Paying rent with Cash - Simplifying processes
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
Second City Real Estate4.821 Reviews
Paying rent with Cash - Simplifying processes
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Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
11yI used to be a very big fan of tenants depositing money into my bank accounts but found on a larger scale it does not work out that well.
One problem is they never completely fill out the slip. They leave out important information such as their address, name and or unit number.
One solution to this problem was suggested by @J Scott which is to hand them out pre-printed slips. I have been there and done that. Unfortunately a large amount of tenants will loose their slips every month, thus creating more issues for the landlord.
As I have scaled up the number of rental units I have found that the very best and simplest method is they must have their money order or cash at our office on or before the due date. They can mail it, hand deliver to our drop box or come inside during business hours and hand it to a Holton Wise employee. Obviously tenants are told that a money order is the way to go if they are mailing or dropping rent in the box.
Doing it this way allows you to overcome common objections and excuses tenants will have for each of the ways they can deliver to us the rent.
"It's in the mail"------Should have hand delivered it.
"Your office is closed by the time I am off work"------Drop box is open 24/7.
"I don't have a car"-------Put it in the mail.
One more issue I have with direct deposit rent collections. A savvy tenant can stall the eviction process by depositing a partial rent payment in your account and receiving a payment receipt from the bank teller.
If they come in with a partial payment you can refuse it. If they mail or place a partial payment in the drop box you can refuse payment by not cashing it.
135 Replies
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes11y
Originally posted by @Roy N.:
Originally posted by @Account Closed:
CNN reported a few years back that 10M US households don't have bank accounts. Even if only a portion of those are renters, that's a lot of tenants that need options. Most of the phone apps and online services are connected to bank accounts. There is obviously a need for cash payment systems for rents. I've accepted cash rents via drop-offs and PM pickups, but haven't yet dealt with accepting payments via the Moneygram type portals. Great thread @Brie Schmidt.
That's interesting. Here the banks are suppose to provide citizens with access to a bank account, as a condition of their charter.
That said, with the amount of "fees" most banks levy these days and the staggering level of their minimum balances to avoid monthly account fees (often 5K+), quite a few people are deterred from using the banks.
There are a lot of barriers here. Fees and minimum balances for sure. But some people have poor credit or lack of address documentation that make a bank account out of reach. We also have tons of people here with expired visas, or no visas and no green cards. Perhaps you've read about it? :)
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes11y
@Roy N. Many places in the states are "fixing" the partial payment loophole. NC is one state that did. For a example of how it's done, see this BP topic specifically my Apr 12, '13 post of an example I saw in court.
The unbanked problem is real. See also the http://www.spentmovie.com/ ad/documentary by AMEX and a critique/commentary. I like that Business Deposit Cards provide an unbanked tenant the opportunity to interface with the banking system. While many unbanked stay that way by choice, many migrate to 'banked' over time. Better for them for sure, and better overall when they are given control and flexibility that 99.9% of us on BP take for granted.
- 11yRoy N.Pro MemberRental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
Originally posted by @Chris Martin:
@Roy N. Many places in the states are "fixing" the partial payment loophole. NC is one state that did. For a example of how it's done, see this BP topic specifically my Apr 12, '13 post of an example I saw in court.
The unbanked problem is real. See also the http://www.spentmovie.com/ ad/documentary by AMEX and a critique/commentary. I like that Business Deposit Cards provide an unbanked tenant the opportunity to interface with the banking system. While many unbanked stay that way by choice, many migrate to 'banked' over time. Better for them for sure, and better overall when they are given control and flexibility that 99.9% of us on BP take for granted.
Estimates of the unbanked portion of the Canadian population ranges from 3% to 9% depending upon the source of the study {Note: there is apparently a report by VISA International which claims 15% of all Canadians 15-yrs of age or older are unbanked. I have yet to read the study, and most I have found or read are half that amount}.
Any Canadian (or landed immigrant) has the legal right to open a bank account with just basic identification. While banks may not extend certain banking instruments to those with poor credit history, they cannot refuse to allow them to open a basic {savings} account.
We also use deposit only bank cards for our cash paying tenants. With this card, they can deposit their rent at any ABM (whether at a branch of our bank or any other). Until recently, we had a tenant who would deposit a portion of her rent each week as she did not trust herself to hang on to it until the end of the month - her card would make 4 deposits every month, but rent was always all there by the first.
