I know of several landlords who charge way too much in late fees. To a point where it's hard for the tenant to catch up

Hi Robert,

We just recently launched a new "Forum" on our Exeter Disccusion Board on Property Management and Asset Management.  Would you be interested in posting educational information regarding property management issues there as well as responding to any questions that might get posted?  You can access it at http://www.exeterboard.com.  Let me know when you have registed and I will set you up as one of the moderators for the Board.

I have a unique take on this. I say if you have a home that should rent for $1000 per month, you charge $1100 or $1150 and IF the tennant pays you BY the first of the month you give them a credit of $100 or $150.

You will be the first payment they make every month and there is no trying to collect late fees. You can advertise the home as $1,000 per month and disclose that as long as the rent is payed by the 1st of the month you give that credit making the rent only $1,000. So no more rent payment coming in on the 5th or so, you will be at the top of the tennants priority list of payments to make.

Try it and let me know what you think.

The suggestion of a discount if the check comes in by the first seems like a good one.

Hi Robert - What a nice compliment Exeter asking you to be one of their moderators.  I'm sure you would have a lot to offer as you always do here on AR.

Regarding your "Late Fee" post, I've been fortunate enough to have great paying "Section 8" tenants for the past 7 years.  They've always been a couple days late, but for the past 6 months or so they've been paying later and later each month, which has me concerned.  I've never charged them late fees and they know this because I've talked to them about it and told them I easily could but I'm trying to work with them.  I know they're struggling and the way I look at it....hey, at least I get my rent check every month.  I'm lucky that I'm able to cover the mortgage payment every month and don't pay any late fees.  However, this past month they got more behind than usual and are now trying to catch up for May.  Like I said I am concerned, but don't want to push them because they could easily move (rentals are not as scarce as they were).  I just don't want to be taken advantage of and have things get out of control.  I probably should have imposed late fees from the beginning, but I didn't think it was necessary.

Florence ~ That's a very interesting idea!  I will definitely considering doing something like that in the future.  That sounds a like it could be a good thing. 

One of the great things about my way of taking rentals listed above is that when you meet the potential tenants they tell you how they will pay on time and how trustworthy they are. By making the rental high but giving a big discount for paying on time they will not look at the payment as being high because they will promise to pay on time.

If they have a problem with it, then you know you are talking with someone that is going to be late all the time, so it helps you weed out the ones you don’t want and it insures that you will be paid by the first of the month, every month.

Make sure it is clear that you have to have it in hand by the 1^st, not postmarked by the 1^st, but actually in your possession.

Believe me for a large discount of $100 to $150 off their rent you will be the first payment they make every month. They may be late on other payments but you will get paid.

Ours is almost always ten percent of the rent.  I have seen others but that is the most seen.

My main point here is to make it a discount not a late fee. In my example of $1,000 per month rent, if you made it $1,100 with a $100 discount, there is your 10%.

Florence,  I have heard of court cases where the judge called that extra amount due a late fee no matter how the property manager framed it.  If you have only a few rentals it probably does not matter but with 100's it might be more risky in some jurisdictions to get too creative.  Glad it works for you.  Thanks for the idea.

Hi Robert, You have a good point and I don't claim to know the laws in other areas. By all means everyone should check the law and restrictions in their local areas.

I just wanted to throw that out as an option that works well in areas that would legally allow it.

 Disclaimer, Disclaimer, Disclaimer.

Florence,  Well put.  No one should do anything without checking out their local laws and those of their licensing agency.  Thanks again.

$50 per adult on lease late/NSF fee and $100 per adult on lease notice fee - If I have to serve a pay or quit or rent with reservation notice, I charge min $300 for a couple on a lease....Under general accounting rules, the next funds paid credit to any late/notice fees so I provide 5 days to pay the fees and if they do not I file an unlawful detainer or Small Claims court action....

Yes, late/NSF/notice fees can be a profit center; however, I prefer to use them as a way to cause residents to priortize their payments so that keeping a roof over their family's heads is the PRIORITY.

I allow 5 days grace period and provide SAE to residents to paying their rent should not be difficult if they have the money.  The more common situation is changing banks and issuing NSF check that I am notified about BEFORE residents so their rent with reservation notice is a double whammy since they did not know they had a problem.

Our property management department charges 10% plus the $25 late fee (if the 4th or later). It seems high but we think it's not excessive as most mortgage companies charge 6% or so for a late payment and it seems only reasonable to be a "markup" between the homeowner and tenant. The tenant may complain, but there's a lot lower chance that they will be late the next time around and the money they pay in late fees is nearly pure profit for our company. I say the perfect tenant is the one who is a day late every month!

I charge 10% late fee after 5 day grace period.