First-Time Landlady: How to collect rent from cash-only tenants?

55 Replies

Hi everyone! I'm so happy to be posting for the first time here at BP! I'm a long time podcast-listener and have been reading the forums and blog posts for a while. Also, I'd like to share that I'm closing on my first rental property (duplex)! I'm signing the final loan docs tomorrow!! :)

Here's my challenge I'd love to get your feedback on. I'm trying to figure out the best way to collect rent for tenants who don't have bank accounts and want to pay in cash. Here's my specific situation:

  • I inherited a tenant from the sale and she pays only in cash
  • The property is 2+ hours from where I live so collecting in person is not doable
  • I'm going to be managing the property myself (I'd like to learn more about this)
  • The property is in a C neighborhood so I won't be putting a rental box to collect monies

I looked into PayNearMe but that's not available to me since I only have one property. It looks like the only option I have is to open a bank account and give them my bank account # to make deposits in person. Is there anything else I can look into? Or, any precautions I should take regarding the bank deposit solution?

Thanks so much in advance! 

Jessica 

P.S. I've reached out to PayLease to see how much their services are but I have to be careful on expenses to keep a positive cash flow.

Never take rent in cash.  

Why?

 - You have no paper trail.   If you are trying to evict, there is no proof they gave you only $100 or maybe $1000.  It becomes a he-said, she-said issue.  

 - It is unsafe to carry large amounts of cash.  You become a target.

Have your tenants get money orders.  The nice thing about money orders is you have a paper trail, and if they get lost, you can recover the money (for a fee).

Most banks will not accept cash deposits by someone other than the account owner holder or a atm card holder for the account. One way I've heard of is getting a deposit only ATM card for the account and giving it to the tenant. I have a couple of tenants that buy money orders or cashiers checks and I give them my LLC deposit slips, but this is only because I let them. Leases say it has to be check or money order at my mailbox by the first.

Open an account with Wells Fargo. They're everywhere and they do accept cash deposits from tenanta. That's what my tenants do, if they don't use Zelle

Use Cozy.co and stop accepting cash.

There are so many reasons to not accept cash, some of which have already been outlined. Tell her she needs to get a money order and mail it to you if she doesn’t have a bank account. I have class c rentals and only take payments through cozy.co

You’re running a business and taking cash payments in an unorganized way is not an option.

You need to systemize your operations!

Thanks guys! I definitely want to move away from cash. But for now, I need to work something out for the existing tenant I've inherited. It sounds like the following are safer options:

- Money orders + deposit slips (or mail). Per @Michaela G. , Wells Fargo accepts cash deposits. BofA doesn't anymore they told me by phone yesterday. (Thanks @Greg Scott )

- Deposit only ATM cards. What major banks offer these? Wells Fargo? Chase? (Thanks @Scott L. )

For online payment, I'm looking into Cozy.co, @Jordan Moorhead . Are there other services like Cozy that transfer money to your account faster?

Thanks,

Jessica

Most locations where you have cash-based tenants will also have MoneyGram locations.  

https://secure.moneygram.com/locations

One property we acquired had all the tenants using MoneyGram.

I second MoneyGram. I’ve also had tenants deposit directly into a local bank. The bank receipt from the teller/atm then is their proof of deposit (it doesn’t give any info other than it was deposited) and my online record is a second paper trail.

I had a similar situation with holdover tenants on a triplex I bought last year. I was able to convince 2 of them to pay using Cozy.co but 1 insisted that I use the previous landlord’s method of allowing them to make cash deposits at Chase Bank. After a lot of back and forth, my hubby said something that changed my mind—always make it easy for people to give you money—so I opened a Chase account and he goes every month to the teller with the rent in cash and my account number and deposits the rent. As soon as the deposit goes through, I transfer the money to my normal business account, thereby reducing the main risk of giving your account # to the tenant—that they’ll find a way to get the money back.

When their lease ends and they leave, I will close the Chase account and just use Cozy for future tenants.

Love Cozy! The tenants can set their payments on automatic and have to go out of their way to stop payment and you can see when they have scheduled the payment. (That’s how I found out one of my tenants had planned to pay late—he went in and changed the date from the 1st to the 2nd—and I was able to call him before and “discuss” the late payment before it happened.)

Wow! MoneyGram sounds interesting! Their fees to send are high though... over $25 using their Estimate Fees tool. Do your tenants have no problem paying that fee @Greg Scott , @Amber Matas ?

