Should you be using Zelle, Venmo, or PayPal to collect rent or a landlord-specific system like Landlord Studio?
There are a number of different ways you can collect rent online, but they’re not all created equal. Before you commit to a payment platform, you need to know which ones have fees, the transfer limits, the control each platform gives you, and what each platform allows when paying and collecting rent.
In this article, we explore the pros and cons of using the Zelle, Venmo, or Paypal for collecting rent, and compare them against Landlord Studio, an industry-specific rent collection software.
Zelle functions as a payment platform that facilitates fee-free money transfers between bank accounts. While its primary purpose revolves around seamless money exchanges among friends, family, and trusted individuals, it can also be used for online rent collection.
There are a couple of key benefits to using Zelle for payments. Zelle offers fast payment processing times with transferred funds instantly accessible in your account, although it may take approximately one business day for the transaction to fully clear. Plus, sending and receiving money through Zelle incurs no additional charges. However, it's important to note that transfer limits are in place, usually around $1,000 per day and $5,000 per month, subject to your specific bank's policies.
Zelle is easy enough to set up. However, it’s ease of use as a rent collection tool is primarily determined by its availability. Zelle doesn’t partner with all banks or credit unions, and in such cases where it’s not supported the weekly sending limit is $500. On top of this, while landlords can request rent payments via Zelle, automatic and recurring payments can only be established if the tenant's bank supports this feature.
Although Zelle offers convenience, it’s not designed for rent collection and as such it's crucial to understand its limitations. Firstly, Zelle does not provide 1099-K forms or report transactions exceeding $600, which may cause issues when reporting rental income to the IRS. With the 1099 requirement changing the IRS will require landlordds to report rental income collected via payment apps exceeding a threshold of $600, compared to the historical $20,000 historically. While you can track your payments manually in a rental spreadsheet this process is unnecessarily time-consuming and prone to errors.
Additionally, Zelle lacks the functionality to set up automatic late fees or prevent partial payments from tenants facing eviction. This could lead to problems, as tenants can make full or partial payments at any time, potentially hindering the eviction process, even with minimal payments like $1 which could halt eviction proceedings altogether.
While Zelle might serve as a temporary solution for online rent collection, it may not be suitable long-term or for higher-value portfolios. In such cases, it's advisable to seek out a different platform specifically designed for rent collection to address these limitations more effectively.
Venmo is primarily recognized for its peer-to-peer payment capabilities, but it does offer the option for rent collection. However, it's essential to be aware that Venmo imposes fees for business transactions and, recently, for payments categorized as "goods and services" — both of which may apply to rent collection transactions.
Similar to Zelle, Venmo transactions reflect instantly in your account, but the actual processing of payments can take one to three days. Initially, there is a transfer limit of $299.99 on Venmo. However, once the user's identity is verified through additional steps, the weekly limit is substantially increased to $2,999.99 per week. It's important to note that users need to undergo the verification process to increase their weekly limit.
Venmo provides a relatively straightforward process for rent collection. Both landlords and tenants simply need the Venmo app to send and receive payments. Landlords can request rent payments from their tenants through the app. However, it's essential to be aware that rent payments are typically classified as business transactions, which incur a 3% fee.
Recently, Venmo has also started charging a fee of around 2% for transactions labeled as "goods and services," which can include rent payments. It's important to avoid disguising business transactions as personal ones, as Venmo has a policy of canceling accounts that engage in such practices.
Venmo offers a swift and user-friendly payment method, but its primary focus is on seamless transactions between acquaintances. It lacks features for setting up recurring, automatic payments, or late fees, and similar to Zelle, landlords cannot prevent or decline a payment made by a tenant.
It's crucial to be aware that Venmo does not provide any safeguards for landlords or tenants in the event of misdirected rent payments. If a tenant accidentally sends rent money to the wrong person, Venmo does not offer refunds or redirection to the landlord.
However, on the positive side, Venmo does issue a 1099-K form for individuals who receive more than $600 for sales of goods and services, which, in the case of landlords, would include rent payments.
PayPal facilitates rent payments and collections, but much like Venmo, it applies a fee of approximately 3% for each business transaction. To accept rent payments through PayPal, it is mandatory to use a business account, as all money received for goods and services, including rent, must be processed through this type of account.
After verifying the account, PayPal does not impose a maximum limit on the total amount of money that can be sent. According to PayPal's Help Center, a user can send up to $60,000 in a single transaction, although there may be some cases where the limit is set at $10,000.
It's important to note that when receiving payments through PayPal,(as with payments through Venmo), the money is deposited into your PayPal account and not directly into your linked bank account.
