According to numerous surveys, most landlords rank payment problems as one of their top concerns. Chasing down rent payments is a nuisance that wastes valuable time—it can also undermine the landlord-tenant relationship. Even worse, payment issues can put your rental income at risk and lead to tenant turnover and costly evictions.
According to a survey conducted by CitiGroup, more than half of Americans have paid at least one bill late. The most common reason for late payments is that they simply forgot. Even if your tenants are reliable, there’s still a chance rent can slip their minds. Consequently, more landlords are turning to online payments for rent collection. If you’re still collecting rent checks through the mail, here are some reasons to consider switching to an online rent payment system, as well as a breakdown of what to expect from some of the most common platforms.
4 Benefits of Online Rent Payments
Generally speaking, collecting rent online is easier for landlords and more convenient for tenants. Here are five benefits to accepting online rent payments:
- Tenants can set up recurring payments
Dealing with rent checks is extra work—for you as well as tenants. Filling out the check takes time and there’s always the potential for it to get lost in the mail or for the written amount to be incorrect. The beauty of online payment platforms is that tenants can often set up recurring payments.
Recurring payments ensure you receive the rent on time while eliminating problems like the tenant forgetting to pay, mistakes on the check (which can further delay payment), or the rent check getting lost in the mail. If tenants don’t want to set up recurring payments, they generally have the option of receiving notifications about upcoming due dates instead.
- Fewer accounting errors
Mistakes on a check can delay how quickly you get paid, but that’s not the only type of error that can be costly. Mistakes in bookkeeping can also happen when you have to enter everything manually, especially if you manage multiple properties. If you don’t have a good tracking and accounting system set up, you may not even realize you didn’t get paid. There are many ways to make simple errors that affect your business.
Many online rent payment services include basic accounting tools to help prevent common errors, like transposed numbers, double posting, balancing mistakes, or forgetting to track a payment. Although these errors can be avoided by using other programs or systems, online payment platforms often have everything conveniently integrated.
- Saves everyone time
Beyond being convenient, online rent payments save both the tenant and the landlord time. Even if tenants don’t set up recurring payments, it just takes a couple of clicks to send the payment. Collecting rent by check can be a time-consuming process for busy landlords, as it typically involves:
- Collecting the rent payments
- Preparing deposit slips
- Going to the bank to deposit the checks
- Posting receipts
- Waiting for the checks to clear
- Updating your bookkeeping
Essentially, every minute spent on rent collection takes time away from the ability to grow your business. If you’ve often felt like there just aren’t enough hours in the day to cross off everything on your task list, switching to online rent payments could be very beneficial—your tenants and the platform will do a lot of the work for you.
- Improves Transparency and payment tracking
Transparency and communication are very important in the landlord-tenant relationship. Tenants feel more comfortable when they feel their landlord is being open and honest with them, especially when it comes to things like rent payments or late fees.
Online payment platforms allow tenants to see their payment history and review any fees they might incur. They also have the ability to make their payments 24/7. Landlords can also clearly see when payments were submitted and which tenants haven’t paid yet, which makes tracking payments easy.
Landlords who have multiple properties have also found online property management portals are a great way improve communication. With these types of portals, rent payments, maintenance requests, and general tenant communication are often all available on a single site. This may not be useful for everyone, but online property management portals can make managing multiple properties more streamlined.
Common Rent Collection Platforms
There are many different ways to collect rent online, but it’s best to do some research before selecting one. Here are a few of the most common platforms landlords use:
Zelle doesn’t charge a fee to transfer money between bank accounts, so it can be a quick, easy way to receive rent each month. However, Zelle doesn’t partner with every bank. If your tenant’s bank or credit union doesn’t offer Zelle, there will be a weekly send limit of just $500. The tenant also won’t be able to set up recurring payments. For supported banks, transfer limits are around $1,000 a day and up to $5,000 a month.
Zelle’s processing times are fairly quick; the funds will show up in your account instantly, but it may take up to one to two business days for the payment to clear. With Zelle, there are no options to set up late fees or to turn off or stop payments. Tenants can make full or partial payments at any time, which could be problematic, especially during an eviction.
Venmo has become very popular for peer-to-peer payments, but it can also be used for rent collection. However, there is a fee for business transactions, as well as “goods and services”. Like Zelle, transactions will show up in your account instantly, but they generally take 1-3 days to process. The initial limit for transfers is $299.99, but that limit is raised to $2,999.99 per week after the user’s identity is confirmed.
To send and receive money, both parties need the Venmo app. Landlords do have the ability to request rent payments from the tenant, but if they’re labeled as a business transaction, you’d be charged a 3% fee. If they’re labeled as goods and services, the transaction fee is 2%. Additionally, there are no options to set up recurring automatic payments or late fees, and payments cannot be stopped or declined. Also, if the tenant accidentally sends their rent to the wrong person, Venmo won’t refund or redirect the payment.
Rent can be paid and collected through PayPal, but there is a 3% fee for each business transaction; business owners are required to accept all money for goods and services through a business account. Once a user verifies their account, the transaction limit is capped at $60,000 for a single transaction. When a tenant sends money, it will go in your PayPal account, rather than directly into your bank account.
To use PayPal, both parties will need to set up a PayPal account to be able to send and receive money. Transactions typically take anywhere from 30 minutes to up to one business day to process. Although you’re able to send and receive large amounts of money, PayPal will sometimes freeze accounts that have irregular activity.
This is something to keep in mind if you receive multiple rent payments in a single transaction, such as a tenant paying their rent in advance. PayPal offers more protections than Venmo, and they’ll usually refund money when there’s a valid dispute—although it can sometimes take weeks for the refund to clear. This also means a tenant could potentially dispute rent transactions—and PayPal typically sides with the payer.
Keep Rent Collection Easy for Regular On-Time Payments
Whether you decide to use one of these platforms or choose one of the many others available, using an online payment system can be an ideal way to prevent nonpayment issues and streamline your rent collection process. According to the National Multifamily Housing Council, 85% of people who pay their rent online will continue to do it on a monthly basis. If you’re an independent landlord who relies on rental income, timely rent payments are crucial. The easier you make it for tenants to pay their rent, the more likely it is that they’ll continue to make their payments regularly.
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