First Time Landlord Questions. HELP!

14 Replies

I have just posted my first rental "for rent" on the market. First question. I am looking for a solid game plan to collect rent that allows my tenant a couple of options to pay. I DO NOT want to door knock monthly to collect. I have the property listed with cozy.co. If my tenant uses their checking account to pay on cozy it is free. But it takes 5 days to clear the bank. Do any of you guys use that? If so how do you like it? I have also considered giving them my banking account deposit slips for them to drop off at the bank monthly. My concern with that is they will have my checking account number. What do you guys do? This my first rental. I want to be professional and appear to know what I am doing. 

Also, the lease. I don't have one. I am in Indiana if anyone wants to share the one they are using. Where should I get a lease or rental agreement from? I need one that I can customize. Thanks in advance. 

I had a lawyer write a lease initially ($500). One year in when BP came out with the lease packages for Ohio ($99), I bought the BP lease and it was better. Now I use the BP lease with a few modifications. 

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@Tiko D. Blane For rent collection I use bank ACH, Zelle (supported by all the major banks, is free and only takes seconds) and deposit directly into my bank account.

Everytime you write someone a check you give them your bank account number. They can't do anything with it. I put my account number in my lease so they can deposit to it. My tenants have different rent amounts and are supposed to write their name on the deposit slip. This way I can go online and see who has paid.

I don not chase rent. They pay or I file an eviction. They get trained quick or they have to leave.

Welcome, @Tiko D. Blane .  You're smart to get out in front of some anticipated hurdles.

I agree with @John Underwood - I use a very similar method for rent collection.

I give my tenants a checking account number where they can deposit their rent each month.  They can ACH, pay at the teller with cash, personal check, etc.  My lease mandates it be paid this way.  I do not accept anything via mail or in person.  I am not involved in the rent collection in any way.  I also get an automated email any time a deposit is made so it makes the bookkeeping easier.  Each tenant has a unique rent amount, so even if the teller does not make a note I know whose rent is coming in.

If someone has your account number, they MAY NOT withdraw from your account (unless your bank does not have any security measures in place).

I have a separate bank account for each building that tenants deposit into each month and I typically have a large balance in them to pay taxes, debt service and other monthly expenses, and I don't have any worries about those accounts being drained by some unscrupulous tenant. If that happened, I would hold the bank responsible for not checking that person's photo ID and not asking for my "lock" password. My bank has an image of my photo ID and it comes up on the teller's screen when one of my accounts is accessed. I've also made it a point to be personally known by the staff at the branch in my portfolio's city.

I can tell you from anecdotal evidence from branch management, there are at least several other landlords that have a similar system set up at my banking institution.

Bank-to-bank WITHDRAWALS from my accounts are not allowed unless the bank account receiving the funds is "officially" linked to mine, which is something I would have to set up with the bank by filling out paperwork at a branch. Other outside accounts can deposit money in without issue, which is essentially what we all do when we pay bills online. 

Good luck to you!

@Tiko D. Blane

Many, many options. I allow paper check mailed to PO Box or PayPal (preferred). PayPal does have a 5 day delay the first time, but then it takes about 24 hours to get money each time after that. Paper check works for me since bank app deposit money easy enough. Your routing number and checking account are printed on paper checks for all to see, so I wouldn’t worry about that.

I use Innago for rent collection. it takes about 2-3 days for deposit. It works like Cozy, I may be changing to cozy. I like that I get an email as soon as they pay and I can log in and see real time rent collection. It also automatically charges a late fee if they try to pay after the 3rd of each month. I use my own lease that my attorney has looked over but the one one BP is a good one to start with. I also have a couple different lease depending on the situation. I use a different lease for a SFH vs an apartment.

I DO NOT want to door knock monthly to collect. 

Most landlords don't want to door knock.  However, if a tenant doesn't pay all landlords will have to door knock.  It's just a part of doing business.  Screening for good tenants is what is needed to make sure you get tenants that will pay.  

Do any of you guys use that? If so how do you like it? I have also considered giving them my banking account deposit slips for them to drop off at the bank monthly. 

Some people do.  As others here mention my first method is ACH.  After that I get checks, money orders, and if all else fails I'll take cash.  I don't use 3rd party processors.  I don't see the benefit in them over a bank ACH.  Banks have very strict rules to follow.  3rd party processors have very few.  

