Landlords have a lot of responsibility on their shoulders. You’re probably well acquainted with middle-of-the-night calls, stressful maintenance jobs, and unruly tenants. It comes with the territory. Physical checks are a tried and trusted standby, but our increasingly tech-driven world has opened new doors for rent collection that can make your job a whole lot easier.
Landlords have a lot of responsibility on their shoulders. You’re probably well acquainted with middle-of-the-night calls, stressful maintenance jobs, and unruly tenants. It comes with the territory (or the property, I guess).
Of course, there’s one issue that every landlord deals with that can be detrimental if not handled properly: rent payments. Who among us hasn’t had to harass a tenant to get their monthly check into our mailbox on time? I think we’ve all heard the same excuses from tenants, too: “I mailed it last week,” or “I dropped it in the night slot yesterday.”
It doesn’t have to be this way.
Physical checks are a tried and trusted standby, but our increasingly tech-driven world has opened new doors for rent collection that can make your job a whole lot easier.
As a landlord, the most important thing about your rent collection method is that it is clearly defined in the lease agreement and easy for your tenants to follow. Everything else really comes down to your personal needs and preferences.
How many tenants do you have? How many rental properties? How far do you live from your properties? How often do you want to interact directly with your tenants? How comfortable are you using different technologies?
All these questions can help you decide what kind of rent collection works best for you and your tenants. You’re not going to want to personally collect rent from 15 different properties, but you also won’t want to rely solely on online collection if you aren’t comfortable dealing with technology. There is no universally correct method, only one (or a few) that work for your specific needs.
Here are some options for you to consider:
This method may seem old-fashioned—and it does come with its problems—but it does save you from having to go and collect rent for individual tenants yourself. All they have to do put their check in an envelope, seal, stamp, and send. Easy right? Well, easier said than done. In addition to leaving payments at the mercy of the U.S. Postal Service, this method also allows room for the gentle “check got lost in the mail” fib. If you’re particularly sensitive to the timing of rent payments, you may want to avoid going this route.
Another option is to set up a specific drop-off location with designated drop-off times for your tenants to deliver their rent themselves. This method generally works best if you have some sort of office space on-site, complete with a drop-box for those who can’t visit during office hours. However, this method comes with its own set of problems, most prominently theft if your tenants leave their rent in cash. The benefit here is that there’s less wiggle room for tenants to make excuses for late or missing payments.
If you aren’t great with technology, but you aren’t looking to interact with your tenants every month, a third party property management company could be the best solution for you. These groups typically have payment systems in place, so you don’t have to lift a finger. All you have to do is sign the contract, and they’ll deal with rent collection, tenant complaints, filling vacancies, and dealing with maintenance issues. Your job will be easy as pie, but you’ll lose your autonomy and a good chunk of change in the process.
Finally, online collection has become extremely popular in the rental world. There are a number of softwares that allow you to establish an online rent payment portal, which makes submitting payment easy and accessible for tenants. You can set up this portal with multiple payment options as well, from direct ACH deposits to credit card payment systems. Payments are instant and easy to track, which makes your job much easier and much less time-consuming.
Let’s face it, most people are used to paying all their bills online by now—including your tenants. Accepting payments through an online portal eliminates a lot of the pains that landlords traditionally deal with: no more waiting on checks in the mail, no more trips to the bank to make deposits, and no need to keep physical documentation of each check. Not to mention that features like recurring payments can make late rent payments a thing of the past.
The only potential downside to accepting online payments is that you’ll be required to set up a payments system, which means searching out a payment processor, fiddling with integrations, and dealing with monthly processing fees. However, when set up a properly, an online payments system can be a huge benefit to to your business. Let’s explore how that can be done.
First things first: If you’re using a property management software, it’s possible that a payments system came bundled in. Don’t assume that this option is the best option, though. Payment providers can integrate into almost any software via a payment gateway, so you have a plethora of options.
Narrowing down those options is a matter of personal preference: do you want to accept various types of online payments (ACH, credit card, debit cards, PayPal, etc.) or would you rather stick to just eChecks? Do you need to add the payments system to an existing website, or would you be building a dedicated portal? Would your tenants need the option to save payment information for recurring payments?
Create an outline for an ideal payments setup and show it to processors -- this will allow you to weed out those who don’t fit your business fairly quickly.
Once you’ve narrowed your list down to three or four processors, it’s time to consider the vital question of cost. Pricing in the payments industry is a convoluted mess. Most providers make their money by hiding fees in complicated pricing structures, but there’s a surefire way to keep them honest: make them compete.
Every processor out there, no matter how they price their service, has similar costs. Interchange, which is simply the cost of completing a transaction, is set by credit card companies and are entirely non-negotiable. Anything on top of that cost is margin for the processor, meaning that everything but interchange can be negotiated by you. Use that to your advantage. Get a quote from one processor, then take it to the next and ask them to beat it. Rinse and repeat. You’ll find that almost every processor out there is flexible with their rates, even if they claim not to be.
Once you’ve chosen your processor, it’s time to get your online rent payment system up and running. Your processor can help you with that. In most cases, you’ll have to utilize a payments gateway to connect your tenant portal to the payment processor. A gateway may be an additional cost for you, but they typically only charge small per-transaction fees.
With the help of your new processor, you should be all set to accept payments online. While processing fees might take up a small portion of your revenue, the headache you’ve saved by creating an easily accessible rent payment system will not go unnoticed by your tenants or staff. Rent payments will be quicker, more reliable, and more secure.