[BRAD] just rented a $1439/ mo home. They chose my PayDayPlan rent. 2 out of last 3 new leases in July chose PayDayPlan.

I need clarification of '2 out 3 new leases chose PayDayPlan'. Did these new tenants choose your pay day plan because they do not make enough money (less than 3X) or they do not manage money well enough to make a full rent payment once a month on the 1st?

In other words, are you renting houses to tenants who in reality can't really afford your asking rent and the only way they can pay rent is when the LL 'works with them' in splitting the rent up into multi-weekly rent payments?

When I am screening applicants, I am trying to figure out if this applicant has the means to make a full rent payment on the 1st of every month. If they can't or even suggest I split the rent into weekly payments (ie. working with them), I do not rent to them because they can not really afford my asking rent.

Roy, I'm not Brad (obviously), but I do the pay day plan as well.

The reason I do it is people manage money poorly. They have plenty to pay the monthly rent, but because they spend it as fast as it comes in and do not have an ounce of personal discipline, they choose the pay day plan. They fully know it costs them more. I say so both in our ads and in our lease. They choose it anyway.

As you know 26 half payments (pay every 2 weeks, 52 weeks per year) equals 13 full payments. An 8.3% increase. Literally all they'd have to do is spend 5 minutes in their online banking app and set up two automatic transfers per month--one on the 1st and one on the 15th or whatever 2 days they choose--to move 50% of the monthly rent amount to their savings account, then on the 30th they have an automatic transfer that moves the money back over. Then I debit their account on the 1st. Easy cheesy.

But they don't. They choose to pay every pay day and can't seem to save money at all.

It is what it is. I used to think the practice was immorally taking advantage of poor people, but then I got into the poor person mentality. I can preach frugality and financial wisdom and responsibility until I'm blue in the face. They will smile and delete my email on their $700 leased smart phone, then go drive to work in their $600/month leased car.

I gave up. Give them what they want. Not everyone buys beer by the 12 pack for $15: they choose to buy it in 6 packs for $9.99 each.

Sid,

If you did away with your payday plans and demanded full payment, what would happen (or not happen) ? My tenants know that if they don't pay full rent and late fees by the 6th day of any month, they will an eviction notice posted on the 7th day. That is motivation enough to get them to do what they are supposed to do. Their personal spending habits on worthless items is of no concern to me.

Now, I do have 2 tenants right now that are on payday plans, however in hindsight, I wish I had never rented to these tenants. I have learned (the hard way) that tenants who operate on an all cash basis, are the very worst money managers.

Roy,

I cannot say for sure, but based on my past experience before we offered payday plans, my guess is most of them would struggle each month and pay a lot of late fees, plus they'd risk having eviction filed. Like you, I don't worry about their money choices. I screen based on if they can pay whatever payment plan they choose, which is included on my application.

Example:

Applicant A chooses monthly rent at $800. They must make at least $2400 combined household income, and I also look for $1000 of discretionary income left over after all bills are paid.

Applicant B chooses the bi-weekly rent at $400. I convert that figure to a monthly rate as follows: $400 * 26 payments / 12 months = $867 per month. They must make at least $2600 combined household income, and I still look for $1500 of discretionary income left over after all bills are paid.

Bills include whatever I find the credit report, rent and estimated utilities. I take the minimum monthly payments for all debts, plus the monthly rent (as calculated above), plus an estimated $250 for utilities. If after I do that math they have at least $1500 for gasoline, groceries, and the other sundry things of life, then I consider their income sufficient and go on to the next screening criteria.

Roy,

I agree completely with Sid. I have one on twice a month payment. They fully make enough to pay the rent. But they can’t manage their spending. I had bounced rent drafts over and over again with every excuse in the book.

Now they then always paid me within a few days of the failed drafts no problem but they also then incurred over draft fees from not only their bank but from my auto draft company (Clearnow) as well as having to pay my late fees.

I switched them to bimonthly and suddenly it stopped. No more bounced drafts going on two years now when before it was every other month.

