Landlording & Rental Properties

9 Ways Smart Landlords Encourage On-Time Rent Payments

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House with "For Rent" sign in front

Of all the tasks a landlord or property manager has to deal with, collecting rent is the most important. It is your rental income—it's how you pay your bills! Managing one or two properties can be easy, but you still might face the arduous task of chasing tenants for late payments. It's when you start managing multiple properties that the job becomes far more challenging.

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Most landlords start traditionally: By collecting rent checks from tenants. But if you are just starting out as a landlord, consider finding more secure, reliable, and faster ways of rent collection. After all, it can take up to seven days from when tenants mail their checks until the funds clear in your bank account. Can you really afford to wait that long?

What are the options out there for landlords who want to be successful in their rental business?

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Avoid Checks and Money Orders

Even today, money orders or checks are still popular methods for collecting rent. Checks are comfortable, and don’t require a steep learning curve for tenants. But rent checks have serious disadvantages. For example, checks are easy to steal, putting a person at risk of check fraud. They are also an easy target for criminals.

According to the American Bankers Association, check fraud is on the rise. It published a survey in 2020 showing that check fraud accounted for losses of $1.3 billion. But that’s just part of the picture. Attempted check fraud amounted to $15.1 billion. So, criminals are targeting checks as the top way to scam people out of their money.

Surprisingly, check fraud is more common than debit card fraud and other types of electronic transactions.

Collecting rent by money orders can be just as risky. Money orders can be issued from several different vendors. If a money order is stolen, it is much harder to get a refund. The tenant may need to wait for this refund before being able to pay the rent—and you have to wait for your money. While a money order can’t bounce like a check, tenants can cancel them.

Money orders and checks are what many people still use to pay rent. But this doesn’t mean it’s the easiest for tenants or landlords. Oher payment options make rent collection a breeze for both parties.

first-months-rent

How to Get Tenants to Pay on Time

Want to avoid late rent payments? Try a rent collection app, which allows tenants to pay online or even in cash without the need for sharing financial information. A landlord can sign up for one of the numerous apps available and inform tenants of this app. Tenants can pay using a variety of methods—credit card, debit card, setting up automatic payments, or even in cash in associated stores. The apps should be mobile-friendly so that tenants can pay anytime from their phones.

Landlords who use rent collection apps benefit from the following:

  • Real-time notifications of rent payments
  • Send out late or missed payment reminders
  • Check tenant payment history
  • Set up late fees
  • An overview of the financial situation

Rent collection apps and online bill pay are a win-win solution for the tenant and the landlord. Tenants are less likely to forget and suffer late fees, and landlords are more likely to be paid on time. Plus, it’s far easier than traditional rental payment methods. The apps have enhanced security and digital trails to resolve any disputes.

Learn more: BiggerPockets Property Management Software Reviews

The Top 9 Ways for Landlords to Collect Rent Online

Let’s look at some of the most popular ways that successful landlords collect rent.

1. Buildium

This app has excellent services for landlords and tenants. Tenants can pay each month or set up recurring payments, and they can pay their security deposit, too. The rent collection app also has a chat tool that allows tenants to contact the landlord in case of any maintenance issues. Landlords can even take advantage of screening tenants with the app. Also, they can automatically list vacancies on Zillow, Trulia, and Craigslist.

While Buildium covers all areas of property management, the packages start at $50 per month.

2. PayRent

PayRent allows for e-check and credit card payments—one-off or recurring. You can accept partial payments, which could be useful in unique situations. Landlords can track payments and use full accounting tools to manage their finances. The downside is that it is a little costly. PayRent takes 3.5 percent of each transaction, plus $0.30 on credit card payments and 0.25 percent of bank transfers.

3. RentDrop

The RentDrop app has a great user interface that is easy for everyone to use. Tenants can set up recurring payments, use a debit or credit card, or allow for ACH direct deposits. So, no more trips to the bank to cash checks or wait for funds to clear. It is perfect for landlords who manage multiple properties because you can quickly get an overview of your rental units.

Better still, for landlords, it is free. Indeed, you might not enjoy all of the sophisticated management tools—but do you need them?

4. AppFolio

This app is also more than just a rent collection app—it’s a property management app. So, it will save you a ton of time if you’re managing multiple rental units. This app is ideal for those who have mixed property portfolios. Some of its features include the ability to arrange renter’s insurance and bulk messaging. Landlords can screen tenants through the app and gain access to rent comparison tools.

The app isn’t as straightforward to use as others, and you might need deep pockets. Prices start at $250 a month.

5. eRentPayment

This app has a wide range of tools for landlords and tenants. Of course, you will find the usual online payment options and reminders. One excellent feature is that tenants can leave maintenance messages for landlords. This feature helps to improve landlord-tenant relationships as there are less conflict and confrontation. As well as tenant screening, eRentPayment offers credit reporting—something that many tenants like if they need to improve their credit history.

