Coping Financially as a Landlord when a Tenant is Late with the Rent

Landlords take a risk each time they rent out their property to a new tenant. Even after they have run a background check, it is still not possible to eliminate all element of risk when a new tenant moves in. Will tenants ruin the carpets? Bang holes through walls or let their pets foul indoors? One of the scariest aspects landlords face is dealing with tenants who are late with paying the rent. How can you cope financially when a tenant is late with the rent?

Never Rely on the Rent Payment as a Regular Source of Income

A big mistake landlords make is relying on the rent payment as a regular source of income. Some rely so heavily on their rental income that they would be strapped for cash to pay their bills, groceries and other expenses if a tenant was late in making just a couple of payments.

While rental income can be an excellent source of passive income when things are going well and you have a model tenant who pays up on time each month, it is very risky to rely on rent payments as a regular source of income. View each payment as a “bonus” rather than part of your monthly pay packet. If possible, set some of the rental payment into a savings account, or add a portion of it toward the principal of the mortgage.

Keep Your Day Job

Many landlords are “accidental landlords” meaning they did not intend to rent out their home when they first purchased the property. It simply happened due to unforeseen circumstances, such as an underwater mortgage or an inability to sell. Turning an underwater property into a source of rental income until the market changes can be a more attractive proposition than losing your home to the banks or a bad sale.

However, some landlords rely so much on their rental income that they give up their day jobs and simply wait for the money to come rolling in. When a tenant is late in paying, this can be very unsettling and land the landlord in a great deal of trouble. Remember that even if you do not have a mortgage on the property, you must still be able to cover such necessary expenses as homeowner’s insurance, property upkeep and maintenance, and property taxes.

Landlords should not fall into the trap of relying too heavily on rental income each month. If they do, they risk falling behind on mortgage and other month-to-month expenses whenever a tenant is late in paying.