Brie: Sorry for the slight hijack of your thread.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes11y
Regarding "Until recently, we had a tenant who would deposit a portion of her rent each week as she did not trust herself to hang on to it until the end of the month - her card would make 4 deposits every month, but rent was always all there by the first." Indeed, this is the reason we went to the WF BDC. Our tenant (and those like her) used to mail money orders 2 to 4 times a month, same as your tenant. The time consumed by collection manager(s) became an issue/factor and we focused on better methods. The deposit cards and online payments reduced our trips moving paper by about 80% over a 12 month period. We've converted some tenants to 'banked' and also some IC (independent contractors) to 'banked' as a condition of doing business with us.
- Investor · Missoula, MT · Member since 2015 · 242 posts · 177 votes11y
This is probably a new age type thing but I have found that using Venmo is very efficient. They can send you rent from anywhere with zero contact with you. You can put it directly into your bank account remotely at any time. It is free for the customer and for you.
- Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes11y
There's a young company in Atlanta called, Renterup, that's piloting a solution for non-banking tenants. You can pay at Dollar General and Wal-Mart with a "paper-or-plastic" card. They can load the card with cash at the store's cash register, then have the bar code scanned. Rent is sent to you via ACH along with who paid, etc. $4.95 fee can be allocated to renter or landlord or split.
They were in pilot mode, but it's a fascinating solution if it takes off. Perhaps worth tracking.
- Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes11y
Originally posted by @Roy N.:
Originally posted by @Account Closed:
It is just normal in our area to get paid in cash, and to pay rent in cash. It was one of the biggest surprises when I came to the market. Having self managed my other portfolio in a A class area I thought I could apply the same tools and systems I had used before, and it didn't work. We offer the option to pay online and not a single person used it.My PM was used to picking up cash from everyone, so in January when we launched pay near me and we were surprised that we had such a high adoption rate. My number one issue was taking the responsibility of rent collection off the PM and putting it on to the tenant.
K. Marie - I did reach out to moneygram directly, but if there is already a rent payment system in place for landlords I doubt they will take me on as a direct client.
I also really like that the pay locations are where they already pay their utilities. It is also a more stable infrastructure so I don't see them losing retailers like PNM did with family dollar.
Second City Real Estate4.821 Reviews - Investor · Harrisburg, PA · Member since 2014 · 1 post · 1 vote11y
Are there issues with setting up a PayPal account to accept rent? PayPal can be done from any phone or computer and anyone can set up an account for free, but they do need some kind of account to link it to. I'm new to rentals but recently had a rentor knock on the door and drop off cash to my house. I obviously did not know they were coming so I didn't have a receipt ready and I am not willing to make sure I am home when they want to come to drop it off.
- Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes11y
@Lynn Kropa we already offer online options, but not one single tenant has chosen this option since we started offering it in January. Many do not have bank accounts
Second City Real Estate4.821 Reviews - Rental Property Investor · Saint Charles, IL · Member since 2014 · 304 posts · 222 votes11y
@Brie Schmidt, I found an old thread on BP that might be worth exploring.
http://www.biggerpockets.com/rei/pay-rent-online-p...
Here are a few more links...
http://www.williampaid.com/how-it-works
Hope you find something useful.
Best,
Ashley
- Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes11y
@Ashley Pimsner - these are for cash paying tenants, online won't work. FYI William Paid closed down in March.
I learned about PayLease a few posts ago and we are looking into that as that has a cash pay option
Second City Real Estate4.821 Reviews - Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes11y
Originally posted by @Brie Schmidt:
K. Marie - I did reach out to moneygram directly, but if there is already a rent payment system in place for landlords I doubt they will take me on as a direct client.
I also really like that the pay locations are where they already pay their utilities. It is also a more stable infrastructure so I don't see them losing retailers like PNM did with family dollar.
According to the rentpayment.com website, they partnered with Moneygram in order to accept cash payments from tenants. So it sounds like it's just a matter of the details: can you set the amount (no partials), what's the deposit and clearance time, etc. If their product is at all acceptable to you, the number of locations just can't be beat.