6. ClearNow

Landlords can entice tenants to use this app when they learn that it can improve their credit score. ClearNow can send rental payment histories to Experian Rent Bureau. Tenants are motivated to pay their rent on time, knowing that they'll find it easier to a loan or even a mortgage in the future.

Keep in mind that the tenant has to ensure that the full rental amount is in their account, or the recurring payment won’t be processed.

7. Avail

Avail is a simple app. Tenants log on and make a payment or set up recurring payments. The app also sends automatic email reminders five days before the rent due date and again on the actual date. Landlords can have the rent payment cleared in their accounts within three days.

8. Zelle

Zelle is a money transfer app rather than a rent collection app. It kind of works like a direct debit. It’s simple to use—just download the app and add your bank details. Most of the time, the landlords receive the money instantly, and neither party has to pay fees. But you won’t be able to use features like recurring payments or reminders. Furthermore, people can send money to the wrong account by accident

9. PayPal

Because of the popularity of PayPal, it is likely that you already have it and, therefore, don't have to download more software. It is straightforward to use and probably a better solution to checks. However, it lacks all of the functions of the best rent collection apps. There is no way to send reminders, and PayPal clearly states that purchase protection doesn't cover real estate transactions.

How Successful Landlords Collect Rent

If you aspire to become a successful landlord who manages multiple properties, start as you mean to continue. Using an online method to collect rent from the outset will ensure a healthy cash flow. Landlords who collect rent online have fewer issues collecting rent on time, and they can devote time to more important things—running a successful rental business.

There are a few rules we recommend following, in addition to using a streamlined app:

  • Late fees: These encourage tenants to pay on time by providing a financial incentive to do so. While it may be tempting to waive late fees, we recommend not doing so as part of your policy—or only allowing one grace period. Knowing these fees will be instituted keeps “rent” as a priority for tenants’ bank accounts.
  • Strong rental agreements: Make sure new tenants and prospective tenants understand their rent payments and your late fee structure by outlining them in the lease.
  • Legal advice: Make sure your late fee has legal backing by consulting an attorney regarding your lease—and, of course, if it comes down to the worst, make sure you’re providing the proper eviction notice and following the legal eviction process. State laws can vary, so pay attention.

Questions? Comments?

Join the discussion below!

