Tenants consistently pay late

[GreenGoblin]

Hi all

We self-manage our IP in Melbourne and have had the same tenants there for two years (on their second fixed-term lease, each lease being around one-and-a-half years). The tenants pay their rent in full, but always between 7 and 12 days late. Initially we'd phone or SMS them 3 or 4 days after the 1st of the month, but now I send a polite SMS reminder around the 7th, sometimes getting a reply, often not. The rent does get paid a few days thereafter.

While our rental agreement states rent is due 2 business days prior to due date, I know the tenants have up to 14 days to pay late. Please advise:
1. If rent is payable 1 month in advance, they'd be in breach of the RTA if we hadn't received at least 14 days rent in our bank account by the 15th of the month (RTA section 246)? e.g. rent paid by 14th July for the month of July.
2. Given that they pay in full, should we be worrying about this? Obviously the late payments impact our own cash flow and payments.
3. Should I be allowing the tenants to continue to pay late or take a firmer line with them? They quote from the RTA whenever there's an issue, so certainly know their rights.

Thanks,
GreenGoblin

 

[wylie]

I also self-manage and had this issue crop up with current tenants. They are good tenants and chose to pay monthly in advance, but I was waiting a few days for rent, which meant they were really "behind" each month. When I queried it, it turned out that one of them was paid monthly and his pay date happened to be a few days after the lease was signed originally, so I was kept waiting.

I fixed it by asking for one week's rent to get them ahead of his pay date. No problems since.

Maybe it is something simple like mis-matching pay periods. If so, this could be easily fixed as above.

Perhaps appeal to their better nature and let them know you have a big mortgage. I sometimes think tenants think we are on easy street and don't actually need the rent. I make sure that our tenants know that we have loans and generally they understand and comply.

At least they are paying....

 

[skater]

At least they are paying....

Yep!

You find that those that can quote the RTA are more likely to push boundaries since they know what they can & can't get away with legally. Like Wylie said, if it is an issue with them, and since you self manage, let them know that you have a large mortgage to pay & if the money doesen't come in in time, then you are out of pocket. Might work, might not.

 

[Rixter]

They constantly pay late because you keep allowing them to.....either take it on the chin and put up with it if its not creating real financial issues for you or let them know that if they continue the status quo you will be left with no other alternative and will not be renewing lease.

 

[Bushy]

Had the same prob once, tenants always payed 12 days late. It created to much work and stress for us and we new they new how to take advantage of the system.

Our solution - We put up the rent and they left on their own free will.

Cheers Bushy

 

[geoffw]

Check their pay periods.

I have had the problem. When I found out that their pay period was fortnightly not monthly I rearranged payments to coincide with pays.

However it may well be that they are just taking advantage of you.

 

[LynnH]

I agree with geoffw.

We had one tenant who occasionally paid a couple of days late. Her payday was 2 days after the date the rent was due. She approached us and requested that the rental due date be moved to the day after her payday (she paid two weeks and three days rent at the time). An easy fix!

The rent has been on time - or early - ever since. A win/win situation and fewer headaches for all involved.

Cheers
LynnH

 

[Dazz]

Is this an indication that some or most of the people you choose to do business with, have less than a fortnight's cash buffer to their name, and hence if you do not re-adjust your original timing, you simply don't get paid ??

 

[alplant]

Sadly yes, there are an awful lot of people who live from one pay to the next. If they are on benefits of some sort it is even more likely that would be the case. With rent payments now being so high I sometimes wonder how low paid people manage at all.

 

[geoffw]

Is this an indication that some or most of the people you choose to do business with, have less than a fortnight's cash buffer to their name

Some. Not most. If it was most it would not even have been raised in this forum, because it would be common rather than a rarity.

If these people we do business with had better money skills there would be many of them who bought houses rather than rented.

and hence if you do not re-adjust your original timing, you simply don't get paid ??

No. Not one post stated that people did not pay rent. They just paid late.

 

[Ausprop]

surely a flaw in the argument for being a resi landowner tho? by it's very nature you are most likely enagaging clients of limited financial capacity or understanding

 

[Minxdamanx]

I wonder what the % would be of people on this site who have had problems like those you have recently described Ausprop or a horror thread that I read from Dazz recently?

I suppose it would be impossible to quantify as we all have different quantities of IP's in various areas that have been held for varying amounts of time - it wouldn't mean much I suppose as the chance of risk would be higher (or lower) depending on those factors.

