Rental Payment Incentive

Rental Payment Incentive

You might call it positive reinforcement versus negative reinforcement.

In a typical lease, the tenant may be required to pay the rent by the first of the month. If they are more than five days late, then a penalty may be added. For example, the rent is $1,000 per month due by the first of every month in advance. If they are late, then they pay a 5% penalty or a total of $1,050.

Although one would think that a renter would want to avoid the penalty and hence pay their rent on time, it is all too frequent that the renter will get into a rut and consistently pay their rent late.

Unfortunately, many landlords are not professional rental managers or are willing to either accept the continual late payments or to not even add the penalty to the rent. If they otherwise have a good tenant, then they are satisfied with the late payments.

Let's take almost the exact same situation, but reverse the wording so that it appears to have a positive outcome for the tenant.

Instead of a penalty of 5%, give a 5% reduction for rent paid on time. For example, the rent is $1,050 due by the first of the month in advance, but if it is paid five days early, then it is reduced to $1,000.

It is primarily a psychological difference, but it may be just the incentive that a tenant needs. If it does not provide the incentive, the landlord is still no worse off.