Collecting rent is one of the most important recurring tasks as a landlord – 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, you’ll need to decide which rent collection method is best for you and your properties.
Luckily, living in the digital age has transformed the rental business for many landlords by streamlining the process online and saving time and money in the process. Receiving the best ROI on your rental properties should always be at the forefront of your mind and that means having a seamless way to collect rent to get money in the bank faster; finding the best solution for both your business and your tenants will enable this to happen. Below we have compiled a complete guide for different rent payment options with pros and cons to each:
Traditional Rent Payment Methods
If you’ve been a landlord for a long time, these tried and true rent collection methods are probably ones you’ve used before or maybe are currently using for your properties. Traditional rent payment options can be great for older renters or if you don’t want to use any sort of tech – but, there are also some disadvantages:
One of the oldest methods of payment around, cash is a secure payment method in the sense that cash can never bounce. If you are handed cash from a tenant, you know that cash will deposit into your bank account with no problem. If you are using cash, you need to be sure you keep detailed records for yourself:
- Pros: Can’t bounce, you know exactly what you’re getting, easy to keep or deposit.
- Cons: Usually have to physically pick it up which is time-consuming, it’s easy to lose, harder to keep track of payments.
#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: Easy to collect without being physically present, can usually deposit 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 of, “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, they require verified funds, and are fairly secure.
- Cons: Tenants have to get the money and mail it to you, 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.
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 – it only makes sense rent payments can be collected online too. Younger generations, who are more likely to be renting, often prefer online methods and are unfamiliar with checks – having an online rent collection system will allow them to pay rent fast on their phones or computer. Don’t let switching methods or going online intimidate you – you’ll discover it will help you further streamline the rental process:
#1: Direct Deposit Via ACH
Setting up a direct deposit between your tenant’s bank account and your own via ACH 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 as well as services like Paypal.
- 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.
- Cons: Setting up a direct deposit via ACH could be time-consuming and it requires participation from tenants, it also can take 4-7 business days for the money to reach your account.
#2: Credit & Debit Cards
Credit and debit cards are often a requested payment method by tenants. Using credit and debit cards is simple and can be done through a variety of services such as Paypal and Venmo – usually, when it’s done through a rent payment service there is a fee tenants will have to pay:
- Pros: Easy to use, is extremely secure, great for younger renters who may not own checks, the process is easy and does not require bank visits or shared account information.
- Cons: Most of these services charge a 2-4% fee, tenants can reverse charges 120-180 days down the road, and landlords in certain states can also run into issues when using service providers, like Paypal, due to the fact that the money is not immediately deposited into the landlord’s account.
Other Rent Payment Factors to Consider
Even if your current method of collecting rent payments has worked well for you, sometimes it is important to adapt or try new methods for a variety of reasons including the following:
- Tenant Age – Every generation communicates differently and that means collecting rent will look differently depending on the age as well. If you want your tenants to pay you on time it’s important to know what works best for them. For example, younger generations will prefer online rent payments while older and retired 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 can also save time for both parties.
- The Digital Age – Living in the 21st century means living in a new digital world where there are constant developments in tech and online tools. It can be overwhelming sometimes, but adapting to online tools for you business will make your life easier. It might be intimidating, but in the long run you’ll be able to run your rental business more efficiently than before.
Overall, when deciding upon your rent payment method, be sure you create an easy system for yourself to track payments and late fees. If your current system is not working well, consider adapting to a new system to find a more efficient process. Remember, because rent payments are your main income as a property investor, screening tenants to know they have a good track record and credit score will ensure rent payments will never be late.
Rent Payment FAQs
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.
This blog was updated from its original post on May 20th, 2020.