PayPal is free, unless your tenant can’t follow instructions

Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes

I know there’s a ton of posts and questions about how people collect rents. I’ve been using PayPal for quite a while. It’s free to landlords and tenants, and I get my money within 24 hours (the first time rent payment does take 3-4 business days).

However, twice now tenants have selected the “pay for item or service” button instead of “sending to a friend”. That option would charge me 3%. So I refund their entire rent, which refunds the fee, and then they need to send rent again. It’s a pain and delays me getting rents.

My point here? I may need to switch how I collect rents. I just don’t like the other free services that take 3-5 business days to send me the payment. And I sure don’t like any service that I have to pay for to get my rents.

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Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

Please note that Paypal has a dispute option. This means that your tenant can dispute the payment after their lease is up. Paypal FREQUENTLY sides with the person who did the paying.

Other apps like Venmo simply tell the person doing the paying that they should request a refund directly from the person they paid.

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y
I wouldnt refund, Id simply send a bill for the remaining amount and leave it up to the tenant to get me my full rent.
Ill usually let the paypal mistake go 1 time, but thats it.
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Jennifer T.Pro Member
Investor · New Orleans, LA · Member since 2014 · 1k+ posts · 944 votes
6y
I offer such a plethora of ways tenants can pay the rent, yet THEY so often take it upon themselves to choose the most difficult and least time-efficient way possible.
Case in point. One of my tenants drops a money order off at my house. She doesn't live that close to me, but her job is nearby. She approached me and wanted to pay via CashApp, so she doesn't have to drop off the money order, especially if it is her day off. Although I've read that other people on BP use that for rent, the website itself had almost no details or fine print of how they work. It didn't look like there was a customer service number/e-mail either. At any rate, I looked into it for her. Didn't like what I saw and told her I won't take CashApp. I already have Cozy available and strongly encouraged that...I'm pretty sure she has a bank account...but, for whatever reason that she didn't explain, she didn't like that option either.
So then I suggested Paypal and explained how to send it so that neither of us were charged a fee. I don't know what she did wrong, but she did end up being charged a fee by Paypal and got mad at me about it (eyeroll). Never mind that she saw the fee before she sent the money and could have bailed out and went her normal money order route. So now she is dead-set against Paypal also. Whatever.
I do have another tenant who pays via Paypal. She was the first one I tried Paypal with. She sent it the "wrong way" the first time and I was charged a fee. I thought about sending it back and having her resend it, but decided to keep it instead and just eat the fee. However, I did instruct her on how to send it in the future and warned that if it was sent incorrectly, she'd be responsible for the fee I incurred. So far, it has never been a problem again.
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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
6y
Please note that Paypal has a dispute option. This means that your tenant can dispute the payment after their lease is up. Paypal FREQUENTLY sides with the person who did the paying.
Other apps like Venmo simply tell the person doing the paying that they should request a refund directly from the person they paid.
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Rob B.
Chicago, IL · Member since 2018 · 546 posts · 227 votes
6y
There are definitely a lot of helpful tools out there designed specifically with the purpose of actually collecting rent; they've thought through some of those pain points (like disputed payments and reverse transactions, which can happen if a tenant becomes disgruntled or they decide to dispute for some other reason...). Again, there are options out there which allow you to collect rent much quicker than those others but still provides other rental management tools you might find valuable; you can easily go with an option that will help you keep track of who paid what and on which date -- a tool that can help to make the process as painless as possible and more efficient for both parties (landlord + tenant), and also offers digital leases. You may also run into transfer limits with some of those other apps (like Paypal) which aren't necessarily designed for the purpose of rent collection.
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Lauren C.Pro Member
Rental Property Investor · Hamilton Township, NJ · Member since 2012 · 211 posts · 149 votes
6y
Hi @Anthony Wick. We use cozy.co. It's free for both tenants and landlord but does take 3 days to make its way into our account. There is rush option for a small fee. We like it because we also use cozy for tenants screening so the accepted applicant would already have an account setup which makes the first rent collection easier.
4 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
6y
Why would anybody even want a service that gives the tenants the option to dispute the charge and get their money back ? Seems like a lousy way to get paid . I know most laugh at me on here about this but I collect cash and give a receipt . That probably sounds antiquated to most but it never bounces the check is “ never in the mail “ it has other benefits , everyone loves Ben Franklin and he never jumps or bounces out of my pocket !
7 Reply
Anthony Rosa
Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
6y
Have you considered "Zelle", Its a banking app and funds are received within minutes. Most large banks & credit unions have it in their system already so you can easily link it to your bank account. If the bank doesn't offer it anyone can download the app and all they need is a debit card.
4 Reply
Rob B.
Chicago, IL · Member since 2018 · 546 posts · 227 votes
6y
The thing about services like Zelle or Venmo is you will run into balance transfer limits. When you use a solution that was designed for collecting rent online you're less likely to run into transfer limits.
0 Reply
Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
I definitely wouldn’t use PayPal to collect rent for exactly the reason that @Mindy Jensen pointed out. Use Zelle or Venmo. Both are free for you (and there’s no option for the tenant to accidentally select a method that charges you a percentage with those two), and they transfer the money just as quick as PayPal without the dispute/clawback risk that PayPal has.