Ken,

Roy,

*I* am the real BRAD:)

It boils down to this: Quit trying to swim against the current.

People want CONVENIENCE Now more than ever.

They NEED help paying the rent esp with inflation hitting their household spending.

Help them avoid late fees and eviction notices by getting in step with their financial timing.

I believe that low income people are some of the absolute best money managers. They know where every penny goes. We might not like their decisions such as car payments, tattoos, cigarettes, and cell phones but they know exactly where every penny goes from each paycheck. They make the conscious choice to alot part of their paycheck to these things.

1. Where is it "written" that rent must align to the monthly calendar set up in 750 BC in Rome by Caesar? It's not on the tablets Moses brought down from the mountain! It's just a common practice from when people had more money to work with each month.

2. Almost every working person is paid each Friday or every other Friday. Even my children with professional jobs are paid on Friday, not by the month.

People are broke. Their financial management goal is to make it to the next paycheck.

3. When does the general public buy anything? On Friday! Have you ever been to Walmart or Kroger on a Friday at 5 o'clock? That is when people have money to buy the things they want and need. Go back on Monday and it's quiet because their money is gone.

4. Residents who are accustomed to paying weekly will have a hard time moving to another home that demands a monthly payment. I'd like to think they stay with me a little longer because of the convenience of the PayDayPlan.

5. It is interesting to me that it's landlords who have a mental block against weekly rent. Renters L-O-V-E it! Give them what they want AND increase your income for providing this extra service.

6. We now list the weekly rent ahead of the biweekly and monthly rent.It's the first price they see. THEY choose it. I don't have to talk anyone into it. I DO ask if they have considered weekly rent.

7. People come to us because they want to do weekly rent.

8. If one of our renters asks to pay late we automatically put them on weekly rent. "can you work with me?" "Yes, we will put you on weekly payday plan so you only owe $210 this week instead of the $800 that you could not come up with." They usually have that much so they can stay current, avoid late fees and eviction notices. They usually stay on that plan because it's so much easier for them.

9. We score applicants green yellow or red. Most are red. Only a few are green, So we wind up working with a lot of yellows - marginal approval. I don't like first time renters so we put them on weekly rent. Helps them stay on track and learn how to pay their rent on a timely basis.

10. Do some LL math: add a 13th month x number of props = additional income without spending money on physical upgrades. Consider it a MANAGEMENT upgrade.

14 homes x an extra $800 rent = $11,200 MORE per year in your pocket with happier residents!

BRAD

Okay Brad20K,..you have made a good case for weekly or bi-monthly rent. And yes, it appears you are the real Brad20K and not an imposter.

Roy, Roy, Roy... My good friend!

AUTODRAFT!!!

You don't have to remember anything.

Rents come out every Friday AUTOMATICALLY whether you are at home or sunning on the beach in Jamica mahn. Some each Friday, some every other Friday.

AND on the First & 15th for those twice a monthers.

Wifey likes to write the addresses on a big calendar for who gets drafted on that Friday.

16 homes x $800 extra rent = $12,800 extra income per year. Hire a teenager to log them in.

Roy, I'm not making the extra money that Brad is because my tenants have all been smart enough to turn down an 8.3% increase in rent. And 99.9% pay on time every time anyway.

Brad20K,

I've never had any of our SFH tenants take me up on the biweekly offer. For our rooming houses, though, it's pretty close to 100% for those receiving paychecks. At move-in, they chose the option that matches their paycheck. Many tell me that they want to move to monthly "probably next month" to get the discount. Has it EVER happened? No, because it means saving up an extra $210. It fits their lifestyle and mentality.

Robin,

There are many LL's that have their low paid spouse handle all of their bookkeeping needs especially when they have a huge stable of rental properties,...hence my post 'how many can you manage?' Since I have to do my own bookkeeping (I am not whining) and I literally do not have TIME to be chasing after deadbeat rents all 30 days of the month. This is the reason I expect all of my rents to be paid in full by the 6th day of every month. If any tenant can't do that, then changes need to be made like posting a P/Q notice.