Sacramento, CA · Member since 2014 · 17 posts · 9 votes
Hello again!
As a new landlord, I am trying to figure out the "best" option for my tenants to pay rent each month. I have looked around BP and read some articles and have a few ideas for a system I would actually use..
1. Tenant goes directly to the bank to pay (I saw this on the thread from www.biggerpockets.com/show37 with @Aaron Mazzrillo that said he sets up a separate account with no money other than for rent payments)
2. Tenant sets up and uses Chase Quick Pay to pay from anywhere
3. Set up a business account with Wells Fargo or Chase and give each tenant a "deposit only card" so they can pay at any branch location
4. Tenant mails payment to P.O. Box (although this isn't my first choice since in CA the tenants rent payment is considered "paid" when it is mailed, not when received)
I may be missing a few, but my goal is to streamline this process and keep my time for myself!
Please chime in with any suggestions on the above or anything I have not mentioned.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
11y
Hey Taylor....there are a lot of different options/services when it comes to rent collection, but it is usually a good idea to first consider the type/sophistication of your particular tenant(s). For instance, if you're renting to upper middle class tenants in 'A' class neighborhoods, you will likely encounter a different preference for how the rent is paid than if you rent to lower class tenants in a 'D' class neighborhood.
To give you an example, a fellow landlord I know has a half million dollar home that he rents in a very nice area to an executive-type renter. In this scenario, rent is automatically transferred from the tenant's bank account to the landlord's bank account on the 1st of every month via ACH transfer. This works very well for both of them since neither have to do anything - it's all automated.
On the other hand, I cater to slightly lower income/class tenants who don't always have money in their account on the 1st. Some don't even have bank accounts OR Internet. Consequently, this limits the options for how rent can be paid.
The options I offer are similar to the ones you mentioned. They can mail me a check or money order to my PO Box, or go to any Chase bank and deposit the rent directly into my account. I prefer the second option since there's no concern over the payment getting lost in the mail and it saves me a trip to the bank to make the deposit if they happened to mail me a money order. My tenants prefer the second option too, and all except one choose to deposit their rent directly at the bank.
I happen to use Chase and just give my tenants the account number for the account where I want their rent payments deposited. It's not a big deal, but they do have to go into a branch as opposed to just finding the closest ATM.
Some landlords are worried about giving out their account numbers to their tenants, but I've never had any problems and the info you're giving them isn't something that super secret. It's no more than the info that can be obtained off every check you write.
Anyway, you've got several options and it sounds like you're on the right track. Let me know if you have any other questions. Happy to help.
Henderson, NV · Member since 2015 · 1 post · 0 votes
11y
I set up a bank account for tenants to make payments to. They can either go to the branch or some do online transfers. It's been successful for me and great for streamlining. It also avoids the "check is in the mail" excuses and also having to go to the PO Box and then to the bank. One precaution I do take though is not leaving excess funds in there in case of fraud.
Flipper · Arlington, WA · Member since 2013 · 10 posts · 0 votes
11y
Hi Taylor,
We do exactly what Aaron does. There are many ways in which to set up the tenant to do online payments, either to your bank directly or through 3rd party organizations that can also do your tenant applications as well as credit checks. I am not sure if I am allowed to list them here though.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
11y
Hey Taylor....there are a lot of different options/services when it comes to rent collection, but it is usually a good idea to first consider the type/sophistication of your particular tenant(s). For instance, if you're renting to upper middle class tenants in 'A' class neighborhoods, you will likely encounter a different preference for how the rent is paid than if you rent to lower class tenants in a 'D' class neighborhood.
To give you an example, a fellow landlord I know has a half million dollar home that he rents in a very nice area to an executive-type renter. In this scenario, rent is automatically transferred from the tenant's bank account to the landlord's bank account on the 1st of every month via ACH transfer. This works very well for both of them since neither have to do anything - it's all automated.
