Of all the tasks a landlord or property manager has to deal with, collecting rent is the most important. It is your rental income—it's how you pay your bills! Managing one or two properties can be easy, but you still might face the arduous task of chasing tenants for late payments. It's when you start managing multiple properties that the job becomes far more challenging.
Most landlords start traditionally: By collecting rent checks from tenants. But if you are just starting out as a landlord, consider finding more secure, reliable, and faster ways of rent collection. After all, it can take up to seven days from when tenants mail their checks until the funds clear in your bank account. Can you really afford to wait that long?
What are the options out there for landlords who want to be successful in their rental business?
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Avoid Checks and Money Orders
Even today, money orders or checks are still popular methods for collecting rent. Checks are comfortable, and don’t require a steep learning curve for tenants. But rent checks have serious disadvantages. For example, checks are easy to steal, putting a person at risk of check fraud. They are also an easy target for criminals.
According to the American Bankers Association, check fraud is on the rise. It published a survey in 2020 showing that check fraud accounted for losses of $1.3 billion. But that’s just part of the picture. Attempted check fraud amounted to $15.1 billion. So, criminals are targeting checks as the top way to scam people out of their money.
Surprisingly, check fraud is more common than debit card fraud and other types of electronic transactions.
Collecting rent by money orders can be just as risky. Money orders can be issued from several different vendors. If a money order is stolen, it is much harder to get a refund. The tenant may need to wait for this refund before being able to pay the rent—and you have to wait for your money. While a money order can’t bounce like a check, tenants can cancel them.
Money orders and checks are what many people still use to pay rent. But this doesn’t mean it’s the easiest for tenants or landlords. Oher payment options make rent collection a breeze for both parties.
How to Get Tenants to Pay on Time
Want to avoid late rent payments? Try a rent collection app, which allows tenants to pay online or even in cash without the need for sharing financial information. A landlord can sign up for one of the numerous apps available and inform tenants of this app. Tenants can pay using a variety of methods—credit card, debit card, setting up automatic payments, or even in cash in associated stores. The apps should be mobile-friendly so that tenants can pay anytime from their phones.
Landlords who use rent collection apps benefit from the following:
- Real-time notifications of rent payments
- Send out late or missed payment reminders
- Check tenant payment history
- Set up late fees
- An overview of the financial situation
Rent collection apps and online bill pay are a win-win solution for the tenant and the landlord. Tenants are less likely to forget and suffer late fees, and landlords are more likely to be paid on time. Plus, it’s far easier than traditional rental payment methods. The apps have enhanced security and digital trails to resolve any disputes.
The Top 9 Ways for Landlords to Collect Rent Online
Let’s look at some of the most popular ways that successful landlords collect rent.
This app has excellent services for landlords and tenants. Tenants can pay each month or set up recurring payments, and they can pay their security deposit, too. The rent collection app also has a chat tool that allows tenants to contact the landlord in case of any maintenance issues. Landlords can even take advantage of screening tenants with the app. Also, they can automatically list vacancies on Zillow, Trulia, and Craigslist.
While Buildium covers all areas of property management, the packages start at $50 per month.
PayRent allows for e-check and credit card payments—one-off or recurring. You can accept partial payments, which could be useful in unique situations. Landlords can track payments and use full accounting tools to manage their finances. The downside is that it is a little costly. PayRent takes 3.5 percent of each transaction, plus $0.30 on credit card payments and 0.25 percent of bank transfers.
The RentDrop app has a great user interface that is easy for everyone to use. Tenants can set up recurring payments, use a debit or credit card, or allow for ACH direct deposits. So, no more trips to the bank to cash checks or wait for funds to clear. It is perfect for landlords who manage multiple properties because you can quickly get an overview of your rental units.
Better still, for landlords, it is free. Indeed, you might not enjoy all of the sophisticated management tools—but do you need them?
This app is also more than just a rent collection app—it’s a property management app. So, it will save you a ton of time if you’re managing multiple rental units. This app is ideal for those who have mixed property portfolios. Some of its features include the ability to arrange renter’s insurance and bulk messaging. Landlords can screen tenants through the app and gain access to rent comparison tools.
The app isn’t as straightforward to use as others, and you might need deep pockets. Prices start at $250 a month.
This app has a wide range of tools for landlords and tenants. Of course, you will find the usual online payment options and reminders. One excellent feature is that tenants can leave maintenance messages for landlords. This feature helps to improve landlord-tenant relationships as there are less conflict and confrontation. As well as tenant screening, eRentPayment offers credit reporting—something that many tenants like if they need to improve their credit history.
Landlords can entice tenants to use this app when they learn that it can improve their credit score. ClearNow can send rental payment histories to Experian Rent Bureau. Tenants are motivated to pay their rent on time, knowing that they'll find it easier to a loan or even a mortgage in the future.
Keep in mind that the tenant has to ensure that the full rental amount is in their account, or the recurring payment won’t be processed.
Avail is a simple app. Tenants log on and make a payment or set up recurring payments. The app also sends automatic email reminders five days before the rent due date and again on the actual date. Landlords can have the rent payment cleared in their accounts within three days.
Zelle is a money transfer app rather than a rent collection app. It kind of works like a direct debit. It’s simple to use—just download the app and add your bank details. Most of the time, the landlords receive the money instantly, and neither party has to pay fees. But you won’t be able to use features like recurring payments or reminders. Furthermore, people can send money to the wrong account by accident
Because of the popularity of PayPal, it is likely that you already have it and, therefore, don't have to download more software. It is straightforward to use and probably a better solution to checks. However, it lacks all of the functions of the best rent collection apps. There is no way to send reminders, and PayPal clearly states that purchase protection doesn't cover real estate transactions.
How Successful Landlords Collect Rent
If you aspire to become a successful landlord who manages multiple properties, start as you mean to continue. Using an online method to collect rent from the outset will ensure a healthy cash flow. Landlords who collect rent online have fewer issues collecting rent on time, and they can devote time to more important things—running a successful rental business.
There are a few rules we recommend following, in addition to using a streamlined app:
- Late fees: These encourage tenants to pay on time by providing a financial incentive to do so. While it may be tempting to waive late fees, we recommend not doing so as part of your policy—or only allowing one grace period. Knowing these fees will be instituted keeps “rent” as a priority for tenants’ bank accounts.
- Strong rental agreements: Make sure new tenants and prospective tenants understand their rent payments and your late fee structure by outlining them in the lease.
- Legal advice: Make sure your late fee has legal backing by consulting an attorney regarding your lease—and, of course, if it comes down to the worst, make sure you’re providing the proper eviction notice and following the legal eviction process. State laws can vary, so pay attention.
Contact Martin Property Management
For more property management tips, or to speak with us about our property management services, contact us today by calling (617) 957-0166 or click here to connect with us online.