Say for example that the market for rent with your priced property in your region was $200a week . And you wanted to get a tenant quick and wanted a reliable one. You drop it by 5% below the market. $190 it will be now, attracting a tenant much quicker. But then at the same time you organise that if the rent is not paid “on the day” that it is due then the rent will be say $240 for that week. And thus your tenant will be thinking to themselves, “holy crap we better pay today or we its just 50 bucks down the drain”.
Any thoughts on this idea or any suggestions about how this would be able to work?
Christopher.
Not sure whether that would be legal. As far as I’m aware, in VIC tenants can be up to two weeks late in any month before any action is taken against them. Also, I think a clause like that, if legal, would scare off prospective tenants.
There are 10 types of people in this world. Those that understand binary and those that don’t.
Hmm. Then what would a similar way(maybe including the rent) that could indeed pull in more prospective tenants and improve their motivation to paying the rent on time.
Christopher.
Hi,
Your idea sounds similar to something I have heard before on a tape set. Note sure whose – it could even be something of steves but it was more of a reward program for on time payment than a penanlty for late payment.
I have note used it but perhaps someone on the forum has – i think it was free dvd’s or something like that.
Maybe you could issue vouchers redeemable at christmas when people are running short of cash for a rent discount – could work who knows.
In an ideal world it’s a good idea to hold at least 3 months holding costs for all properties in an account so that in the worst case senario that all are vacant at the same time of if the tenants are slow paying then you will have ample time to get the problems sorted.
cheers
Sourcing Positive Cashflow Investment Property http://www.cashflowproperties.co.nz
Cash Flow PropertyGreat idea DLLP. Thanks, I’ll have to ponder over those and get back to you. hmmmmm..
Christopher.
I think it wouldn’t be legal either, but a way to make it legal may be to make the rent at $240 pw and then give them a discount of $50 pw if they pay by the due date.
A lot of lenders, private type, do something similar. They say the interest rate 11%, but if you pay within 2 days of the due date it will be only 8%.
Terryw
Discover Home Loans
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Cinema tickets for prompt payment was the idea for commercial property on the tapes mentioned.
Cinema tickets, sounds like a very good idea. The idea(from the tenants perspective) of each week(or fortnight) going out to the movies with the landlord paying would be a very nice incentive to paying your rent on time.
Thanks. Hmm, thats sorted for now…..
Christopher.
Making the $50 a penality is NOT legal BUT you can reverse it. ie. The notional rent is $240 per week but you will offer a discount of $50 per week IF it is paid/recieved/cleared by the due date.
Chris,
In Steve’s book – 0-130, he did a deal with the local video shop in video vouchers for tenants who paid on time. The tenant was happy with his new releases, the video shop owner was happy with the extra sales he made with the tenant in the shop, and Steve was happy with the tenant paying on time. Steve’s win-win situations. My husband and I have shamelessly copied the idea, but what we do is this. On commencement of the lease we give the tenant a welcome gift. This could be a voucher from the nursery (to encourage them to garden), or another gift they might enjoy. At Christmas we do the same sort of thing. This strategy reminds the tenants that we are people like they are, working towards our future. Hopefully it adds a facet of humanity and we are not the “rotton landlord”. Often we know the tenants as we have two houses in the town in which we live. Also, it gives us a chance to send them a Christmas card and remind them what Christmas is all about, and that we pray God’s very best for them always. And “yes”, we do actually do that!
MeegGood idea, getting the vouchers. Nice and cheap and effective.
Win-win, excellent, i like the sound of that
I don’t know about other states, but in SA, it is definately NOT LEGAL to vary the amount of rent stated on the residentail tenacny agreement either by discounting or applying penalties.
Movie tickets OK [biggrin]
With commercail rents you can be more flexible because there is no governing regulating the industry. It is quite common in commercial leases to have all sorts of penalites and discounts as long as they are written in the contract and agreed to by both parties.
Investment Property Management
http://www.adprop.com.auA lot of local councils use this discount method for motivating ratepayers to pay rates on time. It works on me, I don’t want to give them any more money than I have to so I always pay my rates on time and get the discount.
I am a little annoyed that they are trying to play psychological games with me, but hey!! if it works and is ethical , I won’t argue with it.
Todd Burns
http://www.freepropertyhelp.com.au
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