So, you want to update your rent collection method. Maybe you’ve heard that some landlords collect rent online and are wondering how doing so could benefit your business. One of the biggest benefits of collecting rent online is that it gives your tenants the flexibility to pay in multiple different ways, increasing the likelihood that they’ll get their payments to you on time. Below are the three best ways to collect rent online in 2023.
ACH Payments
When you allow tenants to pay via an ACH rent payment, the payment is taken from your tenant’s account and deposited directly into yours. Tenants can sign up for ACH payments by inputting their bank account and routing numbers into the rent collection software of your choice.
The benefits of allowing your tenants to utilize this method of online rent collection is that transactions are cost-effective, quick, and seamless. These payments are also much more secure since there is no manual handling of personal banking information, and it is all taken care of online.
Debit/Credit Cards
Another way that tenants can pay their rent bills online is via their debit or credit cards. They can do so by taking a few minutes to put their card numbers into the payment processing system you choose.
Debit cards may seem more secure since the funds must be already in the account to complete the transaction, but in the small chance that your tenant is a victim of fraud, debit cards are somewhat risky. Because those funds are there and ready for the taking, it can be difficult to recover them. In contrast, credit cards work by borrowing money, so when the person using the card is subjected to theft, it is much easier to recoup any lost money since it was never “real” in the first place. If you find that your tenant is weary about collecting rent online because of security concerns, encourage them to pay with a credit card.
Also, accepting rent via credit card can benefit your tenants who are looking to increase their credit score. If they register with a tenant credit reporting service that allows them to report their rent payments to the three credit bureaus, consistent and timely payments will help your tenants gain a few points on their score. Take the time to research whether you would like to sign up and offer a reporting service to your tenants through a reputable credit reporting company.
Property Management Software
By far the easiest way to collect rent online is through property management software. Many software partners, like Innago, will offer the flexibility to collect rent online free and with the option to pay using any of the options listed above. Also, property management software offers many other benefits like detailed and automated bookkeeping, recurring payments for tenants, and the ability to remind tenants of upcoming events or due dates.
Make sure you first do research into what software is best for you. Some companies cater to small landlords, while others are more convenient for mid- to large real estate businesses. You don’t want to end up with something that is too simple or complex for your needs.
What Not to Do
When pondering which rent collection method is best for you, try to avoid peer-to-peer (P2P) platforms like Zelle, PayPal, or Venmo. These platforms strongly discourage and sometimes outright prohibit rent transactions using their services on a personal account, so avoid all the legal red tape and choose a different method. These apps are made for small payments between friends, as the name peer-to-peer suggests, not for large and important payments like rent. Although you can create a business account and collect this way, you would be required to share private tax information, lose the ability to reject payments, and are unable to benefit from any automation like autopay or automatic late fee charging.
Also, more traditional methods of rent collection like cash or paper checks are too much of a burden. You have to schedule times to meet with your tenants in order to exchange payment, and all your records have to be manually done. Skip all the hours slaving over your Excel spreadsheet and switch to property management software that will do it for you.
Keep in mind, however, that some states require landlords to accommodate tenants who have difficulty paying rent in a certain way. If your tenant refuses to pay rent online, check with your state laws to see what your options are for accommodating that renter.
Conclusion
When you choose to collect rent via property management software, the pros and cons of what kind of payment methods to allow are relatively unimportant. With the right software partner, you don’t have to worry about the complication of allowing certain payment types and not others. Sit back, relax, and let the computer do it for you.
