TheLandlordBlog.com

Collecting last month’s rent at the beginning of a lease term is an overlooked strategy that can really save and MAKE you extra money!  More and more investors are strapped for cash flow these days and here is one more little way you can keep an eye on your bottom line.  Here’s how:

When a tenant signs a lease, have them pay the first month’s rent, the security deposit, and the last month’s rent.  Yes, this likely means they are paying the equivalent of three months of rent all at once.

Who can afford such a large lump sum, you ask?  Tenants who can truly afford to live in your unit.  Tenants that are living paycheck to paycheck, and maybe even in the negative every month, may not be able to afford your terms.  Consider it part of your rental criteria, apply it across the board, and you have another built-in tenant screening mechanism.

Now one thing that you also can do is negotiate a short payment schedule for the last month’s rent.  For example, have the tenant pay the first month’s rent and the security deposit at lease signing, and then have them pay the last month’s rent over three months in three equal payments.  This spreads it out a little for them and you also receive it early in the tenancy (it is not likely they will move out before they pay it in full).

Aside from the tenant screening benefit, there are more direct money-making benefits from doing this.  It just happened to me.

I have a tenant who signed a one year lease last June 1.  She was planning to move out at the end of May.  My property manager was being proactive and checking in with all of our June 1 tenants 90 days before the end of their leases to learn their intentions.  This tenant said that she was going to be moving out of state and may leave a little early.

Sure enough!  She’s already gone and it’s not even May yet.  She had paid April rent on April 1, and she had paid May rent last year when she moved in.  She left mid-April, giving us about 45 days of PAID time to find a new tenant.  There’s a good chance we’ll re-rent the place before June 1, which means we get to collect double rent during the overlap time.  How cool is that?

How else does collecting last month’s rent help you?  It helps when a tenant skips, or breaks their lease and moves out early, possibly without even telling you.  You may not realize they are gone until they don’t pay their rent and you go looking for them.  You’ll eventually figure out they’ve left, and you’ll still have a month of pre-paid time to re-rent their unit.

Collecting money sooner rather than later is always a good thing.  Theoretically you get to sit on one month’s rent for a whole year, collecting interest on the dollars.

Disclaimer: be sure to check your state statutes to make sure the law allows you to collect last month’s rent.

Today’s Carnival of Real Estate Investing has been published on Equity Scout.

C’mon all you real estate bloggers… let’s see one of your posts make the list next week!  Write something brilliant (or just your random thoughts will do fine ) and submit your post to the carnival.  It’s easy and we all benefit!

Today’s carnival of real estate investing has been published at our fellow REI blog called Real Real Estate Investing.  Check it out for some great reading!

I had a minor situation happen this week that could easily have been avoided. I have several units that attract college students. This results in having many lease ending dates of May 25 (with college students I cut their year long leases 5 days short - more on that another day).

My property manager is feverishly and proactively getting these units filled before they become vacancies. We have a procedure to inquire with existing tenants 90 days before the end of their lease to see if they plan to stay or move out. He’s been inquiring, and some tenants are planning to stay another year. For these, we sign a new year lease immediately and get it out of the way.

Some of the tenants don’t know if they are staying another year or not. For these, he keeps inquiring every two weeks until they know what their plans are.

Some of the tenants know already that they will be moving out. What should happen with these is the property manager should get a letter in writing that says they will be moving out and on what date. This is a conclusive declaration that they are moving and gives us full license to re-rent their apartment.

In one unit, we had the tenant say she is moving out but my manager did not get a letter from her indicating such. He proceeded to advertise, show, and ultimately rent her apartment to someone else for a June 1 lease starting date. Just after lease signing, the existing tenant called him to say that she wouldn’t be moving out after all. She’d like to stay another year. UGH!

My manager had to tell her that her place has already been rented and that she would indeed need to move out. Lost opportunity! He could have rented another one of our units to the new tenant and had the existing tenant stay. This would eliminate the potential of one more vacancy. Now he has two options: either try to get the existing tenant to move to one of our other units, or try to get the new tenant who already signed the lease to agree to move into a different unit than he wanted.

Either way the hassle factor is way up as is the risk. It could have been avoided by getting the move out in writing. If you don’t have something in writing, don’t expect it to stick.

Welcome to the April 2, 2007 edition of carnival of real estate investing! Thanks to everyone who participated this week.In keeping with the theme of our carnival, investing, I had to eliminate several posts from the running. I chose several that I thought would benefit our investor audience.My top pick this week is from Josh Dorkin. I am still laughing about it, partly because there is a lot of truth in what he says, but also because I’m a pet owner and I completely identify with his pet-isms!!!

Joshua Dorkin presents Why Pets Are Better Tenants than Children posted at Real Estate Investing For Real, saying, “Some humor for the carnival this week.” Josh, you rock! I’m still laughing at how correct you are!

And the runners up are…

Michael K. Dawson presents We Are Not a Subprime Lender! posted at The Time and Money Group. I’m citing this post because so many investors have used stated income loans for their single family home purchases, and if not, IndyMac has purchased many of their loans.

Allen Young presents Real Estate Investing Out of State posted at Living the Dream. This is a GREAT post with some very timely information! We need to remember to remain open to possibilities that we may have previously considered out of the question.

James Klobasa presents It?s Flipping Payday?.How A $63,000K Studio turns into a $114,500K chq? posted at Real Real Estate Investing Blog. James reminds us that sometimes it’s not all about the money!

John presents Real Estate Value - Market Data vs. Income posted at OhCash.com. Ever wonder how appraisales are done? John explains!

Jeff Brown presents Sez Me — Random Sunday Thoughts — The Duh Factor posted at BloodhoundBlog. Jeff is not only hilarious, but brings us several nuggets from Captain Obvious that smack us across the face.

Victor Emeli presents Strategy for High Equity Rental Properties posted at Financial Freedom Through Real Estate. Victor reminds us that the famous “2 out of the last 5″ tax exclusion potentially applies to rental properties too!

THANK YOU to everyone who submitted this week. Keep ‘em comin’!!! We’re having a bye next week for Easter, but the following week… game on boys and girls!

That concludes this edition. Submit your blog article to the next edition of carnival of real estate investing using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page. If you have a blog, please consider hosting for us. We’d love to highlight your blog!