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The Pros and Cons of Grace Periods

If you own an investment property that you use to rent out, you may have been asked about a grace period when it comes to paying rent. This can be an awkward situation if you are not already sure about your grace period policy. Some property owners do not offer a grace period whatsoever and consider rent to be late just one day after it is due. Others are willing to offer a grace period under the right circumstances.

There is much debate about what is fair when it comes to grace periods. While the ultimate decision of whether to allow for a grace period is up to the property owner, here are some pros and cons to consider before you make your final decision:

Grace Period Pros

Any pro for grace periods is almost always going to be in the advantage of the renter. Basically, a grace period allows the renter to pay their rent late without being penalized. This can help when situations arise where they don’t have the full rent amount in time for the first of the month.

One way to look at a grace period as a plus for the property owner is that it may be a perk that attracts renters. If a potential renter views a 2-day grace period as a benefit, it can help seal the deal and move the renting process along.

A grace period might also relieve some stress between the owner and renter. It can alleviate tension that might arise if rent isn’t paid on the 1st of the month.

Grace Period Cons

For the most part, grace periods are bad for the property owner and good for the renter and there isn’t much benefit to an owner for offering a grace period. It means that you could and probably will receive your rent money a day or two later than you should. Imagine if your boss was allowed a grace period when it came time to pay you your wages. Is waiting a day or two (sometimes even 3, 4, or 5 days) to receive your money convenient or fair?

If you choose to offer a grace period, you should expect that rent will most likely be paid on the last day of that grace period instead of the due date. This has less to do with the specific personality of your renter and more to do with the fact that, as human beings, we all tend to procrastinate.

If you are undecided on whether or not you should offer a grace period in your lease agreement, we invite you to give us a call so we can discuss it with you. We can offer insight that may make a big difference in how you proceed.

Call us today at 480-719-1243.

Tenant Screening Tips

Owning a property that you can rent out is only half the battle in creating an “investment property.” The other part of the equation is finding someone to pay the rent. Just like you are willing to put the time and effort into selecting just the right property for your investment, you should also be willing to do what’s necessary to find the right tenant.

Finding tenants that are both respectful of your property and able to pay rent on time each month is a challenge for many property owners. What many have found is that it’s not as easy to spot a good tenant as it might seem. This can be from inexperience in choosing tenants to not knowing the best way to screen applicants and weed out the bad ones.

Of course, one of the biggest advantages of using a property management firm like RPM East Valley is that they are able to put their years of experience to work for you in helping you find and select the most qualified tenants. If you choose to handle this process on your own, here are few screening tips to keep in mind:

Timeliness

As you first engage with potential renters, there will be tasks that need to be done by both you and the applicant. This includes completing applications, sending copies of bank statements, etc. Watch carefully how long it takes an applicant to complete these tasks. If you notice a cycle where they are unable to get information turned in on time or are constantly asking for more time, it could be a sign on how they handle other obligations in life – including paying rent.

Previous Addresses

When you have someone fill out an application to lease your rental property, you might think that the main information you are looking for is their credit history and a background check. While both of these things are important, be sure to tune into the other details on the application, such as where your applicants lived before. If they have bounced around from city to city or have moved significant distances each time the change residence, it could give you insight into their work ethic and job security.

How They Present Themselves

When your tenant shows up to take a look at your rental property, take a close look at their appearance and how they present themselves. A sloppy outfit can speak volumes about the person.

Some of these things may seem harsh and judgmental, but experience shows that you are better off steering clear of tenants that could potentially give you trouble down the road. You’ll save yourself time, money and stress.

Put the RPM East Valley team to work for you the next time you need to screen tenants for your property. Let us put our professional experience to work for you.  

Selling Your Property While During a Lease

One thing we know for sure is that there are so many different scenarios that can happen when it comes to owning and selling an investment property. While one owner may plan on keeping their property for a very long time with the intention of continuing to rent it out again and again, another may only be hanging onto their property long enough to make a profit.

We are often asked if it is legal and ethical to sell a property while it is occupied with tenants in the middle of a lease. A simple answer would be yes, as long as certain steps have been taken in advance. In many ways, actively selling your property while it is being rented is a great way to maximize your return on your investment.

Selling Takes Time

Of course, selling a home while it is occupied with renters wouldn’t really work if houses were bought and sold as quickly as automobiles. But the truth is, selling a home takes quite a bit of time. It’s not uncommon for months to go by between the time a property is listed and when it is finally sold. You can choose to let your property sit empty during that time, or rent it out to retain a steady cash flow.

Even when a potential buyer does show interest, there is often additional time needed for appraisals and the financing process. Be smart and make money during this process and at the end when the sale closes.

Communicate with Renters

It’s crucial that you are communicating well with your renters during this process. Let them know up front what you are trying to accomplish and keep them abreast of any new developments. The buyer may be looking for an investment property and will allow the renters to stay after the sale closes. As long as you are being upfront and honest with your renters, you are protecting both yourself and them from an awkward situation.

Offer incentives to your renters that are willing to be helpful when it comes to showings of the property. You might also consider offering an incentive should the new buyer want to move in to the home once it’s purchased.

Stay in Control

When selling a property, it can be easy to let panic settle in if calls aren’t pouring in or when showings are slow. Sellers can sometimes feel pressured to lower their asking price in order to attract more interest. When you have renters, you don’t experience the same panic and can feel more in control of the situation. Because you have money coming in each month, you don’t necessarily feel rushed to sell.

For help with managing tenants while you are selling your property, call RPM East Valley at (480) 981-7000