Personally I only have 2 IP's only one of which has caused any grief and that grief only minimal (rather complaining tenants who occasionally pay late). No major damage, bikies, homeless folk, vicious dogs etc ... yet

Am I just lucky? Or are the 'horror' stories more unusual than those that argue against resi property ownership would have us believe.

I am not having a go at anyone. I'm sure that the really bad tenants could be just one lease away - just curious I guess.

 

[Ausprop]

Am I just lucky? Or are the 'horror' stories more unusual than those that argue against resi property ownership would have us believe.

I would say on average about 1 in 10 resi leases ends in major grief (basing it on fellow investors experiences as well). I was going to say it could be related to the type of property you have, but then my mate had a beautiful new house in wanneroo that was completely stuffed by a tenancy. And we also had a nice new 4x2 in singleton that was very poorly treated by a family of quite well known surname.

 

[Rixter]

I wonder what the % would be of people on this site who have had problems like those you have recently described Ausprop or a horror thread that I read from Dazz recently?

Minx, worthy topic for starting a new thread so as not to hijack here.

 

[Minxdamanx]

My apologies all.

Thanks, Rick

 

[Dazz]

worthy topic for starting a new thread

Absolutely not Rixter. Only topics that are a rarity get onto the forum.

Anything commonly occuring is not discussed apparently.

 

[Rixter]

Absolutely not Rixter. Only topics that are a rarity get onto the forum.

Anything commonly occuring is not discussed apparently.

Bowled Lillee through to Marsh.

 

[geoffw]

Absolutely not Rixter. Only topics that are a rarity get onto the forum.

Anything commonly occuring is not discussed apparently.

That's twice in one thread that you have completely twisted what has been said to suit your own views.

 

[Dazz]

Cheer up Just Geoff.

Our views on most things investing are diametrically opposed.....it is only natural that we disagree on most things, as we have done in the past on regular occassions. I accept that. You seem to still be struggling with the overall concept.

On the specific point of this thread, it was a very reasonable 2 line question I put forward, based on the thrust of the initial poster, and subsequently supported by a few very experienced and wealthy investors that I know.

I disagreed completely with what you wrote, but thought it best not to reply. I have now changed my mind.

Some. Not most. If it was most it would not even have been raised in this forum, because it would be common rather than a rarity.

In your limited personal investing experience Geoff, you may have over 14,000 posts on this forum, but that doesn't equate at all with investing experience.....or were you speaking from a more generic level ?? There are other posters on here that disagree with your view. Who's to say who's right. It's probably in the middle somewhere - like most things in life. The assertion that if a subject was common amongst investors it isn't raised on the forum is patently wrong, IMHO. How you can suggest that is beyond me.

If these people we do business with had better money skills there would be many of them who bought houses rather than rented.

I've got plenty of reasons to disagree with that as well, having seen detailed tables in exhaustive literature of reasons given for renting in Australia Just Geoff. Of about 15 reasons, I recall about 4 being because money skills weren't up to scratch. You've written off a whole swath of the public because they rent. The vast majority of the reasons why people rent had nothing to do with their money skills.

Not one post stated that people did not pay rent. They just paid late.

That's a fairly big "just" Just Geoff. There have been numerous threads on that subject alone, throwing the cashflows out to a point where the mortgage payments may come into play. It's close to the # 1 reason why Tenant's are evicted. Paying late causes a tad more than a bit of grief....hence why people post all the time on the subject - including this thread. It's a big issue, not some trifling.

As for your comment of completely twisting words to suit my views......well yes Guv, I admit it 100%. It's what I do for a full time job. When you get up to a certain level of investing Just Geoff - that's all there is - words. Twisting those words to your best advantage is what makes you wealthy. However, one isn't as course as to term it "twisting". One prefers to refer to it as interpretation of the written word. Far more eloquent and illustrative.

Your trouble with me is - you don't agree with my views....but then we both came to that conclusion over 3 years ago. No news there !!

If I could bugger off to some Australian non-ressy forum and get out of your hair, along with a vast array of (dare I say it 99% of the forum) others, I'd gladly go right now. What I invest in is so vastly different from others here, it's not even remotely similar. Just point me in the right direction, send me a little clicky link and I'm outta here chief.

 

[geoffw]

Dazz

You've put you point well. I accept some of what you are saying. There are some things where I would like to expand on what I've said. Just not tonight. It's a little late on the East Coast.

I don't like your belittling of resi investors on general and now me in particular. But that has also happened over the last three years.