My concern with that is they will have my checking account number.

Account and routing numbers are at the bottom of every check written.  So anyone you have ever written a check to has that information.  So will your tenant after they move out and you return their security deposit (assuming you will be sending them a check).  As mentioned above banks have very strict rules to follow.  A person with an account number isn't going to get too far in getting you money.

Also, the lease. I don't have one. I am in Indiana if anyone wants to share the one they are using. Where should I get a lease or rental agreement from? I need one that I can customize. Thanks in advance.

That's the biggest issue here.  Get one from a RE agent, landlord association, or real estate lawyer who deals with investment properties (not a general lawyer).  That lease is what protects you and your property.  You just let someone into what is probably the most expensive thing you own without anything more than their word on what they'll do.  Holy landlording Batman, get sa lease in place!

@Tiko D. Blane ,

You've received a lot of great advice here. 

However, as managers, we do not have the tenants deposit directly into a bank account.  The reason: if they are late with the rent and you serve them notice, get a court date set, prepare for court, THEN they deposit a small amount of rent into your account.  A 'savvy' tenant will know since you accepted partial payment, you must start over from square 1 with the pre-eviction paperwork.

We use EFT and other wire transfers; however if a tenant is late or a payment is bounced, they are shut out of the online account for 90 days. Payment must then be made in cashier's check or money order.  

For every fool-proof collection system, there will be some fool out there that will work a way around it.  Oh well, if this business were easy, anyone and everyone would do it. ; )

I use multiple ways to collect rent. I do whatever is easiest for the tenant. The reason I do this is because its really not a big deal to me to stop by in person on my way home from work. It all ends up in the same checking account, by the push of a button. We can deposit checks right through our phone, and have it cleared in a day. One benefit to collecting a check or cash is I am able to stop by and see the condition of the property, often.

Hey @Marc Winter - just as an aside:  I, too, have those same concerns about partial payments "resetting the eviction clock."  I asked my attorney about this, and he said that as long as you hold the funds in escrow and reiterate to the tenant that partial payments are not acceptable, it should be okay.

Of course, your own jurisdiction as well as the particular judge you get creates quite an x-factor, so I understand where you are coming from.

For this and other reasons, I choose to only evict for holdover, not for non-payment.  As I only offer M2M, I just terminate the lease and then evict for holdover if they don't leave.  Any deficiencies I would pursue in small claims court, but we all know that is usually a waste of time.

@Tiko D. Blane Congrats on the first investment. 

I have recently started using Cozy and really like it. The time it takes for it to make it to my bank account has never really been an issue for me but I could see why it would be a concern. 

I also accept cash or check but this has led me down a rabbit hole of handling rent money more than I'd like too. I'm now working to require any new leases to use cozy or a more automated form of payment such as paying at the bank or ACH. I have not set up a bank account for individuals to pay but am looking in to it with my bank currently. I've had the same concerns as you have with my account number being available to other individuals and that has kept me from going that path. Mainly because I have concern that the information would be used for fraudulent online purchases. I'm not sure how valid that concern is and would be interested to hear more individual's experience with that type of setup. 

Thanks for the post and starting the good discussion. 

With Cozy, you can pay to expedite the payment to (I think) 1-2 business days.  I'm going off what I remember, so don't quote me, but I think it's $3/month per payment or $10/month for multiple payment.  However, you have to choose which of those options you want.

I'm so cheap, I just wait the 5 business days, lol.  But then, I'm typically using the rent I collect as a savings for my next down payment on my next property.  So, as long as I know the tenant paid on time, I don't mind waiting a few days for it.  

This was also an interesting tidbit I found out.  If the tenant chooses to pay with a credit card or debit card, as opposed to directly from their checking account, they're charged a 3% fee.  But you will get the rent in 1-2 business days, even if you've never chosen one of the quicker options.

@Tiko D. Blane

I get my leases for free online. Google free tenant leases and several come up. I use law depot for mine. Then cancel the free trial after I print them out.

I collect rent in several ways. Money orders, cash, checks, PayPal and Venmo app. I prefer cash if they give me the choice.

We use Tellus app. Similar to cozy but it's an app on your phone, I do everything I need to from it. They have 1 business day ACH payment processing available for rent collection and it's been great.