Many landlords have a “My way or the highway” attitude, and THAT attitude limits their income. We MUST be in tune with our residents’ thinking and life-needs so we can serve them. Find out what they want or what they need and let them pay you for it. We are not forcing them. Landlords who refuse such techniques are being selfish, and they’re not looking for ways to serve. I hear complaints about extra bookkeeping and cringe!
My wife says 70% of our new leases choose weekly or bi-weekly rent payment plans. That’s a lot of people who needed a different system. If your resident can pay rent monthly, God Bless and keep going. You are in an unusual market. But I challenge you that MOST residents are hurting and struggling to meet that monthly obligation. The landlord is selfishly FORCING them to act on HIS schedule.
Try this: write bi-weekly or weekly prices out for each home and offer it to your folks. You might be surprised. One landlord recently took my challenge and 25% of his residents grabbed the “Pay Day Plan”. His income went UP and the number of stressed-out residents struggling to pay their monthly obligation went DOWN.
Payment Plans and Marketing
People are COMING TO US for this program while other landlords scratch their heads and say, “Where is everybody?” The banks and realtors have not adapted to the new economy.
I signed two leases today. Both ASKED for a Pay Day Plan!! We post three payment options on a landlord advertising so they were prepared. One chose a weekly plan because, “The months always confuse me with my paycheck”. He was THRILLED to tell me that, “This way I’ll never be late on the rent!”
The other chose a bi-weekly payment plan – a couple in their 40’s and married kids in their 20’s. That’s four adults/ two couples. According to these residents, “It’s easy to split the rent – we pay one; they pay the other. We want to know how much comes out of each paycheck toward rent. And it seems EVERYBODY wants their money on the FIRST – the insurance, the car payment, etc. This is so much easier.”
My Script for Prospective Residents on Pay Day Payment Plans
The traditional calendar which breaks the days into monthly moon cycles was made by Romulus, King of Rome in 753 BC, nearly 3,000 years ago. Are you paid by King Romulus’ moons, I mean MONTHS? (SSI and disability customers can say yes).
How Are You Paid?
(Example: They put my pay in my account every other Friday). Doesn’t it make sense to pay your rent with the same timing as your paycheck? Most people find this plan very helpful to keep their cash flowing evenly and avoid late fees. It does cost a little more for the extra handling at our office but our residents tell us it’s worth it.
I now use a full landlord year calendar on one page and X out the month names. The best kind of calendar is one where the days are all in a row without breaks between the months. We’re going to stop thinking about rent in terms of MONTHS and start thinking in terms of your family’s needs. With this ultra simple system we are letting you choose to match YOUR family’s cash flow, NOT King Romulus’ chart of the moon cycles.
When Were You Last Paid?
(I circle that day). So the next payday will be HERE. I then circle all the paydays for the resident of the year. Now, let’s look at August for example, so we have a good understanding.
When you pay the rent on August 2nd your rent is paid up until August 15th. Does that make sense? When you pay on August 16th, your rent is paid until August 29th. Does THAT make sense? Now, please notice this so you don’t panic when it happens! YOU will get three paychecks in Aug, right? So the rent drafted on August 30th is not really for “August”, it’s really for almost HALF of SEPTEMBER, all the way until September 12th (The next time I do this I’ll try to use colored highlighters to color over each week).
With the old system, you’d have to pay the entire month two days later. This is way easier isn’t it? The NEXT payday is September 27th which covers rent for part of OCTOBER, so it’s almost like September only had ONE payment. The form I passed out at the recent MrLandlord.com Convention shows the prices and a START date. I still use that exact form in my lease strategy.
Let’s say you have a $500 monthly rent. Divide that by 4 weeks = $125.
Add $10 per payment “for handling” making the rent $135 per week. BUT it’s REALLY about what the market will bear. No one is offended by the $10.
A $500 monthly rent times 12 months = $6,000/year. Your resident will have to come up with $500 each time and if they lose their job on January 2nd, YOU won’t know they are in trouble until about February 12th, six weeks later, when they NOW owe $500 + $55 in possible late fees. Where do you think they are going to magically get $550 and satisfy the LANDLORD? THIS is exactly why they don’t answer your calls. They are stuck.
In 2013, savings accounts are a thing of the past for MOST renters, even the high-end folks. They’ve gone the way of buggy whips and 45 RPM records. BUT, a resident CAN hit up Grandma for $135 and pay her back over the next few weeks. $135 weekly rent times 52 weeks = $7,020 a year.
$500 monthly rent divided by two = $250.
Add $10 = $260 every other Friday.
$260 x 26 pay periods = $6,760 a year – a $760 increase in income.
Benefits For Resident:
- Cheaper than late fees
- Matches his cash flow
- Small order in AFFORDABLE bites.
Benefits for the LANDLORD
- Money in hand – Always better than late fees
- Small order bites to collect if the resident defaults
- More income! $1,020 per home!!
If you have 10 homes/apartments that adopt this Pay Day Payment Plan, that’s an extra $10,200 income without investing a single penny in upgrades or new appliances. And this easily pays for the increased bookkeeping.
The above tips are shared by regular contributors to the popular www.MrLandlord.com Q&A forum, and by real estate authors. To receive a free sample of Mr. Landlord newsletter, call 1-800-950-2250 or visit their informative Q&A Forum at www.LandlordingAdvice.com, where you can ask landlording questions and seek the advice of other rental owners 24 hours a day.