Conundrum: PM collects fortnightly but pays landlord monthly.

Hi PCers,

This is probably a stupid question but...

I've been calculating my budget based on incoming rent of $340/wk, which times by 52 weeks in a year equals $17,680.

My PM collects rent fortnightly and pays me monthly, which equals $1360/month ($680 X 2) - minus expenses of course. That seemed fine until I realised that $1360 X 12 = $16,320/year. So that's $1,360/yr less than I'd anticipated!

Obviously this is the old western calendar paradox, which is fine. But I've discovered that it's standard practice for PM's to pay rent to landlords on a monthly basis, so I'm not going to insist on fortnightly payments. But how do they normally account for this disparity? (if at all!) Can I expect a little bit extra a couple of times a year when months fall in odd places? Do I need to remind them of this? Or is this why a smart property investor budgets on a monthly basis instead of weekly/fortnightly?

Forgive my ignorance, and thanks in anticipation
G

 

Something in your maths is wrong because half a week of "missing rent" does not equal 1360 per year. Call your property manager.
1360 per year sounds like just the property management fee being deducted....

 

Are there 2 months were they pay catchup rent (along the lines of paying 5 weeks of rent instead of 4)?
Other than that, I'd request to be paid fortnightly. I get rent coming in fortnightly, and that's much better than monthly.

 

Been there... Some months you will get 5 weeks rent which makes up the difference through the year... It all depends on the billing cycle and how many "Monday's" or "Tuesday's" are in that particular period and what the least start day was..

 

A couple of months have 5 weeks so you'll earn more on those.

Alternatively ask the PM to disburse bi monthly.

 

If it helps and is critical, run a dedicated account for your loan repayments to be drawn from. Ensure the account is always topped up each month with sufficient funds ( from salary and rental income ). Run a minimum balance alert on the account. You can set it up for top ups to be automatic.

Having multiple accounts helps with being organised and to keep your living expenses separated from your property expenses.

Many banks also now allow multiple offset accounts to be linked to a loan.

 

Wombat, I think the OP was asking about rent payments to him/her from the agency. Not about loan repayments to the bank!

 

Make it fortnightly instead of even bi-monthly - it will solve the problem.

 

Yes - but if they are that concerned about budgeting, they should be organised.

 

My monthly dispersements have always been based on how much the tenant has paid that month. Its not a fixed amount.

Maybe do a budget based on fortnightly payments - its easy to work out which months have 3 payments rather than 2.

 

Some tenants pay 6 months in advance so you might receive one large lump sum and then nothing for several months, others may be on time or pay a few weeks in advance. PMs will distribute the funds monthly as they arrive.
If you are concerned just keep a close eye on the paid to date on monthly statements or via the online portal if your PM uses one.

 

As @DT said, ask for fortnightly payments. This is 2016. They take em, they can disburse em.
With one agency I'm paid weekly.
With another, it's fortnightly.
Also, there is some way thay work it out to take the extra fortnight into account but make sure you stay on top of it. Not all PMs are budding Einsteins. I would ask them to explain it to you at the very least.

 

To start with the above calculation is incorrect, it should be,

$340 ÷ 7 x 365= $17,728.57 PA ÷ 12 = $1477.38 per month.

 

Bi-monthly = 24 payments per year. Fortnightly = 26 payments per year (and it aligns with how the tenants pay). I'd take fortnightly.

 

If it helps with budgeting, fine.
But you will receive the same total amount.
Marg.

 

As long as it really is the same amount. Peace of mind.

 

Of course it is.

Being paid bi-monthly means every 15-16 days on average.

Most payments will be for two weeks, but on the occasions that the tenant pays weekly on the 1st, 8th and 15th day you will receive 3 weeks rent.

Or of paying fortnightly, there will those occasions when the rent is received on the 1st and15th day, meaning you will receive 4 weeks rent in that bi-monthly payment.
Marg

 

Thanks all. Very helpful. I'll be a) adjusting how I calculate yearly/monthly rent, and b) having a chat to my PM to get this nailed down.

cheers,
G

 

Common sense really

 

Each time the PM transfers you the money, his/her bank that the trust account is ran from will charge him 20c - $2.20. Getting that amount of money into your account early won't save/gain you much interest. While it will cost the PM some sizeable amount in banking fees and their time to process the midmonth payments.-

• Costs you may not accounted for are periods of time when the property is vacant.
• Commission of the agent (commission rate) + gst (10%).
• Letting fee (first week of rent to the agent for signing up tenants.)
• Lease renew 50% of one week's rent to PM for renewing a lease.
• Any expenses + gst (10%)
• Payments.
• Monthly Admin fee.

Just a general rule with maths... when converting from weeks to months you can't simply times 4 that's just rough...

week / 7 * 365 / 12 = month...

you will find there isn't exactly 52 months in a year... if you enter 52 * 7 in your calc you will find it doesn't equal to 365...