Remen Okoruwa is the co-founder of RentDrop, a free software tool that helps landlords and property managers collect rent and maintain their units. Remen has ...
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    Jim Spatzenfeld Investor from Buffalo NY & Sacramento CA
    Replied about 1 month ago
    My tenants pay via Zelle, CashApp, Venmo, Popmoney, checks and money orders. All of them don’t charge any fees (not yet!) I prefer Zelle because it goes straight into my business account. I hate checks and money orders. I had a couple of lost-in-the-mail money orders and having the receipt with tracking number in hand, the issuer (Post Office) said they would have to first wait about 4 weeks to see if the money order gets cashed before they can do a stop payment and replacement. I told them it got stolen. They still insisted to wait first to see if it gets cashed. Took them 6+ weeks until they issued replacements.
    John Haake II
    Replied about 1 month ago
    From the start I refuse to accept cash or check. Only means of payment is electronic. Originally I was accepting PayPal and/or Venmo, however, it was too hands on and I often found myself needing to remind my tenants each month. I found Cozy and tested it out on a then, new SFH, and liked it. After that I asked the other tenants at another property to sign up. They like it. Very much a set-it-and-forget-it situation for them. I can collect deposits from new tenants and after the first initial transfer for a tenant, I typically get ACH deposited within 3 days.
    Tim Houzenga from Morrison, Illinois
    Replied about 1 month ago
    Self promoting blog post from a co founder of rent drop? Just curious...... Would at least like to know what criteria were used for ranking rent apps explained in the post.
    Rob Sanchez
    Replied about 1 month ago
    I totally agree! They didnt even mention Cozy!
    Elise Hazzard Property Manager from Saint Petersburg, FL
    Replied about 1 month ago
    HI Rob Sanchez, Exactly what I was thinking...where is Cozy?? love the aspect of the automatic late fee when that time occurs; when tenants pay directly, many 'forget' to pay the late fees if they are late. Also like the aspect that Cozy reports timely payments to credit bureau so they tenant can build a credit score, which most of them need, which then makes the Cozy payment system a benefit for both of us!
    Anwer Ali from Raleigh , NC
    Replied about 1 month ago
    I would not recommend PayPal or Zelle. Not sure why it's listed in this article. That's not a rent collection tool and in case of an eviction you may not be able to block the tenant from making a partial payment. The rest of the apps are very expensive for a landlord. One online property management software missing from the tool is tenantcloud.com. It's free and you can do everything with a free version accept for collecting rent. To collect rent it's priced very reasonable priced at $9.99 for 150 properties.
    Anwer Ali from Raleigh , NC
    Replied about 1 month ago
    Accept for $9.99 there's no additional cost. no hidden fees and you can accept as many payments as you want and also pay vendors or your tenants back online at no additional cost. Rentdrop is silly it has wait list which makes me think they can't handle more accounts, so not sure why it's listed here.
    Joe Semifero Engineer / Program Manager / RE Investor from Dexter, Michigan
    Replied about 1 month ago
    I used to use eRentPayment until in October, 2017, something went haywire with their payment system and a lot of landlords got stiffed. (Don't take my word for it, just search "eRentPayments" on BP.) eRentPayments has a lot of great features, but they left a lot f people, including me, high and dry, they weren't answering phone calls or emails, and they were not honest with people. Imagine what a service "costs" you when you don't get a couple of rent payments one month... We switched over to Cozy.co after that episode. Now, instead of the $3 per payment eRentPayment was charging (I don't know what they charge now), we don't pay anything and we receive our payments in the same time frame as we did with eRentPayments. Cozy.co also allows you to make listing for your rentals for free and posts them across a few different sites, allows you to upload and share documents with your tenant, and also allows you to run background checks / screening on prospective tenants where the tenant pays and the report is sent directly to you. A lot of features for what is essentially a free service, and it doesn't have a record of not making payments as eRentPayment has. I agree 100% with the article and fully endorse not accepting checks or cash. Electronic payments leave no ambiguity about if the rent was paid on time, either. We tell our tenants, "Whenever you push send on your computer, that date is recorded and that is when we mark you paid." We have never had a dispute about when a payment was made or had to accept excuses like, "The check is in the mail..." Make your life easier and switch to electronic payments!
    Brad Shaw from Indian Rocks Beach, Florida
    Replied about 1 month ago
    Noticed that Cozy is conspicuously missing. I've been using for several years and find the interface easy to navigate for both landlords and tenants. As treasurer, I also use to automate HOA payments for my condo assoc.
    Randy Bloch Rental Property Investor from Minneapolis
    Replied about 1 month ago
    I am guessing they didnt list Cozy as they do not have app....but I have saved cozy link on my phone and the regular website is quite phone friendly. I love Cozy!
    Mark Evans
    Replied about 1 month ago
    I use Hemlane. It does most everything. 30$ first unit 2$ additional units. Wondering how it compares
    Shane Durkee
    Replied about 1 month ago
    Cozy.co ??? Not a mention? I use this for 22 properties and LOVE IT. works great, easy to use, FREE ACH transfers and more. It’s made my life easy and managing property simple and free. I have considered a more robust accounting option but for now QuickBooks and this has been doing the trick.
    Sean N. Investor from Comstock Park, Michigan
    Replied about 1 month ago
    I have a separate bank account that all my tenants deposit their rent. When it clears I transfer it into my checking account. They love it because the bank that I use is also found in our local super markets so they can use that one when they go shopping or they can use the drive through at others. I tell them to save the deposit receipt for their records. It's been working like a charm for the last 5 years. It's up to them if they want to link their bank account to mine for ACH.
    Jim Meloche
    Replied about 1 month ago
    zelle and paypal don't belong in this list. they are not rent management apps - they don't automatically charge late fees, etc (which is a MUST HAVE in your rent collection system). erentpayment also does not belong on the list - as a previous poster said, they are not to be trusted with other people's money. we have used rentec direct for four years with no problems. they have been everything we've needed to manage the rents of our 12 properties.
    Mark F. Rental Property Investor from Bergen County, NJ
    Replied about 1 month ago
    Thats great you mentioned 9 ways to collect rent other than checks and thanks for the articlr. But the fact that you didn't mention Cozy is pretty weird honestly. Not only is it free with tons of features, its mentioned on BP forums and always brought up at RE meetups I attend. I think you need to educate yourself a bit more before submitting articles to BP.
    Noble Willis Investor from Nashville, TN
    Replied about 1 month ago
    Sounds like RentDrop is a competitor to Cozy. Perhaps your next article you could evaluate the differences and why we should use your CoFounded product?
    Thomas Kelly IV
    Replied about 1 month ago
    Forgot to mention COZY! THE BEST :P
    Steven Farrell Investor from Tyler, Texas
    Replied about 1 month ago
    Check out Roof.io
    Jordan Jones Rental Property Investor from Detroit, MI
    Replied about 1 month ago
    I use Venmo for rent collection. It has been great and really easy. Plus it's free if you do standard transfer to your bank account (which takes in my experience, one business day). However, it's not designed for property specifically so it has no additional management features. It's strictly for making/receiving payments.