitless, and something we can get our minds around easily


At $75,000 a house your uncle made a wise move in 1970-1980...Thats a guess ofcourse considering that houses in Northern California are no longer $75,000....And yes *to me* residential income properties is a waste of my time...Its a waste of money *for me*...Must be nice to have a rich Uncle to hang to ..

Im probably half of your Uncles age and I run *my own * money that returns about %16-%30 annually..

What do you consider profitable after you deduct the debt,water,homeowners ins,vandalism,repairs,heat,electric,taxes,lawn care...You have to literally steal houses for a deep discount to make attractive numbers...Being that it isnt 1970 and the majority of people on this forum dont have a rich Uncle who has 200 properties that were bought in 1970 to hang on to...Ofcourse his numbers look attractive now..Try buying 200 single family homes NOW and see if the numbers work...It will surely turn into a trainwreck.. Single digit cap rates dont excite anyone....Because after you deduct what my time costs to play landlord,each property becomes a loser...And yes chasing people for sandwich money is annoying and a waste of my time...And to me the residential landlord business is fruitless...I could care less how many homes Uncle Bill has...I could post what the amount of money I manage,its irrelevant...I could guarantee you it swallows up and spits out $15,000,000 easily..Its comical that you sight a person who bought properties 40 years ago as an example...Should I also talk about how my Grandmother bought Apple Computer stock many moons ago?...Or how my Grandfather bought Exxon Mobile when oil was $15 a barrel...Its pointless...We are in 2011...

To be successful in the residential landlord business you have to buy at a deep discount..Very deep...Even the buildings you own...If you had to buy them now,even after this RE implosion...Your numbers would be nothing to speak of...Infact I dont think it would work for many reasons...Lack of funding,price to profit ratios do not work,heating an apartment building now kills most profit...I could go on and on...

Im not trying to argue with you,just clarify...

[javipa]

Okay, now we're all over the map.

Evidently, you just don't know where to look for cash-flowing, single family property ...or don't want to...!  Fantastic.  You've got your bread already and don't need to wade in the sea of the great unwashed for profits.  I understand. 

However, your preposterous assumptions that single family investing is a waste of time, because there are no deals; management is too onerous; and costs are too high is all, too "sophisticated," and ignorantly so.  Please keep thinking that, because with your money, you could make life a living hell for the bargain hunters in your farm area.

Just saying!
 

I'm out.

P.S.  I got nothing from my uncle, except good advice.  Otherwise, I've got rich cousins today... So, your inference that somehow I'm a silver spooned something or other is mistaken.  I worked hard for everything I've got.