Rent Payment In Cash ?
When I purchased my duplexes a few months ago I inherited the lease and tenants from the previous owner. I am in the process of creating a new lease to replace the form used by the previous owner. All tenants are month to month so that is not a problem.
All of the tenants have been paying rent with cash. All of the sample lease agreements I have looked at in books and online have a provision saying Cash is not acceptable for rent payment; it must be check or money order.
Is there a reason I don't want to accept cash - to my inexperienced thinking it seems like the ideal way of getting rent payments? Cash does not bounce! Paying buy check would be a major inconvenience for most of my tenants. They are primarily day workers that get paid cash and do not have bank accounts.
Should I leave that provision in the agreements or take it out?
As Always – Thanks for the advice as I learn what I am doing!
Well it depends in part on how comfortable you are with people knowing you walk around with big wads of cash in your pocket.
Next issue, how good is your bookeeping? Accepting rent only in checks makes it relatively easy to keep track of who has paid-- in order to deposit the check you have to make a deposit ticket the ticket balances out to your rentroll. If you take rents in cash its pretty easy to spend it on something, forget who paid their rent or how much and now you have a bit of a mess.
Also, do you have a partner/investor. Such people are always suspicious of your accouting if they find out you take rents in cash.
That said, when I had lots of day-labor types I took the rent anyway I could get it. Sending them off with money in their hand to get a money order is an invitation to have your rent spent on tequila.
Well dotn know how the rest of you feel but in my book cashh is king.... I just write out a reciept for each tenant who pays that way and each and every month all tenants get a invoice for the month and also get a statement of there account showing each and every payment made.
Most of our tenants pay in cash and we've never had a problem with it. As a matter of fact, we have one family who can only pay in cash because they bounced a check.
Cash doesn't bounce!!
Clearly there are both benefits and risks involved in accepting cash payments. I try to avoid cash. In your situation there's logic to accepting cash. But if you're going to do do it, just make sure you take some basic precautions. For example, don't go alone to collect it. Also, don't have them drop the cash off at your house. No need for them to associate your house with bank.
Good luck
Hey,
Cash is great; I can't understand a contract that required the payment to be in some other form. My lease requires cash or cashier check, but as a courtesy, I will accept personal checks.
As an aside, I think it is illegal NOT to accept cash.
If you are in a low-moderate income area and accept cash, you will be robbed eventually. Money orders can be purchased at any convenience store or grocery store. In Shemin's Landlord book he has a great example of a guy who accepts cash who's place has been broken into 5 times in the last two years whereas if people know you do not accept cash, they are less likely to mess with you.
Thanks for all of the responses. I appreciate the input and different opinions.
CASH RULES!!!
I do the same thing with my cash clients as with the rest. I setup a separate bank account and give them the deposit slips. All they have to do is to go to the bank and deposit the money.
Remember:
#1. They are paying me, why should I have to pick up the money.
#2. I have great records of payment and can move the money into my account instantly online.
#3. Cash, Check, Gold Bullion, the bank can handle the money.
#4. None of this "Checks in the Mail" B.S.
#5. Tenants don't know where I live.
[addsig]
I do the same with the deposit slips. They know where it is and when it's due. If it's late, I know immediately and there is no disputing that the check is in the mail. Plus my bank is open on Saturdays and Late nights and they don't charge a thing for deposits!
Best of luck,
Andrew
I had not considered the idea of a separate bank account for each property and letting the tenant make the deposit. This is a great solution.
If you pick a large bank that has lots of branches it should work very well. Maybe some bank fees depending on how they manage the account structure but well worth the costs for the lack of hassle, safety factor and record keeping benefits.
Very well done to the two of you!
John
PS. In other countries direct debits are use so the money is moved automatically from the tenant's account to the landlords. Not common in the US. Assumes a bank account so a bit off topic for this specific discussion.
[addsig]
Hey,
The idea of having tenants deposit money in to YOUR bank account has to one of the WORST ideas for a landlord.
By handing the tenant a stack of deposit slips, you are telling them your bank and your bank account information. We live in the age of computers, color printers and ID THEFT and you are giving them everything they need to steal your money.
If you don't beleive me, then provide me your name (your tenants do know you name, right?) bank's name and account number and I will show you how easy it is to take your money. There is a very good chance your tenant has a copy of your signature also. Have you ever sent them a letter or signed the lease??
Forgetting the idea that your tenants could steal your money, how do you plan on reconciling this account? You are going to receive a deposit for $800; who gave you that money???? The tenant who pays $800 per month, or the tenant who pays $850, but wrote the check for $800.
