These days there is a service or app for pretty much every routine task we need to manage in our lives, and that includes accepting rent payments on rental properties. Adopting one of these systems can increase the efficiency of your management system and also help you avoid some of the drawbacks to traditional payment methods like cash or mailed checks. With a multitude of online payment systems to choose from, what are some of the considerations to keep in mind when comparing and choosing one to utilize?
1. Is the service designed specifically for rental payments?
Some online payment systems are designed more for peer-to-peer payments (like splitting the bill at a restaurant with your friends) instead of specifically for rent collections. This is important for a few reasons. Peer-to-peer payment systems are going to allow for someone to pay you any given amount at any time. This means that a tenant could submit a partial payment of rent and this could prevent you from serving any payment or eviction notices in a timely manner if it is shown that you have accepted partial payments. Also, the tenant could cancel a previous payment or dispute a previously paid rent payment through the servicer who will commonly take the side of the “customer” in a dispute. These are some of the major reasons why you might want to consider a system designed specifically for rent collections.
2. What are the fees (if any) for using the service and who pays for them?
This is quite variable between services so should be something to take a close look at. Some services charge a small percentage of each payment or a fixed dollar amount per payment. Most give you the option to charge this to the tenant or pay as the landlord, but as you can imagine the tenants will likely not be too incentivized by this fee and as a landlord this might result in a significant monthly expense depending on how much rent you are collecting each month or how many deposits it entails. Other services are free to landlords and tenants as they have additional revenue generating features of their platform that allow for them to provide this part of the service at no charge.
3. Does the service allow for partial payment of rents or only full payments?
As mentioned above, by accepting partial payment of rents it can put you in a position as a landlord to not be able to serve an eviction notice on that tenant simply because you accepted a partial amount of rent. Some services allow you to set up your account to accept only full rent payments to avoid this situation.
4. What forms of payment are accepted?
Most services allow for payment by electronic check (ACH), debit card, or credit card. A few of the services allow for cash payments at designated nationwide payment centers that can be applied to the tenant’s account. You should take into consideration what might work best for your particular tenants when deciding what forms of payment you need to allow for. Although for you it might seem antiquated to pay rent in cash or unnecessary to utilize a credit card to pay rent, for some tenants this might be what works best for their situation and by trying to accommodate this you might get more timely rent collections.
5. If credit card payments are accepted, who pays the service charge?
As with credit card payments for any item, merchants are charged a fee for accepting credit card payments for rent. Typically this is passed on to the tenant making the payment, but just make sure this is the case so you don’t end up with a small bite taken out of rents collected.
6. Does the service allow for recurring/automatic payments to be set up?
In general, having automatic and recurring rent payments is beneficial to both landlords and tenants. Not that it should necessarily deter you from setting things up this way, but just be aware that if there is a tenant you are trying to evict and you accept a rent payment through a recurring payment system that might interfere with, or at least delay, your eviction process. Again, this is just something to bear in mind.
7. Does the service provide the option to automatically add a late fee for late payments?
Having the ability for the service to automatically add late fees to a tenant’s account past a certain number of days late is very helpful in making sure you collect on late fees owed and also helpful in showing a fair and consistent policy of instituting late fees. This can be an additional incentivizing feature once tenants realize the system will automatically charge them this fee if they go to pay the rent late.
8. What are the processing times before the money arrives in your bank account?
On average, the typically process time seems to be about 2 to 4 days for the rent payments to reach your bank account from the time the tenant pays through the system. I have seen a few that advertise a longer time frame, so make sure you choose one with a processing time that works with how you manage and pay bills for your property. The rent payment service should advertise this processing time on their website or be able to tell you if you ask.
9. Does the service provide a credit reporting feature to allow tenants to build their credit for timely payment of their rent?
Some services provide the option for tenants to have their rent payments reported to one of the major credit reporting agencies like TransUnion or Expedia. Tenants might like the ability to opt into this feature as it could help them build or improve their credit score with timely rent payments. On the other hand, as a landlord you might like having your tenants sign up for this feature as it is another motivating factor for them to pay their rent on time.
10. What payment portals are available?
Most of the services allow for online payments and some have their own mobile app. Others also allow for calling a phone number to make a payment or texting a payment to the system. Again, it is worth considering what will work best for your tenants and adopting a plan that will easily allow them to comply with your chosen rent payment system.
Hopefully you have a better idea now of what to look for when evaluating options for utilizing a rent payment service. There are a multitude of services to choose from, a partial list of which is below for you to start your search:
I’d love to hear comments on any of the rent payment systems you have used and what your experience (good or bad) has been with them.