Rent Collection: All the Options

Posted by Teresa on February 3, 2010 under Landlord Paperwork and Forms, Landlord Tips, Rents and Deposits | icon: commentBe the First to Comment

iStock_000002872280XSmall-208x300Landlords have many options for collecting rent from tenantssome more secure than others. Take a look at our readers’ tips and decide which is best for you.

1. In person:
A dicey choice, for sure, and one of the more old-fashioned methods for rent collecting. Some landlords physically visit tenants and pick up rent, or tenants drop it by their office.

Pros: You see your tenants every month and can check in with them. If you’re personally picking up the rent, you can check on your property. You’ll have the rent in your hand—no “check’s in the mail.”
Cons: If you’re collecting in cash, it’s dangerous. Depending on your schedule and number of rental units, it could be inconvenient and time-consuming (especially if tenants are away or don’t have the rent ready for you when you arrive).

2. By mail: A time-proven method.
Pros: Landlords don’t need to leave the comfort of your home or office. It’s convenient for tenants to write and mail rent checks on their own schedules.
Cons: You’ll often experience a time lag between the day rent is due and when it is received. Who makes the trips to the post office to collect envelopes? How often will all rent checks arrive at the same time? What if your bank charges per deposited item? And everyone’s favorite: How often will you hear that a check is in the mail, got lost in the mail, or was rerouted to Peru on its way to your PO Box?

3. With an online pay system:
Property owners can set up an online payment system account (such as Pay Pal) so tenants can pay online either with a credit card of through a bank account. Or, landlords have several options with online rent payment portals that are easy to set up and use.

Pros: no checks to deposit—rent funds are deposited directly to your bank account of choice. No waiting for checks to arrive in the mail. A much more secure system to receive payments—no cash involved. Some rent collection packages offer reports and other valuable information to help run your business more efficiently.
Cons: there are usually transaction fees involved—so if the rent is $1000, you could actually receive 2% to 3% less. Transfers can take a few days. If tenants pay by credit card, there is always the possibility they will dispute a charge and cause a chargeback, which ties up the funds until the dispute is settled. Not all tenants have Internet access.

4. Direct deposit/Electronics Fund Transfer (EFT):
Pros: More tenants are paying their bills online. Automatic transfer of rent is one less hassle for them. Funds are automatically deducted every month from tenant’s account and deposited to yours. Safe, secure, and no checks to wait for and then deposit.
Cons: There is the possibility that tenants will not have the funds available when rent is due. Plus, there is the small detail of another form to fill out, explain to tenants, and obtain their authorization.

Whether you collect cash, checks, money orders, or just review your bank statements online and watch your funds transfer in, the best method of rent collecting is an ongoing debate with landlords and property managers.