Any ideas on how to get tenants to stop paying with cash if the manager is collecting it and taking it to the bank every month?
The only way to get tenants to stop paying with cash is to stop accepting it. If the manager refuses to stop accepting it, then fire the manager.
We only have one park (63 pads) and we are still struggling with the same thing. we get a pretty substantial amount of cash at the beginning of the month. Lately we have told all new tenants that they have to pay by check or money order and send them into the property manager but a lot of our older tenants still drop the cash off at the park managers office. Are there any real big benefits to stopping the cash? i know by taking all checks or money orders it sure makes the financials look better, but other than that are there any real benefits for a small operator such as myself to stop accepting cash?
Frank has the simple answer. If you don’t want cash stop accepting cash. Provide a alternative by telling them you will only accept check or money order.
The problem is usually caused by the fact that the tenants do not have checking accounts or in many cases no bank accounts at all as they are likely hiding from creditors. Keep in mind you are operating a business and not make their problem your problem.
The downside to accepting cash are basically two big issues: 1) it makes it very easy for the manager to embezzle and 2) it makes the manager and/or office a potential target for robbery. Even the criminal with the worst math skills can figure out that a park with 100 lots and $200 per month rent has $20,000 in the office at the start of the month (theoretically) and that poses a huge danger. In my first park, Glenhaven, I was in the office when three men came in and ransacked the place while I sat there, wondering if I was going to get shot. It’s not a smart idea to put your manager in that type of dangerous situation, as well as the fact that you would have no insurance on any stolen rent. The bottom line is that there is no rationale reason to accept rent in cash,and a hundred reasons not to. That’s why virtually every large operator in the U.S. does not accept cash.
If tenants complain, remind them that checks and money orders are for their own protection, as it gives them a way to prove they paid the rent. If they give the manager cash and it’s lost, stolen or embezzled – what proof do they have that they paid it (even a cash receipt from the manager might not be taken as 100% proof by a court,as it might have been tampered with, but a check and money order are 100% proof)? Cash is just a bad system for everybody involved.
thanks Frank. i guess i had never thought of the exposure to our manager. thats why i like this forum, theres all kinds of good ideas
We had that very thing happen (manager kept the cash) and lost $4000 over a period of about 2 years. It took many months to try to straighten out each person’s account since some of them did come in with cash receipts to prove that they paid. Another negative impact is that when this does happen, word gets around and of course it is bad publicity for your park. There is almost always a Walmart close by and almost all of these folks go to Walmart so we always tell them they can get a money order at Walmart for less than $1.00. No excuses.
Bret
All good points. Thank you all. My plan is to have the manager return the cash by sliding it into their mailbox and including a form letter that I write stating that it will no longer be accepted for a myriad of reasons that you all mentioned. I’m guessing this will be a frustrating uphill battle, especially if we enforce late fees stemming from cash payment of rent. I’ll just have dust off the Mr. Nasty battle helmet!
Adding to the reasons to not accept cash for rent: verifiability of rent collection when we sell to another investor. I know I would feel more comfortable buying an income stream with copies of checks and money orders to verify how much income the park is really generating.
Nate,
To keep my manager out of the rent collection part of the business, I send an invoice each month and the top part is a deposit slip that they can mail with a check or money order or they can take the deposit slip to the bank and pay in cash. It’s an extra expense and more time to send an invoice each month, but I find it helps with people that are past due to see how much they are past due or if they owe late fees. I can track who pays by looking on line. QuickBooks allows you to customize the invoice and I print it on pre-printed deposit slips.
Return the cash. Make sure the resident knows the rent is not paid until they pay by check or money order. Make sure the resident knows late fees will result if they do not pay your way and on time. Enforce the late fee. File an eviction or two if needed. They’ll get the message and word will spread in the park and you’ll very quickly start getting paid the way you want.
-jl-
Guys,
one of our communities is a No-Star park - and I mean no. 
Not one has an education over 2nd or 3rd grade - all field worker-types, not one speaks a word of English - and we trained them, no problem.
We started with 12 SASE envelopes - it that really helped.
On the 13th month one home’s rent didn’t come in - then we got the call - Problemas, venga. We went and there it was - he put HIS address in the sender section and OUR address in the Return section. We all laughed and he feexed it.
It is really no biggie. The SASEs worked like a charm.