@Jean Haisch - I will be setting up a Cozy.co account until I'm able to find another service whose transfer money time is shorter. :) Do you use a saving account or checking account at Chase? I looked at their fees and to avoid paying monthly fees you have to have $300 daily balance for savings. The min. daily balance is higher for checking accounts.

Thanks!
Jessica

I think back then the fee was $9.00 for the tenants to send via money gram. They never had an issue. It was for a short period of time though, about six months, so that may have been why. The rent on that house was $1900/month and full disclosure it was about 10 years ago. Most of my tenants now deposit into my Wells Fargo accounts, either in person with check/money order or with Zelle and two happen to have accounts at the same credit union as me so they transfer over to accounts I have set up for propetries. 

On the property we acquired, we eventually got all the tenants off of MoneyGram.  

To be clear we didn't have tenants "send us a moneygram".  They gave cash to the MoneyGram seller and essentially got a money order from MoneyGram which they mailed to us.  We deposited the MoneyGram money order into the bank.   I think it cost the tenants $2.50 per.  

We had a problem with our property manager who "misplaced" many of those money orders.  After firing that manager, we were able to go to all the tenants and get their receipts.  It was easy to confirm online that the money orders hadn't yet been cashed.  For a fee (about $20 each if I recall) they can cancel / re-issue the money order directly to you.

Thanks @Amber Matas and @Greg Scott for the clarification. MoneyGram is an option.  I'm leaning towards depositing to the bank if they insist on paying in cash. :)

Jessica

@Jessica H. I opened a Total Business Checking account at Chase. I don't think they have savings accounts for businesses; at least they never mentioned one.  The minimum balance to waive fees is $1500.  Luckily, I have that to spare so it can just sit there while I transfer the $900 rent to my regular business checking account each month, but it means there's still $$ in the account the tenant could access if he hacked the account. It's a risk, albeit a small one, but it's only until his lease ends and I haven't had a problem with him so far.  Cross my fingers.

Cozy's one con is that it takes 5 business days to post the rent it collects to your account.  You can cut it down to 3 days if you pay Cozy a fee of $2.99/unit.  Personally, I just never felt the urgency to get the money now to  make it worthwhile to pay the fee but I also don't think $3 is all that much.  I guess it depends on how much your rent is.  If it's $500/month, that's a bigger percentage than if it's $1500, but you're in California, so you probably get more in rent.

Originally posted by @Jessica H. :

Thanks guys! I definitely want to move away from cash. But for now, I need to work something out for the existing tenant I've inherited. It sounds like the following are safer options:

- Money orders + deposit slips (or mail). Per @Michaela G. , Wells Fargo accepts cash deposits. BofA doesn't anymore they told me by phone yesterday. (Thanks @Greg Scott )

- Deposit only ATM cards. What major banks offer these? Wells Fargo? Chase? (Thanks @Scott L.)

For online payment, I'm looking into Cozy.co, @Jordan Moorhead . Are there other services like Cozy that transfer money to your account faster?

Thanks,

Jessica

 I’ve been told that Bank of America offers deposit only ATM cards but I don’t have personal experience. Was told by a seminar speaker in Texas.

I'm really not very concerned about giving my account number to a tenant. If they were able to do something just by having the number, we would never give checks to anyone, as the account number is always listed. 

@Jessica H. if they are used to someone picking up cash, you may have difficulty getting them to drop a Money Order in the mail. Tenants who can’t hold a checking account are trouble. They are irresponsible people. All you have to do to hold a checking account is not overdraw it.

Originally posted by @Scott L. :
Originally posted by @Jessica H.:

Thanks guys! I definitely want to move away from cash. But for now, I need to work something out for the existing tenant I've inherited. It sounds like the following are safer options:

- Money orders + deposit slips (or mail). Per @Michaela G. , Wells Fargo accepts cash deposits. BofA doesn't anymore they told me by phone yesterday. (Thanks @Greg Scott )

- Deposit only ATM cards. What major banks offer these? Wells Fargo? Chase? (Thanks @Scott L.)

For online payment, I'm looking into Cozy.co, @Jordan Moorhead . Are there other services like Cozy that transfer money to your account faster?

Thanks,

Jessica

 I’ve been told that Bank of America offers deposit only ATM cards but I don’t have personal experience. Was told by a seminar speaker in Texas.

