Most efficient way to collect rent payments

50 Replies

Hello,

What is the most efficient way to collect rent payments? Is it by mailing a check? Scanning someone's credit card? What are some different ways rent can be collected that are efficient?

I have heard others on the site who go by the property to pick it up. Others have found a way to have the tenants deposit it directly into your account with deposit slips you give them. I just have them mail it to me

I collect rent via a couple of methods.

Drop Box: I have a lockable drop box in the basement of a few multifamily properties. I state that it is picked up by as early as 5pm on the 5th. I take pay or quits with me and no rent in box, notice is posted. I dont like this because I have to drive out every month but it does force you to be prompt with the pay or quits and exercise discipline with tenants.

Mail: Receive checks at a usps post office box. I provide stamped envelopes to tenants. Some stores will send you an automated email when you receive a piece of mail

Electronic Transfer: I use erentpayment.com This is obviously my preferred method but not all tenants are comfortable with this.

I'm trying to migrate as many tenants as I can to electronic transfer through attrition but i have alot of existing tenants from recently purchased properties. The one method I absolutely refuse to deal with is a phone call to "meet and pick up rent". This worked with a few units but once you manage 10,20 or 30 units, it would get really old.

I guess the main objective of my post was to find out the best ways to collect rent electronically.
Brad, How do you like erentpayments and what percentage do they take out? Have you looked into any other ways of collecting rent electronically? Possibly through your bank?

Have them take it right to the bank for you.

ABC CO LLC Account 1 - give this account out to all residents. Tell them where the location of the nearest branch is and give them deposit slips, prefilled out if needed.
Just add water.

ABC CO LLC Account 2 - move all $ from account 1 to here for holding and spending.

No waiting for the mail. No "lost in the mail." No FEES!
Simple. Easy.
Best done when leasing, but I have had plenty of success implementing the program after making changes.

Anyone who picks up the rent is wasting a ton of time. I did it for a long time, and what a waste that was.

I second every thing @Ed O. said. I just started using this method (except I just have them deposit it directly into my main operating account, I don't even bother sweeping). Tenants who pay with cash or money orders love this method because no risk of loss in the mail and they get a receipt right then and there.

The only hiccup I would mention is that sometimes it's difficult to figure out who paid what. For example, I've got four apartments all leased at $635, and sometimes one is late or sometimes the the tenants pay in installments (e.g. $300 one day and $335 the other). It can get a little confusing. If some one is late, you've got to figure out who, which can involve some follow up texts or calls, but it's a small cost for the extra efficiency. Just remind them to hold on to their receipt.

Originally posted by John Chapman:
The only hiccup I would mention is that sometimes it's difficult to figure out who paid what. For example, I've got four apartments all leased at $635, and sometimes one is late or sometimes the the tenants pay in installments (e.g. $300 one day and $335 the other). It can get a little confusing. If some one is late, you've got to figure out who, which can involve some follow up texts or calls, but it's a small cost for the extra efficiency. Just remind them to hold on to their receipt.

John,

I never thought about how it could be hard to track who paid what. Another thing to consider.

I have posed this question several times in the past and have [b]NEVER gotten a response:

You cannot evict someone if they have made a partial rent payment, so it's best practice to only recieve rent in whole. How do you deal with partial payments/evictions if your tenants are able to pay partial rent?

Not sure if other banks have a similar feature, but I recently started using something called Quickpay at my bank (Chase). Very easy to setup, very secure, and free (provided you have an acct there). Basically a tenant would go to my banks website and set up their side - linking their email (or cell#) to their bank acct info. I already have my email (or cell#) linked to my account. Once they are set up, they can simply send an email with the rent amount. I get an email stating rent was deposited. Tenant can't see any of my personal bank info, other than email address. This can also be done via mobile phone but I prefer email.

In regards to how I collect rent: I do it the inefficient way. I decided that picking the rent up in person would give me the opportunity to inspect the property once a month both inside and out. I wanted to do this for the first few months and then convert the payment method to something easier if they turned out to not need a lot of oversight. Fortunately, there is really no reason to do monthly inspections with these tenants. Unfortunately, they are immigrants and don't feel comfortable paying rent other than putting the cash in my hand. I suppose I could force them to change, but I like them and it works, so... Also, there is no chance of getting them to pay online, let alone own a computer.

I am hoping to convert my home to a rental in the beginning of next year and hopefull those tenants will be internet saavy.

I have my tenants who sign a 1 year lease provide me with 12 post dated checks. Then I don't need to run around every month. Once the 1st arrived, i just deposit the check for that month.

Originally posted by Ed O.:
Have them take it right to the bank for you.

ABC CO LLC Account 1 - give this account out to all residents. Tell them where the location of the nearest branch is and give them deposit slips, prefilled out if needed.
Just add water.

ABC CO LLC Account 2 - move all $ from account 1 to here for holding and spending.

No waiting for the mail. No "lost in the mail." No FEES!
Simple. Easy.
Best done when leasing, but I have had plenty of success implementing the program after making changes.

Anyone who picks up the rent is wasting a ton of time. I did it for a long time, and what a waste that was.

