Collecting rent is one of the most important recurring tasks a landlord handles – it can also be one of the easiest. When it comes to rent payments, there are a variety of options landlords can implement – from traditional checks to online rent payments. As a landlord, you’ll need to decide which rent collection method is best for your rental business.
Luckily, the digital age has transformed the landlord experience by streamlining the process online; saving both time and money. Receiving the best ROI on your rental properties should always be at the forefront of your mind, which means having a seamless way to collect rent.
Below, we have compiled a comprehensive pros-and-cons guide covering both online and traditional rent payment options.
Online Rent Payments
Collecting rent online is becoming one of the most popular, easiest, and secure methods for both landlords and tenants. With new technology and tools for property management, most of the rental process can be done online – including collecting rent. Younger generations, who are more likely to rent, often prefer the convenience of online rent collection and may be unfamiliar with checks. Don’t be intimidated by going online. You’ll discover it will help you further streamline the rental process and reach a larger renter demographic – here are some of the most popular ways to collect rent online:
#1: Direct Deposit Via ACH
Setting up a direct deposit between your tenant’s bank account and your own via ACH (bank transfer) can be a great option. This is usually a free service for both parties and will require you and the tenant to work together to set it up. You can also use ACH through most property management platforms.
- Pros: Once set up, direct deposit via ACH is a seamless method, you won’t have to do any work to receive payments, and you can set automatic direct payments so rent is never late.
- TurboTenant rent payment benefits include automatic reminders, rent reporting, extensive records, notifications, partial payments, and more.
- Cons: Setting up a direct deposit via ACH requires participation from tenants, and depending on your bank, can also take a few days for the money to reach your account.
#2: Venmo, Paypal & Zelle
Applications like Venmo, Paypal, and Zelle all provide extremely convenient online payment methods. In this day in age, these online services offer some of the most popular ways to transfer money electronically, but this doesn’t mean they don’t come with their fair share of downsides, especially for business owners like landlords:
- Pros: These apps are easy to use, funds transfer quickly, and the process is easy and does not require bank visits or shared account information.
- Cons: Venmo charges a 1.9% business fee, which includes landlords, for each transaction, Zelle limits payments to $1,000 per day and $5,000 per month, the potential for misdirected payments (watch out; your tenant could pay the wrong person), difficulty tracking payments, and lastly since partial payments go through instantly, tenants could pay you as little as a dollar to halt an eviction for nonpayment.
#3: Credit & Debit Cards
Credit and debit cards are often a requested payment method by tenants. Using credit cards or debit cards is simple and can be done through a variety of services, but usually, when it’s done through a rent payment service, tenants are charged a processing fee seeing that most credit card companies enforce it.
- Pros: Credit and debit cards are easy to use, extremely secure, and do not require bank visits or shared account information.
- Cons: Most credit and debit card services charge a 2% to 4% fee, and tenants can easily reverse/dispute charges 120 to 180 days down the road.
Traditional Rent Payment Methods
These tried and true rent collection methods are probably ones you’ve used before, or maybe are currently using for your properties, but they could be fading out fast. With the pandemic came a need for contactless rent payment methods, which eagerly pushed landlords and tenants to utilize digital payment methods. According to a 2020 report by the NLA (National Landlord Association), online payments doubled from 17% in Q4 of 2019 to 33% in Q4 of 2020. Despite this trend, traditional rent payment options can be great for older renters or if you prefer not to use technology – but, there are also disadvantages you should know about:
One of the oldest methods of payment – cash is a secure payment method in the sense that cash can never bounce. If you are handed cash from a tenant, you know you can deposit it into your bank account with no problem. But if you are using cash, you need to keep detailed records for yourself:
- Pros: Cash can’t bounce, you know exactly what you’re getting, and it can be kept or deposited.
- Cons: With cash, you’ll usually have to physically pick it up, which is time-consuming, it’s easy to lose, difficult to document and harder to keep track of payments, and can be easily disputed (the payment is $20 short, but the tenant swears they paid you in full).
#2: Personal Checks
One of the most widely used methods of payment, personal checks are simpler than cash as a check can be put in the mail. Checks can be a good option for long-distance landlords:
- Pros: Checks are easy to collect without being physically present and can usually be deposited on your bank app.
- Cons: Checks can bounce, which will cost you extra money and time, checks can be canceled by the tenants, and they can lead to the classic excuse, “My check got lost in the mail.”
#3: Money Orders/Cashier’s Check
Money orders and cashier’s checks are considered safer than personal checks because you need to use verified funds to purchase them. However, although it’s harder, they can still be canceled before you deposit them:
- Pros: Money orders and cashier’s checks are simple to acquire, require verified funds, and are fairly secure.
- Cons: Money orders can be difficult because tenants have to get the money and mail it to you, and then you have to physically deposit them in a bank as bank apps do not support money orders. Scamming is easier as tenants can get a money order and receipt, but never give the landlord the money order.
Other Rent Payment Factors to Consider
Even if your current method of collecting rent payments has worked well for you, sometimes it’s important to try new methods for a variety of reasons including the following:
- Tenant Age – Every generation communicates differently, and that means collecting rent will look different depending on the tenant’s age as well. For example, younger generations will prefer online rent payments while older generations are more comfortable using checks.
- Contactless Payments – As the world is constantly changing, contactless ways of doing business are becoming easier and normalized. Protecting yourself and your tenants is now more important than ever – limiting contact will help keep everyone healthy and feel comfortable. It is also a time saver.
- The Digital Age – Living in the 21st century means living in a digital world where there are constant developments in technology. It can be intimidating, but adapting to online tools for your business will make your landlord life easier. TurboTenant offers plenty of assistance in setting up online rent payments.
Overall, when deciding upon your rent payment method, focus on creating an easy system that tracks payments and late fees. If your current system is not working well, consider adapting to a new system that provides a more efficient process. Remember, because rent payments are a property investor’s main income, screening tenants to know they have a good track record and credit score will help ensure rent payments are never late.
Rent Payment FAQ
Can I collect rent through TurboTenant?
Through your TurboTenant account, landlords can now collect rent online for free. It takes less than five minutes to set up in your account, easily keeps track of charges, includes reminders and automatic payments, and it’s secure. Renters have the option of paying through an ACH (bank transfer) or a credit/debit card with a fee. Visit here for more information on how to collect rent online through TurboPay.
Is collecting rent online safe for my tenants and me?
Collecting rent online whether it’s through TurboTenant, or other online money transfer services is, for the most part, very safe and convenient. For example, through TurboPay we use industry leaders to transfer money and make sure your information is encrypted – sensitive information for renters and landlords will not be shared with anyone else.
Is it free to collect rent online?
For landlords, most payment platforms do not charge the landlord to collect rent online through a rent payment platform. Tenants will usually only be charged an extra fee if they pay with a credit or debit card.
What is the best method to collect rent?
When it comes to choosing the best way to collect rent payments from your tenants, there is no black and white answer. Ultimately, it comes down to what process works best for you and your tenants. Paper check payments are still a popular method among landlords, but with younger generations renting more, online rent payment services are increasing in popularity and becoming more frequent with social distancing measures in place.