Having a well established and streamlined method for rent collection will make your job as a landlord or property manager much easier. Fortunately, there are numerous ways to easily collect rent from tenants. If you're trying to determine the best way to collect rent, take a look at the five most popular methods for collecting a rent payment to determine which method is the best option for your rental property.
Property management software
Most property management software programs, including the free programs, offer some sort of rent collection service. For a small fee paid to the landlord or property manager, the program will facilitate electronic payment via bank transfer, debit card, or credit card directly depositing the rental amount into the landlord or property manager's bank account on file within a few hours or days.
As an added bonus, most property management programs will also provide the tenant with their own tenant portal, allowing them to set up a recurring payment on the date of their choice with their preferred payment method, automatically calculating any applicable late fees. This promotes on-time payments by giving the tenant the opportunity to automate their rental payment each month.
Use a third-party app
If you aren't using an online property management program, consider using a third-party app like Paypal or Venmo. Both of these allow tenants to make payments to your Paypal or Venmo account for free, which can then be deposited into your bank account of choice within 24 hours. Since this payment method is completed by phone or computer, there is no excuse for late rent.
A number of banks now offer pain-free bank-to-bank transfers called ACH transfers. Apps like Zelle allow tenants to make a rental payment online by entering the landlord or property manager's email address, phone number, or checking account number for free. Talk with your bank to see what bank-to-bank payment method they use or accept. And keep in mind that not all banks offer the same services or fees. While your bank may accept direct deposit, the tenant's bank may not use the same service or charge them higher fees, making this a less appealing option for both parties.
Some tenants still prefer to use mail to send rent checks or money orders for their rent payments each month. While this method of rent payment is becoming less frequent, it is an option. If you do offer this as a rental payment option in your lease agreement, make sure to emphasize that any checks received after the rental payment, whether delayed by mail service or not, is considered late. It should be the tenant's responsibility to put the check in the mail at least a week before rent is due, or a late fee will be assessed as a part of next month's rent.
Another rental collection method is having a designated rent dropbox. This can be a nice solution for larger multifamily properties, like an apartment complex that allows tenants to pay rent by check or money order whether the office is open or not. However, if your properties aren't located in one centralized location, it's unlikely this option will make sense for you.
So which method is best?
While there are multiple ways to collect rent, it's important you ultimately choose a rent collection method that works best for you and your tenant. Consider who you are as a person and who your tenants are. If your tenants don't typically have a bank account or pay rent in cash or by money order, it's unlikely they'll be able to transfer money via ACH or pay you via Venmo. If you aren't technologically savvy and hate having to learn new apps or online programs, don't make that an option.
Ideally, you're buying rental properties that cater to ease of management, and ease of payment for your tenants, which in most cases means some form of online or direct rental payment. But in reality, do whatever it takes to collect rent each month. If that means you have to be at the property to collect a cash payment, partial payment, or check from the tenant, then do it. If you have an older tenant who prefers to mail the check, allow it. Explore your options first, and don't assume the tenant won't be able to accommodate your preferred method of collecting rent. In most cases, when given the opportunity to pay online or via an app, the tenants adapt or may even prefer to pay that way.
Just make sure the rental collection method is clearly outlined in your lease agreement in the rent-collection policy section, with explicit instructions explaining how to make a payment with a given service, app, or method, especially if it's new for the tenant.