Paying Your Mortgage on Your Rental Property.
Updated: Dec 11, 2018
One of the questions I'm most frequently asked when taking a new property into management is: when will I receive my rent? I know the follow up sentence to that is usually, "because our mortgage payment is due no later than the 15th, and we want to make sure we can make that." This is a HUGE red flag for me as a manager.
As a home owner with a mortgage, you alone (well, you and your co-borrower, if applicable) are responsible for your mortgage payment. I cannot tell you how many people I run into, that believe they can allow a tenant to pay their mortgage for them, without thinking about it in depth.
Here is some food for thought: how long did it take you to get qualified for your mortgage (I'm talking the point where the bank actually funded the loan in your name)? How long does your manager take to look into your tenant's background? About a day; maybe a few days depending on the system or receipt of references. The rent the tenant is paying is likely higher than your mortgage payment plus your manager's fee. So your tenant is getting qualified in less time, with fewer resources, to pay more for your home, than you did to get the mortgage. Do you REALLY think you should rely on them to pay your mortgage for you?!
You never know what will happen in your life, or in theirs, either. They could have really great credit, excellent rental history, and then lose their job in a month. Or a close relative falls ill and they need to return home to care for that person. Or heck, they pass away (though there are other factors which could still help you in the event the latter happens, but we'll discuss that another day). So many things can happen over the course of their tenancy, which can cause them either to pay their rent late, or to forgo paying it all together.
The recommendation is to keep at least six months' worth of mortgage payments in a savings account. Pay your mortgage from that account, and then let the tenants' rent reimburse you. That said, it's way easier said than done for most. With my Firm being located in a military town, that's darn near impossible to achieve even one extra payment. That's why it's a recommendation, not a requirement.
I know in business you can't let emotions affect you. But most of us are humans, and we have emotions, and sometimes we just can't be helped. So, be kind to your property manager. Certainly they would shake down your tenant for your money if it were legal, but they can't make the tenant pay. Your financial obligations are not your manager's responsibility, yet they will do whatever is legally in their power to help you, nevertheless. So, if your tenant has not paid yet, find another way to make that payment, and trust your manager is doing a legal shakedown in the meantime.