- Rental Property Investor · Saint Charles, IL · Member since 2014 · 304 posts · 222 votes11y
My personal opinion is that you need to train tenants because there is no reason in this day and age that they shouldn't have a bank account. The lack of a bank account speaks to the quality of the tenant. Change the system, in rental agreement only accept electronic funds, and if you lose a few tenants that will probably have to be evicted anyway so be it, because in the long run your higher standards will result in better quality tenants and increased rents.
- 11yDawn AnastasiPro MemberRental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
Originally posted by @Ashley Pimsner:
My personal opinion is that you need to train tenants because there is no reason in this day and age that they shouldn't have a bank account. The lack of a bank account speaks to the quality of the tenant. Change the system, in rental agreement only accept electronic funds, and if you lose a few tenants that will probably have to be evicted anyway so be it, because in the long run your higher standards will result in better quality tenants and increased rents.
If you invest in a lower income area, you have to expect this. A-class tenants and rents, yes, they will probably have bank accounts. But with lower income, they either can't qualify to get a bank account, or don't have enough money to keep in a bank account, or can't manage a bank account without getting overdraft charges (and that makes them not trust banks).
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes11y
Originally posted by @Lynn Kropa:
Are there issues with setting up a PayPal account to accept rent? PayPal can be done from any phone or computer and anyone can set up an account for free, but they do need some kind of account to link it to. I'm new to rentals but recently had a rentor knock on the door and drop off cash to my house. I obviously did not know they were coming so I didn't have a receipt ready and I am not willing to make sure I am home when they want to come to drop it off.
I would not go the PayPal route. People can challenge payments made to PayPal up to 60 days after payment has been made.
- Rental Property Investor · Holley, NY · Member since 2011 · 507 posts · 347 votes11y
Originally posted by @Dawn Anastasi:
Originally posted by @Ashley Pimsner:
My personal opinion is that you need to train tenants because there is no reason in this day and age that they shouldn't have a bank account. The lack of a bank account speaks to the quality of the tenant. Change the system, in rental agreement only accept electronic funds, and if you lose a few tenants that will probably have to be evicted anyway so be it, because in the long run your higher standards will result in better quality tenants and increased rents.
If you invest in a lower income area, you have to expect this. A-class tenants and rents, yes, they will probably have bank accounts. But with lower income, they either can't qualify to get a bank account, or don't have enough money to keep in a bank account, or can't manage a bank account without getting overdraft charges (and that makes them not trust banks).
Not to mention that some of these tenants don't want creditors to find them. I am not endorsing this type of activity, but in certain areas and with certain tenants in certain types of properties, this is simply reality. If I forced every one of my current tenants to get a bank account that doesn't currently have one, we would be at 50% occupancy over night and have a tough time filling up our apartments.
Some of our tenants are also older and prefer to pay their bills in cash after they cash their Social Security check. Not everybody is tech-savvy and wants to pay their bills with their smart phone while texting and Facebooking as they try to drive around town. Some of them roll old-school and use cash and/or checks still the way it used to be in a simpler time....
I have found that adjusting to what my tenants prefer works better than trying to force them to do it my way. I added texting to my phone plan several years ago because tenants would not answer my phone call asking where the rent was, but they would respond to texts right away!
It boils down to knowing your clientele and running your business to work best for/with them.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes11y
Originally posted by @Ashley Pimsner:
My personal opinion is that you need to train tenants because there is no reason in this day and age that they shouldn't have a bank account. The lack of a bank account speaks to the quality of the tenant. Change the system, in rental agreement only accept electronic funds, and if you lose a few tenants that will probably have to be evicted anyway so be it, because in the long run your higher standards will result in better quality tenants and increased rents.
10M households that don't have bank accounts says, to me at least, that some rental markets are going to be cash only customers. I work in a few. Of those customers, some are going to have good references and income and be good tenants. Who has time to train the tenant to get banked when they are standing there with cash in hand on the 1st of every month? There are now enough electronic payment locations to accept cash rents without a drop-off location or PM pickup. A timely cash paying customer? I can definitely work with that!
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes11y
Originally posted by @Adam Johnson:
Originally posted by @Dawn Anastasi:
Originally posted by @Ashley Pimsner:
My personal opinion is that you need to train tenants because there is no reason in this day and age that they shouldn't have a bank account. The lack of a bank account speaks to the quality of the tenant. Change the system, in rental agreement only accept electronic funds, and if you lose a few tenants that will probably have to be evicted anyway so be it, because in the long run your higher standards will result in better quality tenants and increased rents.
