This explanation of how to collect rent payments (online and offline methods) helps landlords.
Increasing tenant rent payment compliance efficiently leads to greater profits.
Definition of Online Rent Collection
ACH stands for Automated Clearing House. A network of over 10,000 financial institutions which batch-process direct deposits and direct payments electronically. Instead of receiving paper checks and then depositing them in your bank. ACH allows direct deposits into U.S. bank accounts fast and easy.
Do You Need Online Rent Collections?
Nowadays, most people conduct business online. Whether making online bank transactions or buying goods and services online. The same applies to paying rent.
One recent survey claims over half of all millennials never even wrote a check. They do everything online or by smartphone. Ever try to split a bar tab with a millennial? See how fast the Venmo app appears.
Modern-day rent collections rely on online payments than checks or cash.
Here’s How to Collect Rent Payments Using Online and Offline Methods
Let’s begin with online methods as they avoid tedious paperwork and postal system delays. Fast and easy!
Avail, the Fits Small Business website recommends Avail for online rent collection. Especially suited for tenants wishing to pay with credit cards, debit cards, or bank transfers. Their autopay feature automates monthly payments avoiding delays or missed payments. Their monthly subscription plans range from Free to $50.
Yet, no matter what online rent collection company you choose, consider these online rent collection tools:
Buildium provides both online rent collections and rental management features. Their products cater to large property managers with sizeable rental portfolios customized monthly plans starting at $45. Their plans offer document and lease management with tenant portals.
Venmo provides a mobile payment service allowing account holders to quickly transfer money to others. Businesses pay Venmo 2.9% of the total transfer plus 30 cents. But, they don’t charge monthly subscription fees. However, Venmo doesn’t include recurring payment features, reminders, or other rental management features. It’s just a straightforward fast payment service app.
Establish Your Policies for Online Rent Payments Up Front
Before collecting rents online, every lease agreement must include instructions.
Also, give new tenants an explanation sheet of how to do online rent payments to avoid errors. This includes directing them to whichever payment platform you choose with basic instructions on how to set up an account.
Your Lease Terms Must Include…
The terms in your lease must include these:
- Rent: How much the tenant pays and the due date;
- Payment methods: The acceptable forms of payment and where they pay online; and
- Late payment penalties: What late fees you charge and if you will report late payments to credit bureaus.
The Ability for Tenants to Pay Online
Tenants with certain disabilities, elderly tenants, and some low-income tenants may need help to sign up for online rent payments. Your policies need to include flexibility to assist these tenants.
Provide these types of assistance:
Creating step-by-step instructions that clearly describe the process for navigating online set up. Include the instructions with every lease.
Include the online collection platform’s customer assistance contact information. This makes it easier for your tenants to get help without wasting your time.
Send tenants an introductory set up video by email. Most online rent collection platforms include a video explaining their set up process.
Accommodate protected tenants. Contact elderly or disabled tenants with a family member or conservator responsible for their rent. Coordinate with them to setup a system for online payment.
Enforcing Your Online Lease Collections
It’s essential to hold tenants responsible to pay their rent on time. Failing to enforce your lease eats into your profits and hurts your ability to collect future rents.
Increase compliance using these two methods:
Online rental collection platforms often give tenants options for paying their rent.
Encourage all your tenants to choose the automatic withdrawal option.
This prevents late payments. Automatic withdrawal used for bank transfers and credit or debit card payments assures prompt and complete payments.
Set up reminders for online rent payments.
Some services like Avail provide automatic reminders so tenants know upcoming due dates. Comes in handy with the February due date during a leap year.
Charge Late Fees
Set up automatic late fees for tenants who fail to meet due dates.
This keeps you from uncomfortable conversations with late-paying tenants. Automatic reminders of upcoming due dates also help.
Some online rental collection systems include customized options about how you handle late payments. Stay in control by setting up an automatic late payment fee.
Report Late Payments to Credit Bureaus
Most tenants do not want landlords reporting unpaid rents to credit bureaus. They know the consequences of their ability to rent or buy a home in the future.
Provide Incentives for Online Rent Payments
Instead of relying on punishment to force online rental collections, offer positive incentives. Here’s two ways to encourage online rent collections:
Positive Incentives: Offer rewards in besides penalties in your lease agreements. For instance, offer $15 off the rent if paid before the due date. Tenants knowing they save money with early payments become a strong motivator.
Surprise Rewards: Surprise tenants early on who pay on time with rewards. Foster improved relationships with small rewards. Remember, up to $25 gifts per person per year become tax-deductible. Instead of cash, send a tenant a $25 gift card for Starbucks or Amazon after their first two on-time rent payments.
Offline Rental Collections
If online rent collections don’t appeal to you, the traditional methods work too. But, they require more time. Here’s the alternatives:
Collect rents yourself. Whether by cash or check they become time-consuming.
Rent a drop-off box or post office box for checks. Time-consuming and costly.
Hire a Property Management Company
No time to collect rent payments online and offline?
More expensive than the other two alternatives. But, letting professionals do the collecting takes the pressure and stress off your shoulders. Also, the management company maintains great records for the IRS and other government agencies which saves you time and gives you tax deductions.
We Lease San Diego provides professional property management services. Whether you own a single-family rental home or a large apartment complex, we provide you with experienced property managers and maintain excellent records.
Contact Us to find out about or services and reasonable fee.
Steven Rich, MBA – Guest Blogger
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