This does work but a professional tenant can smoke you doing this. In theory, if you accept partial rent, you cant evict. Its possible for a tenant to deposit $1 and you cant evict them for another month, or at least it makes it much more of a challenge.

Here's how I would get around the partial payment dilemma - this is with using Chase quickpay. Mind you, I've never actually had to do this so I'm not sure it would hold up in court. Once a tenant pays any amount, I get an email from my bank stating 'tenantA sent you paymentX, go to our website to accept'. If I never accept then it's never deposited to my account. If it isn't the full amount, I don't accept the payment. I have a lease addendum with these Quickpay payment instructions, also stating I will not accept partial payments. I don't see why this wouldn't work. Anyone have any experience with this?

See now if the hoity toity SFH are better investments than MFH crowd would use this as an argument to support their beliefs, they might actually have something.

Of my 13 tenants, I think 2 have computers... I think 4 have bank accounts. My tenants mail me money orders but I actually like the idea of driving up there once a month and getting checks, may need to start doing that.

Originally posted by Stephen Hundley:
I guess the main objective of my post was to find out the best ways to collect rent electronically.
Brad, How do you like erentpayments and what percentage do they take out? Have you looked into any other ways of collecting rent electronically? Possibly through your bank?

erentpayment charges $3 a transaction. That can be paid by either the tenant or landlord or split 50/50. It can be set up to add late fees and to only accept full payments (no partial payments). I recently set it up for one of tenants that does have a computer but it hasn't been used yet to give feedback. If it works as advertised, I expect to be very happy.

Agree with @Nathan Emmert . I'm also in the MFH crowd, so unless I can get all the tenants on board with electronic payments, then it's not really helping me much. At best I still have to go to the bank to deposit some of their checks/money orders anyway... if not actually collect them. And getting them all on board is another story entirely - not gonna happen - unless I buy them a computer, pay for their service, set it up for them, and remind them to use it every month.

I use http://www.achdirect.com/ and direct debit it straight out of my tenants checking accounts. This is better than the approach of letting tenants deposit money into your account because this way you don't have to worry about them forgetting.

Another alternative that I have heard of for the crowd that likes tenants depositing straight into their accounts is from Chase. They can supply you with X different "deposit-only debit cards" linked to your account. This way you know what payment came from who and they can pay the rent at an ATM after hours.

For my tenants that are not comfortable with direct debit I simply mail an invoice with a self-addressed envelope 1 week before the due date.

When I first started out landlording I used to just rely on my tenants remembering to mail the rent. Sending invoices seems to work much better.

Originally posted by Nathan Emmert:
Originally posted by Stephen Hundley:
I guess the main objective of my post was to find out the best ways to collect rent electronically.
Brad, How do you like erentpayments and what percentage do they take out? Have you looked into any other ways of collecting rent electronically? Possibly through your bank?

erentpayment charges $3 a transaction. That can be paid by either the tenant or landlord or split 50/50. It can be set up to add late fees and to only accept full payments (no partial payments). I recently set it up for one of tenants that does have a computer but it hasn't been used yet to give feedback. If it works as advertised, I expect to be very happy.

I just registered for erentpayment as well and got my bank account activated. While I have not yet used the service (plan on piloting it with my next tenants), it also allows you to provide a paper form to your tenants to allow them to add their bank account info, which they would sign, allowing them to automatically deduct the rent from their bank account each month on the date you specify, providing you with all of the control over debiting the account. The normal ways are also available where the tenant registers online and adds their bank info and will receive payment email reminders and late payment notices automatically with the pre-defined late payment required in addition to auto debiting. Seems to be flexible for tenants with and without computers. FYI.

Brian Hoyt
@Aaron Mazzrillo
@Brad Z.
@John Chapman

Aaron Mazzrillo takes this approach to the best level. He has an account set up for each unit/property. It's easy if you have a suspect / slow payer. Just shut down the account when you see any monkey business. If you really had to, you'd have to close the deposit account so the bad tenant couldn't keep up the abuse. You'd then have to inform all of the others that there's a new account to be making deposits into.
The easiest approach, I'd guess, would be to open 5 or 10 inflow accounts at a time, so that you have spares and to save 9 future trips to the bank for this purpose.

i used to have tenants deposit into my account...they had to write the building and apt. # somewhere on the receipt..never had problems like this and was easy to identify who paid late, partial, etc.

i have since found it's easier to just set up a mailbox..i went to a small mom and pop packaging store here...it's in a convenient location on the bus line, and near most of my properties...they'll allow tenants to come in and hand them 'mail' for my box..of course it's rent payments, but they still put in an envelope so nobody snags the money order...if it's a partial payment i return it and don't issue a receipt..if it's a full payment, i drop off a receipt..i go out once a week to drop off receipts...efficient? maybe not, but it keeps me in control! :)

Originally posted by Ed O.:

Aaron Mazzrillo takes this approach to the best level. He has an account set up for each unit/property. It's easy if you have a suspect / slow payer.

Works like a charm. Been doing it for 10 years and have had zero problems and zero cost to maintain. Makes collecting rent and checking on payments easy when you are vacationing in India for a month as well. Isn't that why we got into real estate, more personal freedom?

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