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.