And what is the cost of all of these accounts? Banks do not open accounts for free (these accounts have $0.00 balance, right?).
Quote:
On 2004-09-10 04:34, Bruce wrote:
Hey,
The idea of having tenants deposit money in to YOUR bank account has to one of the WORST ideas for a landlord.
By handing the tenant a stack of deposit slips, you are telling them your bank and your bank account information....
You missed something there. This is an EXTRA account opened by myself, but it is empty except for what the tenant puts in there. The only day it should have money is the day that the rent is due, and I transfer it out online the same day.
FYI: I bank at Wachovia and they don't charge me a dime for the extra checking accounts.
[addsig]
I wouldn't give them any of my account info either, even if they were diffrent accounts so I would know who paid, and I empteyd the accounts every month. if they are linked to your main account, there is a possiability that they could get to yours somehow. espacally if they are sub accounts. There is also the uestion of how many accounts will you have, 10 tenents means 10 diffrent accounts you have to maintain, and most have a min of a $3/mo fee if you don't have a set balance, or direct diposit.
What are you talking about "linked to my main account"? I have multiple accounts through Wachovia that I can access online, but none of them are "linked". You can't use one bank account to find the account number of another one.
[addsig]
I do not generally accept cash for rent.
Checks or money orders are mailed to me since properties are a long way from where I live. If I were concerned about tenants knowing my address, I have the option of a P.O. Box.
With checks I don't need to spend time writing out rent receipts. Bank deposits are made once a month when I have all of the rent money. I can keep money orders and checks reasonably safely and securely until deposited, whereas, piles of cash would be troublesome.
A spread sheet program writes out the bank deposit slip from journal entries so I don't have to do that. When checks bounce there is a late fee and bad check fee that is enforced and after two bad checks, I only accept money orders.
Just my preference...
Hey Savvy,
I have written this response three times and I keep deleting it, because I am concerned that it was turning in to a seminor on HOW TO STEAL MONEY.
With the information you have provided to your tenants, the fact that you are registered and the fact that you have multiple accounts, I can come up with 5 different ways to steal your money, without breaking a sweat.
We live in a world where the US Banking System has NOT kept up with technology. And scammers are easily able to exploit that fact.
So here is one example of how to take your money:
I order checks, from a local print shop or on-line, using your account details and account number. I pre-sign the checks by tracing your name on to the signature line, so my check book now has 50 signed checks in it. I then pay for items at the store using these checks. They are pre-signed, so I am not trying to forge your signature at the check-out. I could also order things through the mail, but that leaves a trail. When the checks come back, they bounce. You get hit with 50 NSF fees and by all outward appearances YOU signed the checks. That puts you in a world of hurt.
This is a particularly nasty/evil way to steal your money. This is one of the HARDER ways to get your money, because I have to order checks and that costs around $20.
yeah, but any common fool can do that whenever they get a check from you also. So your implying you would never give a tenant a check for their return of deposit or anything? They could just as easily do the same thing...
Bruce,
I think you missed the point that the account they are depositing the rent into is only used for their deposit. The funds are electronically moved out. No one else deposits to that account.
Hence if the account is highjacked the loss is at most 1 months rent (normally less unless they get the timing correct). They are not that likely to get your account info. No more then reading the account number from the back of a check if they pay by check and you deposit it into the bank.
I understand you point but I think in this case the way the suggestion was made already addresses the risks. Put differently you are not taking any more risk then depositing their check and then having them read the back (where you signature might be in that example).
John
[addsig]
Bruce,
They can create all the fancy forged checks they want. Then they bounce all across town because there is no money in the account. The only money in the account is their rent money for 1 day. So they would have to deposit the money and then somehow get the money out before I moved it out electronically. Besides, only 2 people know the account number, and I know where they live, so a quick call to the police would lead them straight to the perps.
If tenants are that crazed about stealing money, they'll just have some friends waiting to steal it from you when you come to collect it. Criminals are criminals and if they want your money there is not much you can do to stop people willing to break the law. The maximum amount that I believe I can lose from fraud is 1 months rent and I'm pretty sure that the banks will refund that.
[addsig]
Bruce,
According to your particular scam, anyone who has ever taken a check from you could do the exact same thing right? As a matter of fact, I bet your checks have your address on them too and then sometimes the cashiers make you write down your drivers licence number to boot. If the scam you just mentioned actually worked, 10's of millions of people writing millions of checks a day would be vunerable.
[addsig]