direct deposit for monthly rent from tenants

General Landlording & Rental Properties
9yFollow

direct deposit for monthly rent from tenants

Virginia Jones
Rental Property Investor · Pulaski, VA · Member since 2016 · 70 posts · 31 votes

i have a tenant that wants to pay me monthly rent through direct deposit. this would be going into the rental checking account for that specific unit. is it safe for me to give the tenant my routing and account number so they can set this up with their bank? or should i just have them mail me a check through the bank's bill pay instead?

0Reply
76 views

Most Popular Reply

Bill BockwoldtPro Member
Investor · Petaluma, CA · Member since 2013 · 58 posts · 33 votes
9y

I had to deal with this for out-of-state properties. I set up savings account at Wells Fargo so the tenants can deposit in person in the locations of my rental homes. I then transfer those to a main account. However, after setting up Cozy they have all moved to that. No banking information is exchanged (I don't know theirs and they don't know mine). Cozy debits their accounts every month (they can choose a date from 1st-5th that works for them) and Cozy transfers it to my account. I no longer need the savings accounts but keep them just in case. I pay no fees at Wells Fargo, and the Cozy service is free so it is very cost-effective. I highly recommend Cozy with one caveat, you can pay extra and get the money quickly, otherwise it can take 7-10 days to get the funds. Not an issue for me, but if you have cashflow timing issues that is something to consider.

4Reply
See this reply in the discussion

18 Replies

Jump to latestLatest
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Set up a special account for them to deposit into and immediately move it from their to your own account. This is necessary to prevent your tenants from claw it back the next day or week.

    Personally I only accept checks and prefer 12 post dated for the year. If a tenant bounces a check they must then provide me with money orders going forward. It is the tenants responsibility to insure I receive all payments on time as I do not pick up payments or chase tenants for payments.

    1Reply
  • Ernest Grindle
    Rental Property Investor · Suffolk, VA · Member since 2017 · 143 posts · 78 votes
    9y

    That's interesting @Thomas S., I've haven't heard anyone talk about the 12 post dated checks to cover the full year. Do you find most tenants are willing to do that?

    0Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Virginia Jones I too would set up a separate account for the direct deposit at your bank, then transfer over to your account from there. I have seen some unbelievable things people do now. My banker said the fraud is out of control!!! Because I own a management company, Wells Fargo now made us go to Positive Pay for all of our accounts, which was $1000 to set up and then had to order special checks (expensive) that have certain things in them that people cant duplicate. Amazing!!!!!

    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
    Compass | St. Pete514 Reviews
    WebsiteView Page
    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    @Ernest Grindle

    Less that 10% of my tenants do not provide post dated checks. They prefer to pay in cash either because that is how they get paid or they do not have checking accounts.

    Some that do provide post dated checks will send them to me 3 months at a time. They have done it for years so I have no idea what their reason is and sometimes forget resulting in a late fee.

    0Reply
  • Aaron Mazzrillo
    Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    9y

    I have what my bank refers to as zero balance checking accounts. I have one account for each door. The tenants get the account number only. I don't even give them deposit cards. I can just hear the excuses, "The ATM ate my money!" They have to go in to the bank and stand in line. I then tell them the deposit slip from the cashier is their paid rent receipt. My bank allows me to set up auto-transfers from those accounts to my main checking account. If rent is due on the 1st, you can set it up to transfer, say on the 3rd of every month.

    Some of my smarter tenants have set up their own automatic bank to bank transfers, but it is only like 10% of the pack.

    1Reply
  • James Davis
    Orange Park, FL · Member since 2017 · 1 post · 0 votes
    9y

    I have one rental property and the tenants transfer money to my account. Wells Fargo has it set up, had to approve the incoming transactions before it went through. They can transfer money into my account only. 

    0Reply
  • Bill BockwoldtPro Member
    Investor · Petaluma, CA · Member since 2013 · 58 posts · 33 votes
    9y

    I had to deal with this for out-of-state properties. I set up savings account at Wells Fargo so the tenants can deposit in person in the locations of my rental homes. I then transfer those to a main account. However, after setting up Cozy they have all moved to that. No banking information is exchanged (I don't know theirs and they don't know mine). Cozy debits their accounts every month (they can choose a date from 1st-5th that works for them) and Cozy transfers it to my account. I no longer need the savings accounts but keep them just in case. I pay no fees at Wells Fargo, and the Cozy service is free so it is very cost-effective. I highly recommend Cozy with one caveat, you can pay extra and get the money quickly, otherwise it can take 7-10 days to get the funds. Not an issue for me, but if you have cashflow timing issues that is something to consider.

    4Reply
  • Jordann B.
    Professional · Portland, OR · Member since 2016 · 24 posts · 12 votes
    9y

    Hi there -- Jordann from the Cozy support team here! As @Bill Bockwoldt mentioned, with our Express Payouts feature, you'll receive your tenant's ACH payments in 3 business days. Otherwise, Cozy's free ACH payment option takes about 5 business days from the time the payment is scheduled to the time it posts to your bank account.

    You can always check in on the status of an in progress payment though from your Payments page and expand that payment to check the "Estimated Arrival Date." I hope that helps!

