ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Financial and Rental Income Policies for Landlords

Updated on January 22, 2014
There is always monthly financial paperwork to be done by a rental income homeowner.
There is always monthly financial paperwork to be done by a rental income homeowner. | Source

Recommended Reading for Landlords

What You Should Know If You Own Property

The first time you rent space, an apartment or room in your property or house in exchange for money (rent), you have conducted a business transaction. You have invested a substantial amount of money purchasing your real estate investment. You need business policies and operational procedures to protect and maintain your investment to its highest and best use.

There will always be situations beyond your control that will have a financial impact on you and your real estate. If you are loaded with credit card debt, get a divorce, or you get laid off from work, chances are, you will not be able to pay your mortgage. If you do not have at least three months of rent in a savings account for your property, and the tenant fails to pay the rent, the mortgage will still have to be paid. The bank does not allow missed mortgage payments because your tenant does not pay the rent.

So, your first business policies should begin with you. What financial precautions do you need to have in place in the event you lose your job, become disabled, or have a tenant problem? You need to develop policies that will ensure your property is financially protected. Here are some good business practices to follow.

§ Do Not Put Your Rental Income in the Same Bank Account as Your Personal Income. Open a checking and savings bank account for the property you own, even if you live in it. Put the rent and your share of the mortgage in that account, and pay the mortgage with it. Call the property bank account something like “Household Operating Account”. If your property is a trust, open up the account in the trust’s name. Do not co-mingle funds. That is, do not put your paycheck into this account.

Anything the property needs to buy should come out of the operating account. This account will tell you whether or not you are able to pay the property’s bills with the tenant income. If you pay toward the mortgage, cut a check from your personal bank account and deposit it into the operating account. When income tax time arrives, you have all the information you need about the property in one place.

§ Put All Excess Rental Income in the Property’s Saving Account. Until you know you have enough money to get through a year, save all the monthly profits. As stated before, you need at least three months of mortgage payments in a savings account. If you use your rent profits on yourself, what will you do if or when the tenant doesn’t pay the rent?

You need money to fall back on if you are unemployed or disabled for six weeks. At some point you may need to buy an appliance, replace a hot water heater, or pay for snow removal during a particularly hard winter. You may want to buy another piece of property in the future. You may need to pay your insurance deductible if your building is flooded, pipes break, etc. Emergencies should be paid from the property profits, not your paycheck. Set aside excess rental income for replacements, emergencies, or personal loss of income.

§ Maintain an Interest Bearing Savings Account with at least three rent payments in it or three full mortgage payments, depending on how much extra cash you have each month. This cannot be stressed enough. If the tenant fails to pay the rent for a month or so, or you have to evict the tenant for non-payment of rent, having property savings will help you not having to go into your pocket to pay the mortgage.

§ Never Spend the Tenant’s Security Deposit. It is to be put in a savings account of its own until the tenant moves out. In some states like Massachusetts, you have to put both the security deposit and the last month’s rent in an interest bearing savings account. You must also tell them the name of the bank where the deposit and last month’s rent is held.

§ Use a Tenant Screening and Selection Process to choose the kind of tenant that you want to live in your building. Who you move into your real building could impact the way your tenant-landlord relationship will evolve. Take the time, attention, and money, complete due diligence in renting out your vacant apartment. Use the same screening process for each and every rental applicant. Prevention is always cheaper than legal eviction action. There is a book that provides detailed information and practical methods of tenant screening titled, “How to Pick the Best Tenant”, available in bookstores and online bookstores.

§ Prevention is Always Cheaper Than Taking Legal Action. A divorce, the unexpected loss of employment, crippling drug use, or disabling injuries are only some of the reasons why you may have to evict a tenant for non-payment of rent. A tenant dealing drugs from the apartment, frequent loud parties, and vandalism of your building or appliances are other reasons you may have to evict.

One way to avoid eviction is to address the problem early. Don’t wait until your property is destroyed, your good tenants leave, or you are on the brink of bankruptcy to take eviction action. Your policy should be to deal with a potential tenant problem before it gets larger. That means rent is due on the first and late on the second. Do not wait until month two to see if the rent will be paid.

§ Once You Begin the Legal Process, Continue it Until the Problem is Resolved. Some tenants will try to prolong the eviction process by promising their income tax refund toward the rent arrears. Or, they will give you a written payment plan to pay the arrears and the current rent each month.

Neither of these, or any other stalling tactic, should cause you to stop the eviction process once you initiate it. You have already spent money on constable fees, court fees, and perhaps even attorney fees. Let your tenants know that if they get behind in the rent, you will not stop until the rent is paid in full. Go ahead to court, and let them make their rent payment plans in front of the judge. They will think twice before they violate a court payment agreement.

§ Never Accept Verbal Payment Plans. If the tenant promises to pay you when she receives her income tax refund, do not believe it until she or he puts that promise in writing. If you insist on doing a rent payment plan without going to court, get it in writing and notarized. Then when he or she breaks the agreement, you have something to show the housing court judge.

§ Have a Rent Collection Policy that you will follow and the tenant can expect you to carry out faithfully. An apartment where the tenant is not paying rent is the same as having a vacant apartment. You are not collecting the income you need to run the property and pay the bills. Moreover, the longer you allow your tenant to not to pay the rent, the harder it will be for them to catch up. You are not doing your tenant a favor by allowing him or her to get behind in the rent.

This list is not all you need to know. If you own rental property, you are obligated to get all the information you need to be in the real estate business. If you have an attorney, go over the rules and ordinances of renting to tenants. If you own rental property and don’t have an attorney, get one soon. You never know when you will need one


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)