So I’m reading this guru book, which is actually full of really good ideas and pointers for beginer landlords. I come to a section about collecting rent and one of the items discussed is insufficient funds. The author claims that before he tries to deposit a check, he’ll ask the bank if there are enough funds in the account to cover the check. If the answer is no, he calls back and claims a smaller ammount written on the check, and again asks if there are sufficient funds to cover the check. Eventually he’ll get to a point where there are sufficient funds.
So to use his example.
$500 rent check
After a few phone calls he finds out that there is:
$450 in the account
The author claims that he would at this point fill out a manual deposit slip and deposit $50 into the renters account. Then quickly cash the check. The outcome is $450 is better than $0.
I don’t think I’d do this personally, but out of curiosity, do you guys think this is legal?
This makes no sense, the landlord deposits $50 of his own money into the account of his tennant so that he can deposit the $500 rent check without it bouncing? That’s equivilant to making a $50 interest free loan to your renter. Not to mention how does the landlord access the tennant’s account. Am I missing something?
This method may be legal. After all there’s nothing wrong with depositing money into an account.
I’ve heard of people using this method to get a debt paid, but I don’t think it’s good for rentals. I suspect the author is talking about a check that is returned for insufficient funds. The first thing I’d do is call up the tenant and tell them what happened. Usually they know what’s going on with their checking account or will make good on it. I’ve had a few bounce before where the tenants lost track of how many checks they wrote, but they did have the money to make up for it. In those cases, my bank only charged $5 for a bounced check and as it was the first time, I just charged them the $5 and that was that.
Anyway the way this works is that the account number is on the check. You can just walk into a bank and fill out the account number and do the $50 deposit. Now the account has $500 instead of $450. You then cash the $500 check whereas you couldn’t cash a $500 check before because there was only $450 in the account. Now you have your original $50 back, but you’re still missing $50 from the tenant. I believe it’s a method of last resort where you don’t think you’ll ever get any more money from the guy.
sometimes the bank will clear the check if you depsoite it in your own account, but your way i think is broder line , think about if this, if you went to court what do you think the judge will do. the first thing is way are you dep money in his account, then you are cash a check for whole account i would not try this , why not just ask the tenant for a new check
Unless the tenant has already moved out, doing this little scheme is nothing short of foolish. The reason is that once you’ve accepted partial rent, you can NOT evict them. Therefore, you’ve in essence paid $50 of the tenant’s rent for them. What are you going to do next month - pay $100?
I know people who have done it and I would guess that it is perfectly legal. There is nothing illegal about giving someone $50, is there. However, they would only do this with a deposit check or something like that - something where the person is not living in your property.
I had someone write me a bad $700 deposit check once. I actually thought about doing this very thing, since they weren’t living in my unit. Then, I decided that I wasn’t going to take a partial payment for a bad check and I went to the police to file felony bad check charges. He was a department manager at Lowes and I also started calling him at work. I informed him that we were pressing felony charges and that he was looking at prison time (according to the detective). He saw the light and paid in full. If he didn’t pay, I’d have been just as happy to see him go to prison. The choice was his.
I have heard of this before. It is called rinsing the account. I would not do that. This is a tactic like closing the gate after the horse has gotten out. What I do is qualify my tenant before I ever lease to them. I do a background check on them to try to determine what type of person he is before I lease to him. There are different types of people. A person never changes from one type of person to another type of person. The type of person that bounces checks…bounces checks. When you lease to them and they bounce a check it should be no surprise to you. He is not going to change and become a person that does not bounce checks just because he moved into your property. I won’t rent to a check bouncer or if I do, I will take a large enough deposit that I can pinch on it to satisfy the check bounces that I expect over the 12 months that the is renting from me.
A person never changes from one type of person to another type of person.
How I wish that were true, but it isn’t. I can’t tell you how many tenants that had excellent screening checks but went bad while they were our tenants. The latest was a single young mother with a baby. She had no criminal record when we accepted her and was on Section 8, but fell in with a bad crowd and started doing heroin while in our apartment. Now she lives in the street (I evicted her). There is absolutely no screening that we could have done to predict that this tenant would do this. I could cite incident after incident, but it happens all the time.
You are right. I should have said it differently. They don’t get any better. They can get worse. But a person that never pays his bills never starts to pay them just because he is in your property. You are right…the good can go bad.
I don’t think legality has been established in this thread. On the surface it seems harmless since you are putting money into the tennants account rather than taking it out but there may be some obscure federal banking regulation that might prohibit unauthorized use of another’s account. Worse, as a landlord should you ever go to court with this tennant the fact that you accessed their bank account and comingled funds would likely raise eyebrows and diminish your cause.