    2Reply
  • Shaun Patterson
    Property Manager · West Palm Beach, FL · Member since 2012 · 296 posts · 143 votes
    9y

    I would say you should have a separate account for this. our company sets up everything electronically now so we don't even take checks or cash from clients. There can also be a lot of issues with giving people your account information. Fraud is everywhere especially in the real estate community. @Jordann B. from cozy sounds like a good fit. Another option I would add is if you use quickbooks for your accounting they have a feature to send out invoices. This can be sent to your tenants and they can pay from their. Through ach or credit card. It doesn't show your account information at all.  

    0Reply
  • Jeffrey Long
    Real Estate Agent · Myrtle Beach, SC · Member since 2016 · 63 posts · 34 votes
    9y

    I use Cozy for my two rental SFRs and it works well.  Funds go directly to the account of my choosing and my tenants like it because they can split payments among themselves instead of it all having to be in one check.  You do have to be patient for the funds to come through though. Nice synergy if you use them as part of your application process too. 

    1Reply
  • Keith Hand
    Investor · Brunswick, GA · Member since 2016 · 19 posts · 5 votes
    9y
    @Virginia Reasor There is already some good information here, but I'll tell you my opinion. We do not accept checks at all because they bounce and everyone incurs fees. Also, you usually don't find out until several days later, and a lot of tenants will have spent that money by the time you find out it bounced. Then you have a mess. I will also warn against telling them to mail you a payment. You'll find out that mail is easily lost, or at least you'll get that excuse from a tenant. Then you still have a mess. There are many ways to collect payments online for free, or close to it. We started with Tenant Cloud, but have sense moved away from it because the accounting feature was too weak for us. It is great if you only have a few units, though. They only charge $10 per month for you collect from as many renters as you want. We have since switched to Buildium, and they charge $0.50 per transaction, but you can charge that to your tenants if you like. If you don't want a management software, there are plenty of other online payment options that you can use. We are moving toward online payments only, and that is what most property management companies in my area are doing now. It's definitely the simplest option.
    1Reply
  • Neil WhitneyPro Member
    Rental Property Investor · Picayune Ms. · Member since 2017 · 47 posts · 25 votes
    9y
    I just opened my business account this past weekend at Chase. My tenants will each get a deposit only card where they can run cash or checks into any Chase atm or branch. Hope this helps.
    0Reply
  • Barry H.
    Investor · Scottsdale, AZ · Member since 2017 · 237 posts · 78 votes
    9y

    I have my tenants deposit rent directly into my WFB checking account - YES - they have the account number.  Maybe I just have dream tenants but I have never had a tenant hack their way into my account to take money out in 7 years???  That really happens???!!   Don't they need passwords?  IDs (if at the bank)?    

    0Reply
  • Frank Chin
    Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
    9y

    I use a service called ClearNow: ClearNow

    There's a free service called Cozy, Cozy and there's a thread here discussing the Pros and Cons of this service.

    ClearNow cost me about $13.95/month base fee plus $2.00 for each tenant. For tenants paying rent on the 1st, they debit the tenant account on the 1st business day of the month , and credit my account on the 4st business day of the month. I used them for several years, and got paid like clockwork. The send email reminders to the tenant and myself several days ahead.

    With these services, the tenant does not have my account number. With ClearNow they have the option of reporting their payment history to the credit bureau to build their credit.

    1Reply
  • Shaun Patterson
    Property Manager · West Palm Beach, FL · Member since 2012 · 296 posts · 143 votes
    9y

    @Barry H. Ill give you a situation that happened. Tenant gets routing and account number to make a deposit. He passes the info than on to his friend that friend goes to the bank and gets the address that the account is listed on(yes they have some smooth talkers and some banks write down your address on the deposit slip) He now has your name or the business name the address and account info and starts paying transactions through the account. The owner of the account only checks the account once every few weeks to make sure that the rents are in on time and finally see the charges on the account. Some people might not think this is anything bad or crazy since the bank can dispute the fraudulent charges. But IMO the time and headache for all of that to be done sometimes is more than it would take to  just protect yourself in the future.  I used to work for a big bank and seeing things like this happen always made me fearful of giving my account info out. 

    1Reply
  • Barry H.
    Investor · Scottsdale, AZ · Member since 2017 · 237 posts · 78 votes
    9y

    Thanks for the detailed explanation on how the fraud could occur. I think I will keep things the way they are with existing tenants but will consider something different for future  tenants.

    0Reply
  • Marion Nicholson
    Investor · Midlothian, VA · Member since 2014 · 38 posts · 11 votes
    9y
    Get deposit cards and give them to your tenants... Wells Fargo and BofA offer them .
    0Reply
  • Jose Rodriguez
    Portsmouth, VA · Member since 2013 · 23 posts · 4 votes
    9y

    I have been giving my tenants the bank account/routing number for years without an issue until now. Last year we evicted a tenant and yesterday I found a fraudulent charge from Direct TV. when I called the bank the tenant's name came up. Now I have to switch bank accounts and find a safer way to enable tenants to make deposits in the bank. We don't take checks or collect rent so it will be a headache having to switch everything now but the risk is there for anyone with your account number to setup a debit from your account so I suggest avoiding that if possible.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free