Switching Tenants to Online Payments

19 Replies

Hey Everyone,

I'm currently having a hard time switching tenants over to online rent payments.  Right now only about 10% of my tenants pay online.  I've given everyone instruction sheets on how to pay online, but they don't seem interested in making the switch.  How do you guys convince your tenants to pay online? Do you make it mandatory in the lease? 

Thank you! 

I have some tenants who pay on line but most put checks into a lock box in the laundry room. I had to convince one tenant to quit paying cash. I rather enjoy going to the property once a month to drain all the quarters from the washer and dryer; usually 200$+ in quarters, collect the checks, spend a few minutes chatting with a tenant or two, give the place a once over and leave.

Hi @Luke Jackson . I know this struggle well, owning in the midwest has its pro and cons, which seem to be common all over. The tenant base is polarizing, some super hard working, some super not hard working; some open to technology and others dead against it. 

To answer your question, tough love is the best way to do it. When we acquire a new property with inherited tenants, who are more than likely a bit "old-fashioned", we usually give them some time to freely ask questions and don't change much at the beginning. Then after a few months, we reach out to each, explain who we are and why we operate like we do, that we intend to make the property a better place to live and give them an open line of communication. At the same time, we explain why we have our tenants pay online and that we have had issues paying offline in the past. We mention that it costs us more to pay offline, between storing their rent before going to the bank, then going to the bank and processing the payment. We give the tenants the option to continue to pay this way, but a fee will be assessed for our overhead to do so. At this time of course there are complaints, but you have to stay strong and enforce the rules. Some will resist, but generally, we get past it.

I hope this helps...

Bruce

What tools are people using for this?

Also some states you can charge processing fees for certain payment methods and in others it is illegal. But i believe you can always give a discount.

I implemented online payments in 2010. With 300 rentals, I get about 60% of my tenants paying online and the rest use checks or money orders.

If I had to do it all over again, I would tell all the new tenants that online payments were mandatory. If they push back, you have to accept other forms of payment but I suspect the overwhelming majority would just do it.

Simply write it into your lease as the only option to pay.    My tenant wanted to do cash and is not an online person (young guy).   I told him to give it a try and it also builds your credit rating.  I knew he wanted to buy a house someday and reminded him a 620 is a minimum credit score he needs for loan.  You will never get your credit score up by paying everything in cash.    A year later he is quite happy he did this.

I would raise rents by a couple of dollars ($5-10) & offer a discount for online payments.

Try to look at it from the WIIFM (What’s in it for me) principle. To a tenant, online paying gets you your money faster & they lose the grace period of waiting for the check to clear. If you offer a discount their benefit is more money in their pocket. You may still have some old fashioned pay by check people, but I bet they will be in the minority.

I offer $5 discount for online bill payment. All my rents are collected online accept one tenant that direct deposits in my bank account. If you don't like the $5 hit, the raise rents an extra $5 next time to cover the discount. 

I require  online payments in my lease. When we purchase new apartments everyone on month to month signs a new lease or faces a rent increase. Most of the younger people jumped right on the bandwagon. For the older folks If they don't have internet or email I have an "ACH permission form" and we set up a recurring transaction for them. If the rent increase is steep enough people will sign up. The unbanked can get a pre-paid debit card at walmart or circle K as long as the card permits ACH debits it should work.

Originally posted by @Michele G. :

I would raise rents by a couple of dollars ($5-10) & offer a discount for online payments.

Try to look at it from the WIIFM (What’s in it for me) principle. To a tenant, online paying gets you your money faster & they lose the grace period of waiting for the check to clear. If you offer a discount their benefit is more money in their pocket. You may still have some old fashioned pay by check people, but I bet they will be in the minority.

 What a great idea! :)

I had a tenant who kept trying to come to my house with cash at 5pm on rent day (yes, I was a newbie landlord and made the mistake of giving him my address—never again), put an envelope with cash in my unsecured mailbox, pay check (but please don’t cash until next day), pay late. I pushed back every time and he ended up always paying on time but he was such a pain and always tried something every single Rent Day.

When his lease was up, I raised his rent $100 but gave him a $100 discount for paying on Cozy. No problems since then.

  I also kicked around the idea of the $5-10 discount like stated above, but I don't know how I would track it efficiently.  I think what I am going to do is give them a instruction sheet stating how to pay online when we sign the lease.  If they make a large fuss over it or are older, then we can let them pay in conventional ways. In this way we will slowly raise the percentage rate of online payments as we turn units over. Thank you for sharing your wisdom with me everyone! 

Make the discount a check box on the lease. Show the full rent and the discounted amount and have them check one. They opt for the discount all the time or none of the time. They always pick the discount.

I make it mandatory in the lease to pay through Cozy.co

Had some pushback with the existing inherited tenants but overall it's working now

I had the same issue a few months ago with tenants asking my assistant to meet them somewhere in the 1st of the month so they could hand her their rent money. It was taking up time and costing me money to pay my assistant to collect the rent. Then I had  one of our previos private money lenders on a deal share that she was just having the tenants deposit money directly into the account that receives rent payments. She said it worked better than other things that she had tried like Cozy and other systems. 

Now I have all of my tenants deposit their rent directly into the account that receives rent payments. There are still a few who mail it or slide it under the door at my office but most deposit it directly. On the deposit slip they put their address so that I know whose rent it is. This has made it a ton easier and much more efficient. Since I charge steep late fees and they risk it not getting to my office on time through the mail service most of them switched over to depositing their rent checks directly into the account.

I could see making it mandatory if you have quite a few units. I don't have many so I make it optional. Some do, some still pay by check. But I just take a pic of checks with my phone and deposit it into account. Not difficult. Again, I don't have a ton of units like of you guys. One thing I don't allow is cash payments. And, if I have to collect the rent in person, I charge a $25 convenience fee. I've never had to collect in person. 

I do what @Roshan K. stated: I make it mandatory as part of the lease to pay via Cozy.co

Surprisingly I did not have pushback from inherited tenants, even though it was not technically in the preexisting lease.