If you own property (or will in the future) your income depends on renters paying rent.
On the first day of the month rent is due in advance in full for most renters, even if they rent an apartment, retail store or office space.
Owners depend on rent so that they can pay bills associate with owning property. These bills include debt service (mortgage payments), property taxes, insurance and operating expenses.
Because Owners depend on rent they want to make sure all the renters pay rent in full when it’s due. For this reason, owners are busy during the first days of the month (you won’t see them on vacation at this time!)
During the first days of the month, owners collect the rent payments, make sure every renter paid and that every renter paid the right amount.
This process happens on the first of the month in big real estate companies and small ones!
In a big real estate company, people from various departments including accounting, property management, administrative and the owner are involved in the process. In small company, this process may only involve the owner and a bookkeeper.
Many owners create “Rent Rolls” to help make sure all rent is paid. Simply, a Rent Roll is a list that shows (i) the name of each tenant; (ii) the space the tenant rents; (iii) the amount of the monthly rent; (iv) the date the rent is due and (v) the date the rent is late. An Owner creates a Rent Roll by reviewing the Leases. A Lease is the agreement between the renter and owner that determines the amount the renter pays for the right to possess the owner’s property.
What happens if the renter pays the rent after the first of the month?
To find out the answer, read the Lease.
Most Leases say that if the renter pays the rent late, the renter will have to pay a late fee and other fees.
What happens is the renter doesn’t pay at all?
Most Leases and state laws give owners the right to file in court to retake possession of the property that the renter rents. This is called eviction.
But wait, up, hold a minute – owners don’t want to evict.
Owners want to keep their income stream going. The way to do this is to pick tenants who are able to pay the rent.
Tune in to learn about tenant selection in an upcoming blog!
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Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright © 2012 Suzanne Hollander, Professor Real Estate® The People’s Professor.
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