Options for Collecting Rent From Tenants

Different Ways a Landlord Can Collect Rent

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Getting paid by your tenants each month is a good thing, but if you do not have a streamlined process for collecting rent, it can be a hectic time as well. Deciding on one or two ways in which you will accept rent payments will make it easier for you to track the payments and for you to know sooner who is behind on their rent. Learn five options every landlord has for collecting rent from their tenants.

What Method Will You Use to Collect Rent?

As the owner of the rental property, you decide, within the law of course, how your property will be run. Deciding how rental payments will be collected is a part of this personal choice. You have to choose the option that best suits your needs. You may decide payments will only be collected using one method or you may allow multiple methods of payment.

Factors that Influence the Best Way to Collect Rent

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.

2. How Far Away You Live From the Property- If you live far from your rentals, hiring a third party to collect the rent or an electronic funds transfer may be better options for you.

3. How Much You Want 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 Options for Collecting Rent

Many options are available for collecting rental payments.

These methods include personally collecting the rent, as well as outsourcing rent collection to a third party. Here are five options you may way to consider. Regardless of the option you choose, you should clearly explain in the lease agreement how rent will be collected each rent term.

1. Online:

One way to accept rental payments is online. There are many online sites which offer this service 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. These online sites are great in that they do not require you to give any personal banking information to your tenant.

Pay Pal is another option for collecting rental payments. While it is free, it is not as user-friendly for the tenant. The tenant must follow exact instructions so that the payment is not delayed or so that you are not charged a fee.

For example, if the tenant does not mark the payment as a personal payment, you could get charged a business transaction fee. It can also take several days for a payment to go through, so it can be hard to determine when the tenant actually made the payment.

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.

2. 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. 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.

5. Property Management Company:

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.