If you give your tenants a rent discount for paying on the 1st of the month, how much (% of total rent) do you allow and how do you enforce it?

For example: say your rent amount in the lease says: $750.00/month. How much less will they pay if they pay on the 1st? Is there any grace period here? Any additional late fees for payment on the 3rd or longer?

Some LL's will require the full $750.00 to be paid on the 1st and then refund $50.00 back to the tenant,..assuming it was received on the 1st. This is where the LL stays in control. Other LL's allow the tenant to apply the discount themselves.

How does your rent discount work?

I tried this for a while in my early years. It was a nightmare to keep up with. My tenants mail their payments (as opposed to dropping them off), so as you can imagine, there was always disagreements of when the payment was made. Somehow "received by the first." is too difficult of a concept for many.

Offering this just added more problems into my life.

1Gr81,

With direct deposit at my bank, the date of deposit is engraved in stone (bank's database that is).

I thinking about creating a rent discount for my future tenants,...if I can make it work. Late fees just punitive in nature (they punish tenants for paying late) whereas a rent discount for paying on the 1st or earlier, can motivate people to behave the way we all want them too.

I am the opposite. Rent is due on or BEFORE the first and is late after that. About 50% of my tenants pay around the 23rd or 24th (of the previous month) these days! Most of the rest pay on the last day of the month or right on the 1st. TWO pay by the 5th (NC law says I can't charge a late fee until after the 5th day.)

NC Investor

Okay, NC law requires a 5 day grace period,..fine. However, if you could entice them to pay on or before the 1st (with a small cash reward),...wouldn't that make sense? If they could pocket $25.00 just for paying on the 1st, they would never need to use the 4 additional day grace period. Forget late fees here and think in terms of 'rewards',..like 1-2% cash back on credit card purchases!

Because my rents are above market, I could afford to give a small amount of cash back for payment on the 1st. I am trying to figure out 'how much (or how little)' will it take to entice them to pay on 1st or before.

Way to go Doris! I knew someone here could make this work!

I require direct deposit of all rents.

Rents are received per the bank's time/date stamp.

I allow $25 discount for payment by 5:00 on the 1st.

Our state requires 5 days grace.

9 of my 10 tenants pay by the first (normally). One always pays a few days late, but always calculates the correct fee and deposits that amount.

I charge $5/day late fee for my cheaper places; $10/day for the more expensive ones. Progressive fee gives them further incentive to pay early or on time.

It is no accident that the first 5 days would add up to the $25 discount.

The standard terms of the rental forms offered by some of the leading landlord associations in Ontario encourage offering a prompt payment discount of 2% on rent. This is the maximum discount allowable under the Residential Tenancies Act (crazy that discounts to tenants are regulated but that is another story). In practice I take my advertised rent and gross it up on the application form to cover this. So for example my current vacancy rents for a discounted rent of $1,460 but the lawful (undiscounted) rent is $1,489.80. This is the sum that the tenant would pay if they did not pay on the first of the month.

Mine hasn't been tested in court, so whether it would fly ...

$25 discount if paid before the first, water bill must be current (unpaid water goes to property taxes, if too high.) Rent in my state is supposed to be due on the first, late on the fifth, if memory serves. (Got to get to another boot camp to see how judges are interpreting whatever the law is!) I will NOT tell someone its due this day, but late that day? What? I was was good at algebra, and that just doesn't equate!! So, rent is due on the fifth. To get a discount, rent must be in before the first. Late fee occurs on the sixth, if tenant texted and told me what date rent would be in by, and got APPROVAL.

That conversation goes like this,' get busy, rent will be in by the tenth.' Ok, tenant. Great thx .

If no text and approval, 5 Day P or Q goes uP on the sixth, and there is follow through.

If the revised date for rent is approaching, and tenant knows they are not going to make the deadline, they know to text again. That text usually goes like this: "Hey Busy, been a rough patch. We're going to have X amount in by the tenth, and we'll pay the last X amount on the 18th, with the $10 fee.

First late fee is $25, any additional late fees are $10. If we're having a lot of late fees, I make a point of going over to work on something when they are home, and we have a conversation.

I will admit, its getting harder to keep track of as I get older, and I don't have nearly as many tenants as you. But, for one tenant, they got the system immediately, they love it, and they keep the house great, neighbors love them, rent is always all in by about the 18th, most in by the tenth. Other tenants loves the early discount, one's already paying July. Others tend to be on time, neither early or late. But, they occasionally use it, and like that they can pay ahead and save, or, if they get in a spot, they can text, pay a fee, all is good.

I'm thinking an excel spreadsheet or a rent manager package could help. I've done my rent rolls pencil and paper on 13 column paper spreadsheet, mostly cuz I'm stubborn, and computers used to be fun in the 1980's, now they are annoying (showing my age.)

To fill a difficult rental, I offer a discount after 12 months of the rent being paid on time, evidence by the post mark on the envelope. Example:

The market rent is $2,200 for a prime located 2 bedroom remodeled apartment. Hard to fill at that price. However, upon 12 months of on-time rental payments, the 13th month is "FREE"! So the rent is then $2,030 averaged for the 13 months. At just over $2,000, my apartment is a steel.

No in MA it is illegal to offer a discount for rent paid on or before the due date.

We are not required to give a five days GRACE period, we just can't charge a LATE fee until the 5th. I tell people rent is LATE on the 2nd, even if we can't collect the fee, and that we could file for breach of lease if rent is paid after the first.

WMH,

ROY: Almost every tenant pays on the first and a few on the 25th of the preceding month. Most of the others on the 2nd. A few stragglers on the 5th. I'm fine with it.

My tenants pay electronically. The invoices are automatically emailed on the last day of the month except for those who have specifically requested them by the 25th (bankers who get paid monthly). Sure I could send the invoices earlier and some may pay earlier but most don't and then on the first ask where the invoice is because it gets lost in their email. I don't want them paying without an invoice since their electronic payment is automatically matched to the invoice and recorded in QBO. If they pay before the invoice is sent it needs to be manually recorded. My time is worth more than receiving the funds a day or two earlier. And a 2% discount would on average only be $35-40 and I doubt that would motivate them. I know it sure doesn't motivate me.

NC how do you generate extra income if everyone pays on time? we generate about 400.00 plus a month in late fee's-- not much until you do the 12 month calculus figures. (I knew calculus would come in handy one day) $4800.00.

PMH, its amazing how threat of losing favored possessions can influence tenant behavior. Only a few short years ago, here in the cheesehead state, landlord had to pay to store tenant's stuff for 30 days after an eviction! Law changed just as I was signing my first tenant. I made sure I got the new contract. Store their junk! That's crazy talk.

Most of my tenants don't manage to get the early discount. But, they like the idea of it. Most of my tenants pay late as often as not. But, they know the system, I bring in extra, like myob, and they appreciate the flexibility.

I don't issue P or Q notices since my lease waives notice. If the situation gets to the point that a tenant needs a push I have my atty send a letter reminding them of the consequences and then bill the tenant for the legal fees.

As for increased income from late fees, my rents are generally right at the top of market rent. And I find that for the most part tenants than can afford my rents are inclined to pay on time.