Why Landlords Are Moving to Online Rent Collection
The real estate industry has traditionally been resistant to change. As such it’s perhaps unsurprising that there are many landlords who still collect rent via cash. However, collecting rent by cash is an insecure and inefficient method of rent collection. It makes the lives of both landlords and tenants harder and it’s been found that it actually increases the chances of a late pr even missed rent payments.
Add to this how the market has had to change over the last year in response to the pandemic, reducing face to face interactions and companies steadily adopting more digital solutions.
In this article, we look at the pros and cons of collecting rent online vs. more traditional methods like cash or check.
Cons of Collection Rent in Cash
Easy to Lose
Cash can go missing. If it does go missing at any point for any reason before it’s put away into the bank there’s no way to get it back, it’s gone.
It’s Insecure
The majority of people are honest, however, while it’s unlikely that your employees or anyone else would steal from you, having easy access to thousands of dollars in cash might just be too tempting for them. And once again, with a cash payment, there’s no way to prove that the money was stolen and there’s no way to get it back.
It May Signal Illegal Activity
There are plenty of people that get large portions of their paycheck in cash — bar staff being a key example. However, there are also a lot of less legitimate reasons for a person to be making cash. This could be because of illegal activity such as selling drugs or perhaps they’re just attempting to avoid taxes.
If they’re not collecting their paycheck in cash then it would be a lot easier for them to pay their rent online via a bank to bank transfer or using their card.
The Pros of Cash
You Get Paid
It’s not always a bad thing to be able to take cash payments. Sometimes there is no other option. At the end of the day cash is better than nothing.
No Risk of Payment Failing
Online payments can fail or even be reversed. There is no chance of this with a cash payment. Once you have the cash amount the tenant has no way to recall the payment. Additionally, if they do try and pay only a partial amount you can reject a cash payment.
Ultimately, the cons outweigh the pros when it comes to online rent collection. It’s an inefficient, insecure way to collect rent that could easily lead to greater difficulties and issues down the line.
The Cons of Collecting Rent Online
Various Fees or Other Limitations
How you collect rent online plays a big part in how beneficial it is. Some systems or processes will have associated fees or even transfer limits. For example, setting up an ACH transfer through your bank could cost as much as $35 and reclaiming that fee from your tenant through a convenience fee may not even be legal in your state.
Failed Payments & Disputed Charge
Another risk is one we mentioned above, failed payments. For example, a tenant attempts to pay but doesn’t have enough funds in their account,. The payment fail and because of processing time they end up being late with their rent payment even though they attempted the payment on time. Alternatively, if they pay via card they could then dispute the charge to their card, often payment providers side with the customer in these scenarios.
Partial Payments
Additionally, with online rent payments, there is potential for your tenant to transfer a partial amount of the rent into your account to derail eviction proceedings. With some payment platforms, there is no way to block partial payments which could lead to a drawn-out and expensive eviction proceeding
The Pros of Online Rent Payments
Reduce Late & Missed Payments
Probably the biggest benefit of online rent collection is the ease and convenience for both parties. The direct result of making rent payments easy is that tenants are less likely o pay their rent late. If they can log in and pay in a matter of seconds, or even set up recurring payments, then they have no excuse to not pay.
100% Secure & Fast Payments
Payments will be transferred directly into your bank account meaning there is no chance for the money to be lost or stolen. Additionally, while ACH payments can take up to 5 business days, this is still a faster process than collecting and banking cash. On top of this, there are platforms which allow for instant transfers.
Improve Tenant Experience
The convenience of online rent payments doesn’t just improve the likelihood of timely payments, it also actually improves a tenants experience of renting out that property. A happy tenant is less likely to decide to move which in turn means fewer vacancy periods for your apartment.
Saves You Time
By removing the need for you to constantly chase and process payments you will save yourself a huge amount of time each month in the management of your properties.
Plus, with certain online rent collection platforms like Landlord Studio your rent payments are automatically tracked in their income and expense tracking system saving you hours of admin every month for your income and expense tracking.
A Digital Trail
With online rent payments, you have a clear digital trail making it easy to track all your income, gain a clear insight of your cash flow and prove income at tax time.
Online Rent Collection Solutions — Avoid Late and Missed Rent
An all in one solution — Landlord Studio ACH Payments
Collect rent through a platform such as Landlord Studio and have the rent automatically reconcile. Plus it integrates with their suite of property management tools allowing you to create automated rent reminder emails and more.
Learn More About Landlord Studio
Pair a free solution with your income and expense tracking system
There are various free online payment solutions on the market. While they don’t have landlord specific features such as blocking partial payments and setting recurring payments these solutions are a fast, easy and free solution to upgrading your rent collection process.
Zelle
Most major banks participate in the Zelle network so if your tenant has a bank account it’s likely that they can pay easily and simply using Zelle.
Venmo
Venmo allows you to send and receive money quickly and easily through their app to people on your contact list. You can quickly connect to people through social media, or, like Zelle, you can use their email or phone number if they already have a Venmo account. Although it’s not designed for collecting rent you certainly could use it that way.
