Increasing rental income doesn’t have to be one-sided — some options benefit both the landlord and tenant. Sure, there’s no free lunch, but you can probably swap that one-piece chicken for a burger. I’m talking about the biweekly rent payment option for your tenants as a way to increase the rental income of your apartment.
Biweekly rent payment options increase your annual rental income because there are 26 payment weeks in a year. Receiving monthly rent payments, in effect, gives you only 24 payment weeks. Biweekly rent can earn you an additional 8.33% a year.
Although tenants pay more over one year, it is a desirable option if they receive biweekly salaries. And that’s true for most employees. To be clear, biweekly in this context refers to “every other week” or “every two weeks,” or fortnightly, and not “twice a week.”
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The math behind biweekly rent payments
Breaking down this pay schedule is straightforward. There are 52 weeks in a year, so collecting rent biweekly (i.e., every other week) means you receive rent 26 times a year.
Suppose your rental income is 1,000 per month. With 12 months in a year, under the normal monthly payment schedule, your total annual rent is 12,000:
1,000 per month x 12 months = 12,000 per yearBut suppose, instead, you collect 500 per payday (i.e., the 1,000 monthly rent split into two paydays). In that case, the total amount you collect in a year is 13,000:
500 per payment week x 26 payment weeks = 13,000 per yearTenants paying rent twice a month can result in 8.33% additional income for apartments.
So is paying rent weekly (biweekly) better than monthly? It depends on who you ask.
Why tenants may choose to pay biweekly
A big reason why tenants opt for a biweekly payment scheme is cash flow timing. The unfortunate reality is many people struggle with budgeting, and paying rent that coincides with their salary makes it easier to manage.
Of course, the best option would be financial education and being disciplined with money — having a monthly budget at the outset. But tenant evictions are a real threat, and I’d rather offer an option that makes it easy for them to keep their homes.
Why landlords would want to collect biweekly
While flexible payment terms can lead to abusive tenants (See 13 useful ways to avoid bad tenants), increasing annual rental income can be appealing.
An 8.33% increase in rental payment is huge. At a cap rate of 8%, your 1,000 per year increase translates to 12,500 in added value. That’s money straight to your net worth. Multiplied over several units, and the added value can be significant.
Also, offering the unit at a lower price may mean attracting more tenants and, consequently, a lower vacancy rate. Instead of offering a unit at 1,000 per month, you could charge 923.07 per month and get the same annual rental income.
923.07 per month / 2 biweekly paycheck = 461.54 every other week
461.54 x 26 payment weeks = 12,000.04Challenges of collecting fortnightly rental payments
But like many things, the increase in income comes with a price — the more significant risks are necessary for potentially greater returns.
(Related: The Risk and Return Trade-off Applied in Real Life)
Fortnightly rental collection means more property management work, particularly in tracking rental payments, late payments, and the corresponding late fee.
Besides, property management best practices show how it’s easier to collect everyone’s rent at the start of the month. In fact, we prorate our tenants’ advances, so their rents are also due on the first day of the month. Collecting biweekly rent will necessitate a rental property tracker that sets visual cues when rents are due.
(Shameless plug: You can buy my Google Sheets or Excel rental property tracker here. Or send me a message for your custom-made tracker.)
An optional payment scheme
I am all for being strict but fair landlords, and I don’t think making biweekly rent payments mandatory is necessary. The payment option should remain precisely that — an option.
And for the right tenants, it is an option you will want to consider. Tenants win because they can make rental payments, and the landlord wins with the added compensation. It’s a win-win.
