Successful landlords are always looking for ways to increase their profit margin. Are you maximizing the income potential from your property? Are you charging late fees? We are going to look at this from two important angles: the amount of late fees and the frequency of late fees.

Are You Charging Enough Late Fees?

State laws regulate late fees that can be charged to a tenant. For example, North Carolina law states that the late fee cannot be more than 5% of the rent or $15 – whichever is greater.  This means that according to, the average one bedroom apartment in Raleigh (outside the city center) rents for $822 per month. A 5% late charge would amount to $41.10. If you are renting a two bedroom, according to Rent Jungle, the average rent is $1,438. A 5% late charge would amount to $71.90.

That is a serious amount of extra income. It blows the average late fee of $25 per incident right out of the water. So, landlords, are you charging a high enough late fee?

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Are You Charging Late Fees Enough?

Another issue that arises with late fees is that some landlords are hesitant to charge them – especially to habitually late tenants who always pay in the end. While we are not encouraging you to be callous or indifferent, there comes a time enough is enough.

North Carolina tenant/landlord law allows a 5 day grace period for rent. So, if the rent isn’t in by the 5th (assuming the rent is due on the 1st), then you can charge a late fee on the 6th. Let’s assume that each tenant is late with their rent once a year and you have 25 units in your apartment building paying $900 per month and your vacancy rate is 7%. A 5% late fee would be $45.  If you charged the late fee every time a tenant was late, you would earn an additional $1,035 annually (25 Units x .93 occupancy = 23 Rented Units which are late once per year x $45 = $1,035).

That is equal to more than one month’s rent. That would offset tenant turnover losses. Landlords, are you charging late fees enough?

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How to Collect Late Fees

Being the tough guy is not much fun. It is only one step above sending an eviction letter. So what can you do to lessen the impact of collecting late fees? Here are some ideas that have worked for other landlords:

Give a Grace Period for Rent. Make sure your tenant’s know there is a 5 day grace period before a late fee is assessed. If you really want to be the nice guy, send your tenants a reminder text on the 3rd.

Allow a One-Time Late Fee Waiver. Life happens and you understand that. Why not allow each tenant a “Get out of Jail Free” card for their first late payment. It is a nice gesture and makes charging the next late fee that much easier.

Give a Rent Discount rather than a Late Fee. Charging a late fee is the easy part, collecting it is not so easy. One way to get around that is to have an early payment discount. Say their rent is due on the 1st. The rent is $945. If the rent is paid on or before the 5th, they only have to pay $900. Everybody loves getting “money for free” and you never have to worry about collecting late fees and your tenants will be driven to pay on time.

So landlords, are you charging enough late fees? Are you charging late fees enough? Are you doing enough to enforce late fee collections? A little tweak here and a little collection there and you could see some extra income come your way.

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