If you own rental property, collecting rent every month from your tenants is a top priority. The traditional rent collection method has always been to send a rent check. From a tenant’s perspective, writing a personal check once a month is straightforward. However, if you are a landlord trying to eke out a living from a few rental units, processing rent checks is a clumsy, time-consuming process. Accepting rent payments by check can also severely impact your cash flow.
But surely, there must be better ways of running a successful rental business than collecting rent checks. After all, most consumers use the internet for banking and shopping online. Also, digital wallets like PayPal, Venmo, and Zelle are popular for splitting bills or making electronic payments. There is also a growing trend among professional landlords to use mobile payment apps specifically designed for rent collection.
Are you a landlord looking to save time and make rent collection more straightforward? Do you want to find out about ways to collect rent better suited to the modern renter in a digital age? If so, please continue reading to find solutions to your greatest pain point — collecting rent on time.
Let’s face it — it takes a lot of your precious time to process a rent check. Did you know that it can take up to seven days from when a tenant writes and mails the check until the cash is available in your bank account? Would you not prefer to get rental money in your bank account in a matter of hours rather than days?
Here is a typical timeframe of how long it takes to process a tenant’s rent check. First, the tenant writes and mails the check. This usually takes up to three days to arrive unless there is a longer wait due to postal delays. After receiving the check, you must drive to the bank, stand in line, and deposit the check. Then you must wait for one to three business days for the check to clear.
Additionally, since October 2021, many landlords may have to wait even longer for checks to arrive. CBS News reported that changes in the United States Postal Service would result in four out of ten first-class mail items having slower delivery times. In some cases, this means your tenants may incur late fees because their personal check was late.
Here’s a list of compelling reasons to avoid collecting rental payments by check:
One of the biggest challenges successful rental property owners face when switching to rent check alternatives is convincing their tenants. After all, sending a check is straightforward for tenants. It’s landlords that are burdened with the hassle of processing paper checks
Surprisingly, paying rent by check and cash still seems the most popular method. For example, the Federal Reserve Bank of Boston reported that 42 percent of renters still mail a monthly rent check. In addition, a surprising 22 percent of landlords continue to accept cash payments. The study found that a meager 8 percent of tenants paid rent using an electronic method.
As a property owner running a profitable business, you must be in control of rent payments. This means that you can specify acceptable ways for your tenant to pay rent. In most states, you must provide at least two methods of payment.
Using a mobile payment app is the best alternative to a paper check. Not only is it convenient for you as a landlord, but your tenants are probably already using one to make online payments. Also, you have an electronic “paper trail,” which is more secure than keeping paper documents. However, some digital wallets or “peer-to-peer” payment methods are better than others for rent collection.
Here are the pros and cons of some popular payment apps, including some designed specifically for landlords.
PayPal is one of the most well-known digital wallets, and many landlords use this as a rent check alternative. Tenants can pay rent directly into a landlord’s bank account, or you can request a rent payment.
However, PayPal is a poor option for collecting rent because there is no payment protection. Additionally, you can’t block partial payments. And PayPal can sometimes freeze a tenant’s accounts if they suspect any questionable activity. Finally, PayPal has monthly fees for using a business account.
Zelle is a popular mobile application that lets users quickly transfer funds. A benefit is that the money appears directly in your bank account if you sign up to Zelle. And there are no transaction fees.
But there are cons to using Zelle for collecting rent. For example, it’s possible for a tenant to pay someone else accidentally instead of the intended recipient. And it’s hard to resolve disputes if you use this service. In addition, like PayPal, the lack of payment blocking and purchase protection means that Zelle is not great for online rent payments.
Buildium is a property management app popular with many landlords. The app streamlines rent collection, sends reminders, calculates late fees, lists vacancies, and allows tenants to request maintenance visits. It is also possible for landlords to post vacant properties on sites such as Zillow and Trulia. Landlords can also accept payments, send out invoices, and process security deposits.
One thing to consider with Buildium is that it’s expensive. So, if you only manage a few rental units, it’s not a cost-effect alternative to rent checks. In addition, for some users, the plethora of features makes it challenging to use.
Rentdrop is a straightforward rent collection app, allowing landlords and tenants to collect rent online for free. Rentdrop has some handy features for landlords like scheduling automatic payments, processing security deposits, tracking rent payments, and sending rent reminders. In addition, the convenient app allows roommates to split the rent, and landlords can also offer tenants flexible rent payments.
Rentdrop lacks some of the features of expensive property management apps. But the service is free for landlords and tenants to use and is an excellent alternative to collecting rent checks.
PayRent is a mobile application that helps landlords manage their properties. Landlords can use the app in place of rent checks. The app makes it easy to track a tenant’s rental payment history. Also, tenants can pay rent using either a debit card, credit card, or checking account with an e-check.
However, there are some drawbacks to using PayRent. For example, you must pay transaction fees, which can cost up to $50 per month to use.
Sending a paper check is fast becoming a part of history. So if you run a successful business, there are many reasons to stop accepting rent checks and convince your tenants to use an alternative method. Not only are digital payments more secure, but they will also save you time and money and help free up valuable resources.
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