Collecting rent is a pretty vital part of running a rental – but it will perhaps (or perhaps not) surprise you that not everyone has this process nailed. Tenants are sometimes difficult – maybe they work in a restaurant and live off cash tips. Or they just don’t like the idea of online banking. Perhaps they’re older and don’t like, or are unable to do things differently and so insist on sending checks in the mail.
In today’s modern age of technology and digital payments there really is no reason for a landlord to be collecting cash payments or accepting checks. These are outdated – slow and insecure forms of payment that just make everyone’s life harder.
So, I guess that’s our first point. Let’s get digital. Treat your business like a business, and make rent day easy for yourself and your tenants.
In places like the UK, Europe, Australia, or New Zealand, the answer is simple. Bank to bank transfers. Preferably have your tenants set up a direct deposit using their online banking. This is free in the countries mentioned above.
In the US though this can be expensive with a bank transfer costing up to $30 each time and a direct deposit costing upwards of $50 to set up, often with ongoing monthly fees.
Never fear though! There are a plethora of alternative options and workarounds available for the savvy landlord.
You can now use Landlord Studio to collect rent online!
Landlord Studio’s Online Rent Collection feature is designed specifically for use by landlords. It allows you to automate the entire rent collection process and manage all your rental property income and expenses in one place.
Tenants can quickly and securely transfer the rent straight into their landlord’s bank account. It’s fast, secure and easy, and paired with other Landlord Studio features makes late rent payments a thing of the past.
* Free 14 day trial. No credit card required.
With Zelle pay, you can send and collect rent payments instantly through your banking app, or the Zelle app if your bank doesn’t support Zelle Pay yet. The transfers are free and only require you to know a US mobile number or email address (as long as the other person already has Zelle).
You can use Zelle with multiple accounts at multiple banks, but, and this is a big but, you must have a different email address or U.S. mobile number linked to each account to connect it with Zelle. If you try to use the same email address or mobile phone number to enroll with Zelle at multiple banks, you will receive an error message.
Most issues when collecting rent with Zelle arise when Zelle isn’t supported by both parties banks. If both parties banks aren’t supported we suggest using alternative service.
Venmo allows you to send and receive money quickly and easily through their app to people on your contact list. You can quickly connect to people through social media, or, like Zelle, you can use their email or phone number if they already have a Venmo account. Although it’s not designed for collecting rent you certainly could use it that way.
Paypal has been around for a while now. They revolutionized online payments, and it’s taken a while for other companies to catch up. Many people have a Paypal account already. Paypal allows you to quickly, easily, and securely send money to someone else’s Paypal account through their app or online.
Apple are making some interesting moves in the payment sphere and now allow US customers to pay each other inside iMessage. You simply connect up your debit card and then you can pay your contact inside the Message app.
They have also released Apple Card – a credit card with zero fees which is well worth knowing about.
The following methods have associated fees, but are also worth considering.
Related: How Facebook’s “Project Libra” is Going to Revolutionize the Rental Industry
Direct Debit payments are the most reliable and secure way to collect rent from your tenants, but it can be tricky to set-up a Direct Debit yourself. Any Direct Debit payment will require a mandate signed or approved by the tenant before it can be activated, and organising this yourself will be difficult.
A Standing Order, otherwise known as ‘The Standing Order Mandate’, is a set of instructions given to a bank or building a society that tells them to make payments for a fixed amount regularly to a specific bank account.
In the case of rent payments, a Standing Order will be set-up by the tenant to send the rent amount to the landlord’s bank account on the due date each month. Once a Standing Order is set-up, it can run indefinitely until it is canceled.
This is more of a last resort but for those times when your tenant is having a “tough month”, allowing credit card payments can help everyone stay on top of the rent payments. Using a credit card will incur processing fees (which will need to be charged to the tenant) as well as involve the tenant risking their credit score if they are unable to pay off that credit card debt for the next month.
You will need to use a 3rd party to enable this such as Plastiq which has a 2.5% fee, or Venmo which has a 3% fee.
There is another downside to allowing them to use a credit card to pay rent which is the time taken for the money to go through to your account which could be days, weeks, or even months.
Collecting rent online is the fastest and most efficient way in which to collect your rent payments. However, in the US it’s not been made simple by the glacially slow adoption of banks to enable efficient bank transfers means you have to use a workaround.
If you are going to collect rent online you should make sure your tenants are aware of this and have this detailed in your lease. On top of this make sure you detail how you expect the rent to be paid with detailed instructions of how to get set up so that the tenant has no excuse to pay late.
The terms of your lease should include:
Recognize Ability of Tenants to Make Online Rent Payments
Make sure you recognize those individuals with certain disabilities that might hinder their ability to pay online. Elderly renters, for example, may need more assistance to be able to complete online rent payments.
Your policies should be firm, but be sure to make it easy for everyone to be able to pay – offering assistance if needed.
Ben is an author and real estate enthusiast. His interest in all things entrepreneurial has led him to work with real estate professionals all over the world, distilling their knowledge into articles and Ebooks.
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