Cozy is also good (and free), but the funds transfer takes a little longer. Though, with Cozy, you don’t have to worry about any limits on how much can be transferred (which can sometimes be an issue with services like Zelle and Venmo).
0 Reply
Ned J.Pro Member
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
6y
I use Zelle..... quick, easy, free... If you use a service where the tenant screws it up, I MAY eat the fee ONE time, but after that, its on them...... On many of the services, the tenant can fight the payment and the service will often side with the "payer", not the "payee"...... so there is always a possibility that a tenant may screw you on a rent payment if they do a "charge back" with the service.... that is always a risk with these forms of payments
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Anthony Wick
OP
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
I'm definitely looking for an alternative. But, I am NOT looking for a fee based serviced. I've had a couple minor problems, but not enough to start paying $25+ per month just to get my rents. I've looked at alternatives before, but I'll have to look again. Perhaps I'll come around to Cozy. But for some reason, I really dislike waiting 3-5 business days to get my money. No, I don't need the rents to make mortgage payments, or run a budget nearly that thin, but it just annoys me.
Not going the cash route. As a matter of fact, my lease states a $25 fee if I have to come get your rent, or you pay in cash. That's simply too much work, gas money, and time for my liking. I'll also have to look into the limits per month. I actually still have 1 tenant that mails me a check every month. Seems harder for them than paying online, but they like it. And they are actually a young couple (early 30's).
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Maya Roberts
Rental Property Investor · Sunnyvale, CA · Member since 2019 · 60 posts · 40 votes
6y
Hi @Anthony Wick, we initially used a property manager and part of our frustrations was waiting until the 20th each month to collect our rent checks! Plus other frustrations... Today, my husband and I manage our rentals now.
We recently started with Burbz because we found @Kenny Dahill on these forums. He was open and honest about everything, which we really appreciated!
It does take the standard 3-5 days to collect our money, but we get emails notifying us of each 'payment step'. For example, once the tenant actually sends payment we know immediately. That's comforting for us.
1 Reply
Kenny Dahill
Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
6y
@Anthony Wick, every 'rent collection' solution will have its Pro's and Con's. Free and paid. It's a matter of picking what you're willing to tolerate vs. not.
Unfortunately for us in the industry, the standard ACH clearing timeframes are out of our control. I understand the desire for instant transfer but the system is a lot larger than us real estate software companies. We simply play by their rules.
Credit card payments are instant, however there are typically transaction charges associated with them. Paid by the tenant typically but that isn't ideal for them.
An alternative could be putting in the lease that the payment must clear into your bank by the 1st. That puts the obligation back on the tenant to pay earlier. It's similar to those tenants who pay by mail; they have to factor in delivery days.
I would be very careful refunding tenants who paid by PayPal Service. I don't know how that would look in court if you have a record of refunding and asking for rent again. I know 3% adds up but you increase your risk by having them re-pay rent.
0 Reply
Kris L.
San Antonio, TX · Member since 2019 · 930 posts · 836 votes
6y
@Dennis M.
Collecting cash is great if it is on small scale. I don't really want to have $50k+ cash in the office during rent payment time myself. The wrong person figures that out and there is going to be a major issue.
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Anthony Wick
OP
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Kenny Dahill . A tenant in the middle of their lease attempting to state they didn't get the refund so they shouldn't have to pay rent "again" is the least of my worry. That would not hold up in court at all. Paper trail easily shows what their mistake was and how they did get a refund. And no way am I adding in another 3% of fees or expenses into my budget. Might as well call a PM and ask if you can pay 3% more of what they charge.
Now, I do know all methods have their pros and cons. Even cash, you have to spend the time to actually go get the rents. Checks could bounce. Venmo and Zelle could have partial payments and thus negating your eviction proceedings. Paypal has it's limitations, as I started the topic.
But, you're telling me it takes 5 business days for a payment to clear through the system, and that's why companies hold the money? You aren't telling me that are you? Those transactions happen over night. I'd rather hear; "we have to make a profit, thus we hold your money, charge fees, and otherwise look to maximize our profits". At least that's believable.
0 Reply
Ryan Dossey
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
6y
You guys are REALLY brave allowing tenants to pay rent via Paypal. We used to use them for merchant account processing but businesses with higher MRR volumes are HORRIBLE to have on Paypal. We at one point had them hold hostage everything we got for 60 days while they "verified" the business we were in. Without even touching the whole dispute resolution process I would never let a resident pay via Paypal.

