19 Sep 2011
Because we work in the real estate industry, it’s much easier for us to understand the implications of things like late rental payments on landlords. If you’re a tenant, this might be a good read for you so that you understand what happens when you’re late paying your rent.
Property investors provide a means of housing for people who prefer to rent or can’t afford to buy, but that doesn’t mean they’re loaded with cash. For many mum and dad investors, they’re just as careful with their budgets as anyone else. So when rent isn’t paid on time, it can throw a number of things out of whack, and if it goes on for long there can be some troubling flow on effects not only for the investor but for their tenants as well.
The cycle starts like this…
1) Late rental payments means the investor doesn’t get the money that they’ve budgeted to receive for that property.
2) This could throw things like their mortgage payments on the investment property out and leave them out of pocket.
3) If this happens consistently, the investor will want to find a new tenant (which would mean the current tenant has to move and will probably have trouble securing another property because they haven’t paid their rent on time).
4) If things become too financially difficult they may have to sell the investment property, which is not only a major inconvenience for tenants, but the property could be sold to anyone… it may not be another investor.
5) Less rental properties on the market means higher demand for the ones that are available. Higher demand means higher prices. Tenants end up having to pay more than they did in the first place, making it even harder to meet their rental payment commitments.
The lesson here is that tenants need to ensure that they’re budgeting for their rent and not living beyond their means. There are a number of ways that late rental payments affect the landlord, but it’s important to consider the implications for tenants in the future.