To use PayPal for rent collection both parties involved need to create a PayPal account. Users have the flexibility to make payments using various methods, including with a bank account, debit card, credit card, or funds from their PayPal account balance. The processing time for transactions usually ranges from 30 minutes up to one business day.
While PayPal is suitable for transferring significant amounts of money, it's crucial to be aware that the platform may flag or temporarily freeze accounts with suspicious or irregular activities. Therefore, if you receive multiple rent-related payments in a single transaction, exercise caution to avoid potential issues.
Compared to Venmo, PayPal offers more robust protections, and they often refund money in the event of a valid dispute. However, this refund process can sometimes take weeks to resolve.
Tenants have the option to dispute transactions through PayPal, and in such cases, the platform may lean towards supporting the payer (the tenant) during payment conflicts.
If your total PayPal earnings surpass $600, you will receive a 1099-K form, which you must report to the IRS for tax purposes.
Landlord Studio is a property management software specifically designed for online rent collection (amongst other things). Features like automated rent reminders, late fees, and automatic income tracking will help make the process more streamlined. Tenants also benefit from paying rent with Landlord Studio with easy-to-set-up auto-pay and fast access to their historical payment history.
Landlord Studio is a free software that is designed specifically for landlords and comes with a range of purpose-built tools and features.
When it comes to rent collection there’s a straight-forward $2.50 transaction fee for bank transfers which is charged to the tenant unless the landlord opts to pay this fee. Payments are deposited directly into the landlord’s account within three to five business days.
Landlords can easily block partial payments to prevent tenants from derailing eviction proceedings and all income collected through the system will automatically be logged against the property in our award-winning rental property accounting suite.
Setting up rent collection on Landlord Studio is a little more complex than simple cash transfer apps like Venmo. This is because you also get more automation and better security protections for landlords and tenants. To get set up you need to enter your lease details into the system, along with the rent amount, and the tenant’s name and email. You will then need to do a quick security verification check. We then guide the tenant through the setup process in the tenant portal or via the tenant app.
Landlords can invite their tenants to sign up for free. Both parties have electronic access to important rental payment information through their account, including scheduled rent payments and payment history, payment tracking, and rent receipts. Landlord Studio has native iOS and Android apps for both landlords and tenants so you can easily access your account from your phone or another smart device.
Because the Landlord Studio’s online rent tool was designed specifically for rent payments, it offers features other payment platforms don’t — like the ability for tenants to turn on Autopay, view their rental history, or submit maintenance requests via the app.
Landlords can also automate late fees, set reminder emails about upcoming or overdue rent, and amend or cancel future rent payments. Landlords that collect more than $600 in payments will receive a 1099-K form.
You can even collect deposits, late rent, and tenant payable expenses via the system.
An additional benefit to Landlord Studio rent collection is that any payments made through the system will be automatically logged in our best-in-class rental property accounting tools. You can even connect your bank accounts via bank feeds and we will auto-match the transaction so you can one-click reconcile as well.
For income and expenses collected outside of Landlord Studio, you can manually input them, use our smart scan receipt feature, or reconcile via bank feeds.
Landlord Studio offers live customer support, so if either you or your tenant has an issue, someone from the Landlord Studio team is always available to help you solve it.
Each of the platforms listed here offers pros and cons, but it’s best to choose an option to help you make rent collection more manageable. To get started with Landlord Studio, create an account for free to set up your rental properties and tenants. Once you set up your account, you can take advantage of all the different features to save time and money as a landlord.
Peer-to-peer cash transfer apps like Venmo and PayPal are free. However, you will find that for business purposes they charge a percentage of the transaction value as a fee (about 3%). For larger payments like rent, this is a large cost for a simple transaction. Look for software that will make your rent collection free or charge only a small set fee per transaction. Landlord Studio, for example, is free for landlords and charges a $2.50 fee per transaction to tenants.
Using the ACH network, which the more affordable rent collection systems run on, means rent payments will be made available in your bank account in 3-5 business days. In order for a platform to offer faster payments they will need to resolve the payment using their own finances whilst the payment clears. However, this causes issues in the event of a chargeback or failed payment.
Yes, rent can be paid with a credit card using some rent payment systems. However, paying rent with a credit card will incur a credit card fee (often around 3%).
Can you use payment apps like Zelle, Venmo, or PayPal to collect rent?
Yes, you can use peer-to-peer cash apps like Zelle, Venmo, and PayPal to pay and collect rent. However, the systems are not designed for rent payments, and using these apps could cause problems in the future, especially if you want to scale your rental business.