 This is correct. You need to open a business checking account with BofA and request a deposit-only ATM card. They issue several of these for free which you can provide to different tenants. The hitch is you need to keep a 5k minimum monthly balance or there is a $15/month service fee. You decide if you can keep a min balance or accept $180/year fee for this convenience and avoiding lost checks in the mail or any excuse, since there is an BofA ATM in every town. They can deposit any combination of cash or  check so there is no excuse. ATMs accept the rent 24/7. use this with one of my only cash tenants. Best decision ever to avoid having to manually process their cash deposits monthly and not having to coordinate rent drop off/pickup with the tenant...

Originally posted by @Jessica H. :

Hi everyone! I'm so happy to be posting for the first time here at BP! I'm a long time podcast-listener and have been reading the forums and blog posts for a while. Also, I'd like to share that I'm closing on my first rental property (duplex)! I'm signing the final loan docs tomorrow!! :)

Here's my challenge I'd love to get your feedback on. I'm trying to figure out the best way to collect rent for tenants who don't have bank accounts and want to pay in cash. Here's my specific situation:

  • I inherited a tenant from the sale and she pays only in cash
  • The property is 2+ hours from where I live so collecting in person is not doable
  • I'm going to be managing the property myself (I'd like to learn more about this)
  • The property is in a C neighborhood so I won't be putting a rental box to collect monies

I looked into PayNearMe but that's not available to me since I only have one property. It looks like the only option I have is to open a bank account and give them my bank account # to make deposits in person. Is there anything else I can look into? Or, any precautions I should take regarding the bank deposit solution?

Thanks so much in advance! 

Jessica 

P.S. I've reached out to PayLease to see how much their services are but I have to be careful on expenses to keep a positive cash flow.

Never ever accept cash.  Others on this thread have mentioned a few reasons.  We have it explicitly excluded from our lease.

We have begun to accept payments via  Venmo, and while we don't get payments that way, we also just set up Apple pay.

@Jean Haisch , @Scott L. , and @Jeff Bridges - thanks for the additional info on opening a business checking account in order for the deposit-only ATM cards to work.

@Michaela G. - I agree with you. I would also just use the account for receiving rent and move the money to my regular account asap.

@Bart H. and @Joe Splitrock - I will talk to them and see if I can persuade them to open a bank account. I'm stuck with the tenant I've inherited. 

Thank you all!

Jessica

Originally posted by @Jessica H. :

Hi everyone! I'm so happy to be posting for the first time here at BP! I'm a long time podcast-listener and have been reading the forums and blog posts for a while. Also, I'd like to share that I'm closing on my first rental property (duplex)! I'm signing the final loan docs tomorrow!! :)

Here's my challenge I'd love to get your feedback on. I'm trying to figure out the best way to collect rent for tenants who don't have bank accounts and want to pay in cash. Here's my specific situation:

  • I inherited a tenant from the sale and she pays only in cash
  • The property is 2+ hours from where I live so collecting in person is not doable
  • I'm going to be managing the property myself (I'd like to learn more about this)
  • The property is in a C neighborhood so I won't be putting a rental box to collect monies

I looked into PayNearMe but that's not available to me since I only have one property. It looks like the only option I have is to open a bank account and give them my bank account # to make deposits in person. Is there anything else I can look into? Or, any precautions I should take regarding the bank deposit solution?

Thanks so much in advance! 

Jessica 

P.S. I've reached out to PayLease to see how much their services are but I have to be careful on expenses to keep a positive cash flow.

 Property manager, do not accept cash and possibly work on getting new tenants - 

Originally posted by @Jessica H. :

@Jean Haisch , @Scott L. , and @Jeff Bridges - thanks for the additional info on opening a business checking account in order for the deposit-only ATM cards to work.

@Michaela G. - I agree with you. I would also just use the account for receiving rent and move the money to my regular account asap.

@Bart Hedgcock and @Joe Splitrock - I will talk to them and see if I can persuade them to open a bank account. I'm stuck with the tenant I've inherited. 

Thank you all!

Jessica

 What do the leases say you inherited?

Our leases give acceptable means of payment, and cash isn't one of them.  

MY guess is even with inherited tenants you can refuse to take cash as payment.  Require at the least to get a money order.

@Jessica H. they deposit it relatively quickly. I would build up a reserve in the account so you  aren't worried about it.

@Bart H. , the inherited tentant's lease says they are to pay in person to a local address. That's not an option for me since I'm not hiring a property manager. But yes, I will talk to them to encourage them to open a bank account and pay me electronically. I just want to have an option if they insist to pay in cash.

Jessica 

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