First Rental Property

Hi Everyone,

I hope that you are all doing well.  First off, I would like to say, thank you to all of you who have recently submitted guest blog requests over the past several weeks.  There have been so many requests recently that I have a back log of guest posts to publish.  I will be publishing these posts in the coming weeks.

Also, because there has been such a demand for guest bloggers, I will not be accepting any more requests until later on in the year. Thank you SO much for your interest!  Once I am ready to accept guest blogs again later in the year, I will make the announcement through a future blog post!

Now on to business….

Today’s date is August 4th 2012.

If you own a rental property, and if your rent was not paid on time, you need to take action if you have not done so already.  You need to  prepare the necessary paperwork required in order to notify your tenant of their ‘non payment of rent‘.

In Ontario, Canada where I am, the paper work that you prepare in the event of non payment of rent is called the N4.  I have no idea why the call it an N4 here.  It is such a weird name.  So weird, the form name was once mistaken for a type of gun!  🙂

You should know that novice real estate investors fall into the following trap…

Often times when the rent has not been paid by their tenant, they are given an explanation by their tenant as to why the rent was not paid on time.

In many cases, the novice real estate investor then delays in submitting the necessary paperwork notifying the Landlord and Tenant Governing body in their area of the non payment of rent.

This is a very common mistake that novice real estate investors make.

You must never delay in submitting this paperwork!

…But

There is always a BUT…

New real estate investors will make this mistake time and time again.  I see it all the time.

I do not blame the ‘newbies’ because I have also made this mistake myself.  I have delayed and delayed and delayed submitting paperwork because I was repeatedly told by a tenant that the rent is going to be paid.

Well, my real estate investing friends, I want you to know that you cannot delay in submitting this paperwork.  If you do, the process will eat you alive.  In many jurisdictions, legislation is in favour of the tenant.  As such, as a landlord, if you delay in submitting paperwork, you are doing a disservice to yourself.

No matter what, if a tenant is late in paying their rent, you have to file the initial paper work notifying the tenant of their ‘non payment of rent’

Don’t FREAK out!

New real estate investors always freak out when a tenant does not pay rent.  They also freak out about the paperwork and about WHEN they are supposed to submit the paper work.

When is the right time to submit the paperwork?

Not knowing the answer to this questions literally kills a lot of novice investors.  They have no idea when they are actually supposed to submit their paper work to their tenant and to the governing body.

The RIGHT answer!

The right answer is that you should submit your paper work notifying the tenant and the governing body of the non payment of rent as soon as you are allowed.  That means, that you always submit the paperwork on….

The 2nd of the Month

What Most people do…

What most people do, and when I say ‘people’, I am referring to experienced real estate investors.  What they do in reality is NOT submit their paperwork on the 2nd of the month.  This is a generalization as I am sure that some actually submit their paperwork on the 2nd.  However, most people don’t submit on the 2nd.

Why don’t people submit on the 2nd

People don’t submit on the 2nd of the month for a number of reasons.

-some people are lazy

-some people don’t know the rules surrounding how to deal with non payment of rent

-some people like to give their tenants some extra time to pay the rent

Which day do you become a real estate wimp?

You become a real estate wimp if you do not submit your paperwork by the 5th of the month.  This is already too late, however, in my books, it is the absolute LAST day to submit the paper work to your tenant.  There is absolutely NO reason why you should be delaying any further past the 5th of the month.  If you do, you are asking for trouble.  If you tenant has decided not to pay you rent again, or is unable to pay you rent, you need to begin the eviction process.  Waiting, staling, hoping is going to do you no good.  You have to take action and submit your paperwork on this day, or BEFORE!

How do I know this?

Believe it or not, but I once waited over 4 months before submitting paperwork to notify the tenant and the governing body of their non payment of rent.  This was a huge error of judgement on my end.  A huge error of judgement that almost cost me a little over $5000 in unpaid rent.  Fortunately, I was able to recover the rent at a later date.  However, I came VERY close to losing out on $5000 in rent just because I was not following the process.  I almost lost $5000 in rent because I was a real estate investing wimp!

