In this guide, we’ve discussed several important concepts, such as encouraging timely payments and how to handle late payments. The great news is that all of these aspects of rent collection are easier and more effective if you collect rent online.
In this chapter, we’ll compare online rent collection to other alternatives. We’ll show you how landlords and tenants both benefit from online rent payments. And then, we’ll answer your most common questions.
How Online Rent Collection Compares to the Alternatives
When it comes to collecting rent, you have a few options. You can accept cash, checks, direct deposits, or use online payments.
Cash
Dealing with cash is harder to document. What if you receive a partial rent payment, but your tenant claims he or she put a different amount in the envelope? Your tenant could argue that you removed cash from the envelope. It’s harder for you to prove what you received because there is no paper trail.
If tenants are mailing cash, there’s the chance the payment could be lost in transition. It also requires that tenants have checks, envelopes, and stamps. Not to mention, they’ll have to go somewhere to mail it.
Check
Paying rent via check is extra work for your tenants. They’ll have to write a check and find a way to mail it if they don’t have a mailbox near them. Similarly, you’ll have more work to do. You’ll have to wait for payments in the mail. You’ll have to go to the bank to deposit them. There’s the chance a check will bounce, and by the time you have a check that works, it’s possible a lot of time will have gone by.
Some landlords choose to pick up rent checks from their properties, but that can be difficult if the properties are farther away. Similarly, some landlords have their tenants drop off the check somewhere, but that just adds work for the tenants. You want it to be as convenient as possible for tenants to pay rent, so they are more likely to pay on time.
And last, paying by check is a security issue. Any time a tenant pays rent via check, he or she is giving away bank account information to anyone who receives the check.
Direct Deposit
You could have tenants directly deposit money in your bank account. However, this would require that your tenants know your bank account information, which is unsafe.
Online Payments
When it comes to online payments, not all services are the same. Here a few important factors to consider:
- Cost for you: there may be subscription fees for a service
- Cost for your tenants: there may be transaction fees
- If there are limits to how much money can be transferred
- If it’s secure to transfer money on the site
- If the service is designed to facilitate payments
- If the service is objective
There are options like Chase Quickpay, but keep in mind that they limit how much money you can transfer daily. The maximum amount you can transfer in one day is $2,000. This may be a problem if your monthly rent price is above this limit, especially during months where your tenant is paying first month’s rent and a security deposit. Chase Quickpay is also not designed for rent collection, so there are no reminder emails, no automatic late fees, and no automatic receipts.
The best way to collect rent online is with an objective, third-party service that specializes in facilitating online payments.
Here at Rentalutions, we have specifically built our software to process rent payments. In 2016, we processed over 38,000 charges, totaling over $50 million dollars in rent. We use 128-bit encryption to make sure all financial information is secure.
Below, we break down how landlords and tenants benefit from online rent collection.
How Landlords Benefit From Collecting Rent Online
Collecting rent online will make your life as a landlord easier, saving you time and energy.
Convenience
Collecting rent online is more convenient for you for several reasons. For one, it eliminates extra work for you. We send automatic rent reminder emails and automatic receipts for payments, so you don’t have to. Payments will also be directly deposited in your bank account. You won’t have to pick up checks at your property or drive to the bank to deposit them.
Automatic Rent Payments Means You’ll Receive Rent On Time
As a landlord, automatic rent payments help you because it means you don’t have to rely on your tenant doing any extra work each month. You can relax knowing that rent is automatically set up to be paid each month.
Save Time
Online rent collection makes collecting payments from a distance much easier. You’ll save time knowing rent can be paid without having to drive anywhere including your rental property or the bank.
Easy to Set Up
All you need to do to collect rent online is sign in and create new charges. You can see how easy this is to accomplish below:
Automatic Late Rent Fees
You can turn on automatic late rent fees if you want our software to instantly create a late fee charge any time your tenant has not paid by the fifth of the month. This eliminates some extra work for you, as you won’t have to create the charge. It also lets you hide behind the software. You can let your tenants know that our system automatically charges tenants late fees any time rent is late.
Automatic late rent fees are an effective way to motivate tenants to pay rent on time. It shows tenants you are not lenient about late rent payments.
Customize Notification Preferences
As you can see above, you can personalize your notification settings. You can also choose when your tenant will receive reminder emails. These email notifications help make sure tenants will remember to pay rent on time, which is important.
Our notification options are designed to make the process as transparent as possible.
Transparency
We designed our software to be transparent. You will know when your tenant schedules a payment, when the payment will withdraw from his or her account, and when it will be deposited in your bank account.
You should always know what is going on with your rent payments, which is why we make everything very clear. The green circle shows you when a payment has been paid. The screenshot above shows the payment is roughly 80% paid. If a payment is processing, the circle will be yellow.
You can sign into your account and see the status of a payment at any time.
Bank Account Management
If you have separate bank accounts for each rental property, you’ll want rent payments to be deposited in the correct bank account for that property. This is especially common if you have separate LLCs for each rental property. Fortunately, you can easily link your properties to different bank accounts. In fact, you can add an unlimited amount of bank accounts in our system.
Privacy
You can rest assured that your bank information is completely private. Your tenants will never see what account their payments are being deposited in. Your bank account information is always secure.
How Tenants Benefit From Online Rent Payments
Online rent collection makes your life easier as a landlord, but the great news is that it also makes your tenants’ lives easier, too.
Options For Paying Rent
Tenants have payment options for paying rent. They can add a bank account and pay directly from their account. They can also pay by credit card. And if a tenant pays outside of the system one month, then you can still mark the charge as paid. That way, you always have a clear record of which payments are paid and which are outstanding.
Automatic Rent Payments
Tenants only need to turn on automatic rent payments once and for the remainder of the lease, their payments will be scheduled and deposited on time. Rather than logging in and scheduling a payment each month, tenants can relax knowing everything is taken care of automatically for them.
Credit Score Boost
Most people are waiting to buy homes and vehicles until later in life, which makes it tough for tenants to build a credit profile while they’re renting. The good news is that now, credit bureaus are beginning to account for rent payments as they calculate credit scores.
We’re currently working on a feature that automatically reports rent payments to the three major credit bureaus. That way, when your tenant pays rent on time, he or she gets a credit score boost.
Common Questions About Collecting Rent Online
Below, we’ll answer your most common questions about online rent collection.
Can you collect rent online even if you have a paper lease?
Yes! While, we offer an online lease, you do not have to use our lease in order to collect rent with us. Even with a paper lease, we make it easy for you to collect rent online. You’ll simply create charges and then we’ll let you upload your lease to your portal, so you and your tenants can see it.
What are ACH payments?
ACH stands for Automated Clearing House. The ACH network processes online financial transactions in the U.S. ACH payments offer added security and efficiency because they follow rules and regulations set by the Federal Reserve.
What if you collect rent online but your tenant wants to pay you cash one time?
We recommend not allowing tenants to pay rent in cash. If they do, be sure to provide a receipt and keep clear documentation of when and how it was paid. If your tenant pays rent outside your online system, you can most likely mark the charge as paid, so nothing is missing from your online record of payments (this IS a feature in Rentalutions).
What if you are midway through a lease and you want to start collecting rent online?
You can start collecting rent online at any time. Just be sure to notify your tenant of the change. We recommend providing written notice of the change 30 days before you expect your tenant to make an online payment. You can invite your tenants to sign up from within your account.
For your next lease, be sure to update the lease so it documents how you expect rent to be paid.
Next Steps
In this chapter, we went over everything you need to know about collecting rent online.
Sign up here to start collecting rent online.
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Originally published at Rentalutions.
