5 Different Methods for Collecting Rent
Tenant Payment Options
Establishing a method for collecting rent each month will make it easier to keep track of which tenants are current with their rent and which ones are behind on their rent. Each landlord must decide which option works best for their specific situation. Here are five different ways you can collect rent from your tenants.
4 Factors to Consider When Choosing Rent Collection Method
Not every rent collection method is right for every landlord.
Looking at these four factors can help you determine the method that will work best for you and your tenants.
1. Number of Tenants/Rental Units:
If you have own 20 rental units, you probably don’t want to personally knock on 20 doors to collect rent on the first of every month. You will want a more streamlined and efficient way to collect rent.
2. Distance From Rental Property:
If you live far from your rentals, hiring a third party to collect the rent or doing an electronic funds transfer may be better options for you.
3. Desire to Interact With Your Tenants:
You may only have two rental units and may live less than a mile from your rental property but prefer to have a more hands-off approach to managing. In this case, an electronic funds deposit or the mail may be the best ways for you to get your rent.
4. How Comfortable You Are With Technology:
If you are not comfortable with technology, you may prefer to collect the rent in person.
5 Methods for Collecting Rent
There are several different ways you can collect rent from your tenants. These methods include personally collecting the rent, as well as outsourcing rent collection to a third party. Below are five options you may way to consider. When you decide on a rent collection method, you must include a clause in the lease agreement that clearly explains the rent collection procedure.
1. Collect Rent Online:
One way to accept rental payments is online. If the primary method you use to collect rental payments is online, you usually have to allow another form of payment for those that do not have access to online resources, such as paying rent by mail.
There are many online sites which offer online payment services to landlords. These sites include ERentPayment, RentMatic, and RentMerchant. You can do a search of online rental collection services to find the site that best suits your needs.
Prices will vary depending on the plan selected. Some sites or plans are very basic with simple rent collection being the only service offered. Other sites may have more bells and whistles with services that could include an online rent roll, the ability to upload important forms, and documents for your tenants and the ability to send messages to your tenants.
Pay Pal and Venmo are other options for collecting rental payments. Venmo allows instant payment, but requires you to be friends on social media. Pay Pal is a free service. That downside is that payments made on Pay Pal can take several days to process and it requires the tenant to follow exact instructions so that the payment is not delayed or so that you are not charged a fee.
2. Collect Rent by Mail:
You can choose to allow tenants to send their rental payments by mail. This saves you the time of having to collect the payments yourself.
This method does have certain issues. For example, the envelope could be postmarked by the required date, but you may not receive the payment until several days later. The rent would not technically be considered late, but you would still not receive it on time. In addition, if the tenant only partially pays their rent, sending it in the mail will buy them a few extra days until you find out.
Allowing the mail method of payment also allows for the age old excuse of "the check got lost in the mail." To prevent this, your tenant can obtain a certificate of mailing from the post office, which costs a little over a dollar. This certificate serves as proof that the mail was sent when the tenant says it was.
However, it does not verify the actual amount that is in the envelope.
3. Drop-Off Location:
If you have an office for your property investing business, you may choose to allow tenants to drop the rent off at this location. I would not recommend allowing your tenants to drop payments off at your home address or to ever give your tenants your home address, unless, of course, you live at the same address as your tenant.
4. Collect Rent In Person:
You can decide to personally collect rental payments from all tenants. The good part about this is that you will have the payment in your hands immediately. The bad part is that it is time-consuming and frustrating to try and coordinate pick-up times with all of your tenants.
Finally, you could choose to completely outsource rent collection to a third party by hiring a property management company. Not only can this company collect rent payments for you, but they can also deal with all tenant complaints, handle maintenance issues and fill vacancies. You will have to sign a contract with the company and pay an agreed upon amount based on the services you desire.