1 Reply
Kenny Dahill
Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
6y
@Anthony Wick, what I'm telling you is the standard ACH requirements. It takes 2 days on the payer end and 2-3 days on the payee side for ACH to clear and process payments. There is still a process for ACH to review and confirm the 'payer' account has enough funds.

Anytime the payee pays to accelerate the payout, that's technically the holding company taking a risk and paying out before the payment has thorough gone through clearance. You could in theory pay to get your money faster and the payment bounces, which is added liability for the ACH holding company. That's why they charge you the $2-4 generally; cover risk.

Everybody thinks Cozy and similar companies profit from the holding period. That's false. The truth is we never even have control of your money, we rely on a payments vendor's technology because there are a lot of regulations. Even Zelle is similar to this. Our payments vendor doesn't hold the money either, they have their own holding partner. ACH is a glorified checks system; payments can easily bounce which is why there's that protected delay.

The truth is your payment can probably be reduced by a day; 3-4 days. However the longer the ACH holding company holds onto yours and the millions of other payments, the more protected they are from bounces and fraud. It's not overnight though.

I understand why you don't want to pay the 3%. I'm not arguing that. I just wouldn't refund it, have them pay you a fee instead. That also puts the burden on them and would be a better lesson learned.
0 Reply
Peter TverdovBusiness Member
Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
6y
Closing in on 300 tenants.
They pay via Venmo or Cozy.
KISS method.
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5 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
6y
I don’t collect anywhere near 50k in a month so that won’t apply to me or probably 99% of the people on here but I would agree at that point it makes no sense . I like to check on my properties anyways and I don’t like waiting for my money so for me it works .
2 Reply
Timmi Ryerson
Property Manager · Ketchum, ID · Member since 2016 · 277 posts · 132 votes
6y
We use Smart Property Systems. It is not free but all of the accounting is done for us and that saves huge amounts of time. Like other processors, it takes 24 hours for credit and debit cards and 3 business days for ACH. That is because the bank waits to approve the payment for that amount of time, and no other reason. I looked at Cozy but they do not support a lot of the features I need. Our tenants are very happy with their portals that track their payments, allows them to contact us and they can see their statements and account balances. We just plan for the 3 day delay.
0 Reply
Syed H.
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
6y
Originally posted by @Anthony Wick:
I'm definitely looking for an alternative. But, I am NOT looking for a fee based serviced. I've had a couple minor problems, but not enough to start paying $25+ per month just to get my rents. I've looked at alternatives before, but I'll have to look again. Perhaps I'll come around to Cozy. But for some reason, I really dislike waiting 3-5 business days to get my money. No, I don't need the rents to make mortgage payments, or run a budget nearly that thin, but it just annoys me.
Not going the cash route. As a matter of fact, my lease states a $25 fee if I have to come get your rent, or you pay in cash. That's simply too much work, gas money, and time for my liking. I'll also have to look into the limits per month. I actually still have 1 tenant that mails me a check every month. Seems harder for them than paying online, but they like it. And they are actually a young couple (early 30's).

Just an FYI, PayPal is changing their terms soon. If you are sent money and are charged a fee, if you refund it, the fee isn’t refunded. I’m not sure if you have to pay for it or sender does tho. They just changed this.
Also I agree cash sucks. I get mainly money orders mailed to me. Some checks. I love the money orders since they don’t bounce. I might try cozy as well.
1 Reply
Joe A.Business Member
Realtor · Waco, TX · Member since 2018 · 75 posts · 80 votes
6y
@Anthony Wick My suggestion is to set the due date for rent at least 5 days before you need it to pay bills. That way it doesn’t matter if you wait the 3-5 days. Even better, make sure you have enough in reserves to cover expenses for at least the next month. That way as long as you’re consistently collecting rent, you’re good to go.
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Mary M.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
ACH or Zelle.
0 Reply
Chris Vanderloo
Rental Property Investor · Littleton, MA · Member since 2019 · 13 posts · 12 votes
6y
Boy oh boy… you make paying rent as idiot-proof as possible, and the universe just goes and makes a better idiot…
2 Reply
Matthew Olszak
Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
6y
Originally posted by @Mindy Jensen:
Please note that Paypal has a dispute option. This means that your tenant can dispute the payment after their lease is up. Paypal FREQUENTLY sides with the person who did the paying.
Other apps like Venmo simply tell the person doing the paying that they should request a refund directly from the person they paid.

Yours was my exact reply just reading the title. Of course, ACH and credit cards can be disputed, checks can bounce, hell even cash can be reported as stolen. But there is none easier to get your money back as a payor than Paypal (as experienced in my early days with Ebay). And its not just that paypal tells you that you need to make a refund, they deduct the money from your pp account, and if there isn't enough there, they pull it from your bank account. You have 0 recourse beyond suing the tenant, which is rarely a good business decision.

If your tenants can use paypal, they likely have a bank account - why not just tell them to pay you through their bank's bill-pay system if you don't want to use another service?
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PayPal is free, unless your tenant can’t follow instructions

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