On the other hand, I cater to slightly lower income/class tenants who don't always have money in their account on the 1st. Some don't even have bank accounts OR Internet. Consequently, this limits the options for how rent can be paid.
The options I offer are similar to the ones you mentioned. They can mail me a check or money order to my PO Box, or go to any Chase bank and deposit the rent directly into my account. I prefer the second option since there's no concern over the payment getting lost in the mail and it saves me a trip to the bank to make the deposit if they happened to mail me a money order. My tenants prefer the second option too, and all except one choose to deposit their rent directly at the bank.
I happen to use Chase and just give my tenants the account number for the account where I want their rent payments deposited. It's not a big deal, but they do have to go into a branch as opposed to just finding the closest ATM.
Some landlords are worried about giving out their account numbers to their tenants, but I've never had any problems and the info you're giving them isn't something that super secret. It's no more than the info that can be obtained off every check you write.
Anyway, you've got several options and it sounds like you're on the right track. Let me know if you have any other questions. Happy to help.
Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
11y
@Taylor ComerCongrats on becoming a landlord (I believe this is new) anyway I just filled my first rental and gave the tenant 3 options to choose from.
1. Direct deposit from their account to mine (ACH)
2. Chase quick pay or equivalent based on their bank (they had Chase)
3. Deposit only card so that they could go to any Wells fargo location or ATM to physically deposit the money.
Like @Kyle J.says above it will largely be driven by what will work for your tenant and for you.
First off, thank you so much for the great information!
We have more C class tenants, so that helps to think of what works best for both landlord and tenant. I think the idea that calls out to me is having the tenants deposit their rent straight into a separate account that I set up with no funds other than rent or set up and account with Wells Fargo and give tenants a deposit only card.
I thought about Chase Quick Pay since the two banks closest to the property are Chase and Wells Fargo, but do you think asking tenants to sign up for something would "be too much to ask of them right away"?
Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
11y
@Taylor Comer that's why I gave them three options on how to pay, it is being flexible for what will work for them. The tenants ultimately chose the chase quick pay as that was what worked best for them. However all three options worked for me. So it is a win regardless of what the tenants chose but it still gives the tenants the option to pick what will work best in their eyes.
Tucson, AZ · Member since 2015 · 5 posts · 0 votes
11y
Lots of good options here. I've found the easiest to be Google Wallet. That way paying rent is as easy as writing an email and you don't have to give out any account information. It just uses an email address and is super simple.
Rental Property Investor · Atlanta, GA · Member since 2015 · 41 posts · 31 votes
10y
P.O.BOX? That's old school...
I rent to A class tenants. So they all prefer convenience. I use both Venmo and Google Wallet. For both, tenants can pay via their smart phone app or computer. It's free, they can set up automatic pmts, they can belong to any bank, and all they need is my email address.
This also removes any "I forgot, or it's in the mail"... they can pay anywhere, anytime.
I then transfer the funds from that app to the appropriate bank account set up for that property. Each property has it's own account.
Financial Advisor · Elmira, NY · Member since 2015 · 132 posts · 67 votes
10y
FYI, at least in NY state, Chase no longer allows non-account holders to deposit cash.
As of now (Oct 2015), tenants can deposit checks or money orders (but not cash) into our Chase account to pay rent. Some branches initially said 'no third party deposits', but that was a training issue, not actual policy. We just double checked on money orders this week, as one tenant's branch told them "no third party money order deposits" but that was incorrect...
Attorney · Bettendorf, IA · Member since 2015 · 106 posts · 47 votes
10y
I do not have a huge portfolio, but for the properties I management myself I've been using: Cozy.co
They make marketing the property, accepting applications, screening tenants and collecting payments all pretty easy. The only negative is that it takes a few days for the rent to process. Rent is due on the first and typically is deposited into my account within 5 business days. I just changed my mortgage due date to the 10th (most residential mortgages I've seen are not actually late until the 15th).
Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
10y
I am sort of with Kyle J. above. Think about your market. And think about your scale. And, of course, making it easy, simple and sustainable (for you and the customer/tenant). It is up to you... and may depend if you are small time part landlord or going big time... or catering to lower income, working class or high income professionals.
If you have a couple of rentals, you can hit the easy button and just hand the tenant SASE's at lease signing. This has worked for me on a small scale for ten years-- never lost any in the mail. They drop it in, I get it, and deposit it. Simple. Some even come straight from their accounts.
Maybe I just have reliable tenants or a good mail service, but it has been a bullet proof and an easy ritual for me and my tenants; even if still old school, it is a durable process that works with any tenant, at any level of tech or financial sophistication, even avoids any tech glitch, is low fee, and survives any bank merger, bank policy rule (or fee), etc. --which seem to happen daily..
Of course, I started before alot of the newer services and many may be worth a look. But I see little challenge in getting the mail (of course, my bank is right next to the PO BOX for me, which is also on the way to work, so it may depend on your facts...)... I get free coffee, to boot. Plus free Cookies on Friday. I actually recommend working all your routines, from rent collection to maintenance, into your life (especially if a part time landlord)...
So it may depend on your situation and scale, but getting my mail box money is probably the easiest (even enjoyable) part of the job. Of course, I have been at 5-10 rental units. At 20, 50, or 100, you bet I would have to go paperless and systematize it with a service and program just to keep track. But if you can't handle a few paper checks, it may be another issue to consider before launching into landlording...
And also think about what works for the tenant. Consider what works for unbanked tenants who can send money orders or for older or non-technology types. So maybe have a couple of options--from SASE to an online payment system that works for you and the tenant..
Lots of good options here, but one thing to consider with giving tenants the ability to deposit or pay electronically. This happened to a fellow investor who had the tenants deposit directly into an account.
The tenant began making partial payments that prevented the investor from being able to evict.
I had a tenant that wanted to pay electronically. I still just get a check in the mail. I later found a site called rad pad that allows the tenant to pay electronically and informed them about it, they have yet to use it however, but it may be the best of both worlds by refusing to except partial payments without pior arrangements.
Puyallup, WA · Member since 2014 · 71 posts · 17 votes
10y
I've been using erentpayment.com for several months. Both of my tenants love it and use it exclusively (they also have the option to mail a check). It emails them a reminder on the 25th of each month. When they pay I am notified immediately, although it does take a few days for the money to be deposited into my account because they wait for the transaction to clear first. Their charge is $3 per month per unit. You can charge that to the tenant, spit it with the tenant or pay it yourself. One of my tenants had trouble remembering her password and called them directly. She said they were very helpful and offered to do the transaction over the phone each month. So far I am very pleased with them.
Baltimore, MD · Member since 2015 · 54 posts · 3 votes
9y
I understand that as a landlord, the security deposit is supposed to be in deposited into an interest bearing account. What is the percentage that is supposed to be earned on this deposit?
Someone above mentioned Cozy... there are other services like this that allow you to pay your rent and build a credit history. That might be a great selling point for some renters wanting to build credit to buy a house some day.
I know you can also send money via Venmo and other solutions.
Investor · Lynchburg, VA · Member since 2015 · 41 posts · 20 votes
9y
I want to make it as simple for both my tenants and myself. I just bought a duplex a couple months ago and inherited a tenant. They have been a great tenant so far but my goal was to make paying rent be as easy as possible for them. My tenants are younger, mid 20's and have 2 kids so most likely, they have smart phones. I told them I wanted to use the CASH App. This app is great because its secure (the parent company is Square) and gives you the option for instant deposit into your bank account (for a 1% fee) or next day deposit for free. My mortgage isnt due till the 15th so I always do the next day for free option. Its been great so far. Eventually I want to get to something like cozy or another type of Property mgt software however for the time being this works really well.
I understand that as a landlord, the security deposit is supposed to be in deposited into an interest bearing account. What is the percentage that is supposed to be earned on this deposit?
just fyi: that's dependent upon the specific State.