If you invest in a lower income area, you have to expect this. A-class tenants and rents, yes, they will probably have bank accounts. But with lower income, they either can't qualify to get a bank account, or don't have enough money to keep in a bank account, or can't manage a bank account without getting overdraft charges (and that makes them not trust banks).
Not to mention that some of these tenants don't want creditors to find them. I am not endorsing this type of activity, but in certain areas and with certain tenants in certain types of properties, this is simply reality. If I forced every one of my current tenants to get a bank account that doesn't currently have one, we would be at 50% occupancy over night and have a tough time filling up our apartments.
Some of our tenants are also older and prefer to pay their bills in cash after they cash their Social Security check. Not everybody is tech-savvy and wants to pay their bills with their smart phone while texting and Facebooking as they try to drive around town. Some of them roll old-school and use cash and/or checks still the way it used to be in a simpler time....
I have found that adjusting to what my tenants prefer works better than trying to force them to do it my way. I added texting to my phone plan several years ago because tenants would not answer my phone call asking where the rent was, but they would respond to texts right away!
It boils down to knowing your clientele and running your business to work best for/with them.
I'm guessing your cash rents are lower than here in CA. Here it's not unusual for a household paying $1000-1500/mo rents to want to pay in cash. Many households in my areas make and save plenty of money but they are definitely cash customers for just about everything. These are households that save $50K regularly to pay cash for rental property in cheaper areas while they live and rent in better areas (less crime, better schools). It's difficult for me to find fault with households that operate this way. They have a plan and they work hard to achieve it. The senior and fixed income thing is the same where I am. They manage their money better by paying cash.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes11y
Originally posted by @Jon Q.:
Originally posted by @J Scott:
Originally posted by @Brandon Schlichter:
My concern however is that the deposit ticket has my company's bank acct # on it. What are your thoughts?
Nothing to worry about...
Every check you write has your company's bank account number. Millions of checks per day with bank account numbers change hands among untrusting parties -- if there was a risk there, the banks would change the system. An account number without any additional credentials is worthless...
I disagree. There are various reasons not to have your tenant know your checking account numbers, most importantly to be able to refuse partial payment of rent.
Jon - do you allow tenants to pay rent using a personal check?
@Jay Hinrichs - do you allow tenants to pay rent using a personal check?
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes11y
Your rules should partly depend on the quality of your tenants...example: tenants living in class C MultiFamily will not be the same as those living in Class B SFRs. Generally they will have higher credit scores and hence should be treated differently.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes11y
Originally posted by @Jon Q.:
Yes. If one ever bounces..,then only cashier checks or money orders.
Then I hate to be the bearer of "bad news", but your tenants who pay by check probably already have access to your bank account number! "How is that?" you might ask ...
Well, the endorsement on the rear of the check will have the payee and account number where the deposit is being made. The tenant just has to get the check image of the reverse of their rent check to see this.
So you will have to prohibit all rent payments by check to avoid the tenant's game of "making partial rent deposits into landlord's account to delay eviction" ... regardless of tenant's past payment by check bouncing or not.
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes11y
We both know that most tenants aren't that smart and will not go through those steps in reality.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes11y
Originally posted by @Jon Q.:
We both know that most tenants aren't that smart and will not go through those steps in reality.
C'mon you can do better than that. :) This argument shows up here on BP quite often. Anyone you write a check to and anyone who pays you via check has your checking account number. Those are the facts. These same tenants that you say aren't smart enough to get the the checking account # off an endorsed check probably aren't smart enough to commit bank and mail fraud either. So, where are the examples of tenants stealing from a landlord's checking account. How do they do it? What's their hustle?
- Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes11y
Originally posted by @Account Closed:
Originally posted by @Jon Q.:
We both know that most tenants aren't that smart and will not go through those steps in reality.
C'mon you can do better than that. :) This argument shows up here on BP quite often. Anyone you write a check to and anyone who pays you via check has your checking account number. Those are the facts. These same tenants that you say aren't smart enough to get the the checking account # off an endorsed check probably aren't smart enough to commit bank and mail fraud either. So, where are the examples of tenants stealing from a landlord's checking account. How do they do it? What's their hustle?
I'm not sure what you're talking about. Who said tenants are stealing from landlords bank accounts? I'm I missing something?
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