What I learned

I learned to never again be a real estate investing wimp.  I learned that NO MATTER WHAT, if rent is not paid on the 1st of the month, the ‘notice of non payment’ must go out by the very latest by the 5th of the month.  (The 5th of the month is my personal preference, currently.)

Bottom Line

You got into this business or are looking to get into the businsss of real estate investing because you are not a WIMP!  You are willing to take risks that other people are not willing to take.  Real Estate investing in full of risks and rewards.  You must learn very early on to manage the risk that you are exposed to.  The only way to manage the risk of a tenant not paying, or not paying on time, is to file the necessary paperwork with your governing body as soon as the rent is not paid.

Don’t be a wimp.  If you are a wimp, you may very well lose lots of money in  rent and be wiped out of this businesses due to your inaction.

Best Regards,

Neil Uttamsingh

ps: All real estate investors need support, whether you are new or experienced.  To learn step by step guidelines on how to deal with non paying tenants, read my post on how the Real Estate Investment Network can help you!

Any real estate investor with experience in managing tenants knows that non-payment of rent is an issue that has to be dealt with from time to time.

If you are thinking about buying your first rental property, good for you!

Owning a rental property is a lot of hard work, and the experience may not be as glamorous as what you see on TV. However, if you have the discipline and stamina to deal with the issues that come up, you will be well on your way to success.

As a new real estate investor first starting out, you should know that at one point in time, you will encounter problems with collecting rent.

Non payment of rent can come in different forms.  Here are some of the different ways…

1) The rent is due on the 1st of the month, and your tenant is late in providing you the rent. (cash, cheque, or electronic transfer)

2) You deposit a rent cheque on the first of the month and the rent cheque bounces (is returned by the financial institution due to non sufficient funds)

3) Your tenant does not have the money to pay rent, and does not provide you with the rent money for that particular month. 

There are so many factors as to why tenants sometimes don’t pay their rent on time.  Some are real, legitimate reasons, where as other times, the reasons are not sound and in fact are very flaky.

As a new real estate investor you must know that you have to…

“Prepare For The Worst”

Meaning…

Be ready for the first time that you do not receive your rent on time from one of your tenants.  It will happen to you at some point.  The only question is when.

We all learn our lessons from different life experiences.  Some of us learn faster than others.  Whether you learn slow or fast doesn’t matter.  What matters is that  you learn, and evolve and make changes in your real estate business so that you are prepared for the next time when one of your tenants does not pay rent on time.

How to prepare for late rent payments

Get familiar with your local Landlord and Tenant Governing body.  In each City, State, Province and Country the legislation regarding how Landlords and Tenants can interact with one another differs.

Get familiar with the forms you need to serve to your tenant when non payment of rent occurs.

The point that I am trying to make is that you need to become familiar with these forms before a non payment of rent issue ever happens to you.

You need to be armed with knowledge for when you do encounter a situation in which one of your tenants is not paying their rent. You need to be comfortable with the forms, you need to be able to understand them, and be able to navigate them easily.  You need to know how to fill them out properly.  You also need to know the rules surrounding when you are allowed to submit the forms to the tenant if they are late with their rent.  You need to know how many copies you need to retain and how many copies you need to present to your Landlord and Tenant Governing body.

Practices that I have Incorporated

It has taken me over 6 years as a real estate investor to learn one very important rule. This rule is to always have printed out and on hand the necessary forms and paperwork that needs to be served to a tenant in the event that they do not pay rent on time.

I have these forms printed out and I keep them in my ‘real estate’ binder, so that I can quickly access them.

I have learned with experience that I have to do this because I have been involved in multiple situations in which rent was not paid on time.

When I look back, the longer that I waited to collect the rent that was owed, the more problems occurred as a result.

As such, I have learned from my own experience to be proactive and to be prepared.  That is why I now carry these forms with me.

I have learned to prepare for the worst.

In preparing for the worst, I am becoming a better real estate investor.

How have your experiences been with collecting late rent payments? If you do not own a rental property yet, what scares you the most about non payment of rent?  Leave your comments below.

Best Regards,

Neil Uttamsingh.