Best way to collect rents with no bank account

21 Replies

Ok, I have a dilemma. How is the best way to collect rents if the majority of your tenants don’t have bank accounts. I know it is hard to believe in this day and age but there are a significant number of people who do not have a bank account. They are used to doing everything in cash. Most don’t have smartphones or other gadgets. All the latest Gee-wiz technology is foreign to them.

I’ve finally convinced everyone that I don’t take cash. Their solution is to buy a money order at the corner store. I tried getting them to mail in payments but it takes over a week to travel the two miles from the apartments to my PO Box. I know we’ve all heard the check is in the mail but in this case it is true. All local mail is sent 70 miles North to Dallas where it is processed and sent back to the same post office where it was sent. Finally a postmaster places the envelop in my PO Box. With the time lag we are well into the month before I can be sure rent was payed.

My current solution is to stop by and pick up rent in person. This works for four units but Isn’t going to scale to the 12 units I close on at the end of the month. What are my options? I don’t want people coming to my house, I don’t have an office. What are your thoughts on a lock-box on site? Any other suggestions?

@Pete Harper I have lock box in a twelve unit full of people who don't use computers much but are perfectly good folk, just not interested in tech-many seniors and in a rural area. Some do ACH, others put checks and MO in the lock box. I go there first week of every month do a few things, and pick up all the checks and drain the coin laundry machines. I have other properties where everybody does ACH payments. They are in town and younger people. 

Half my tenants deposit the rent into my bank account. Some large banks don't allow this so use a smaller bank. I don't collect rent. They need to get it to me. 

This sounds like a nightmare to me but then again so does the thought of me using cash.  On your new unit you can always use method of payment as part of your screening, everyone I have rented to wanted to pay electronically and I do it through Zillow, the same site they applied from so I know they can get on it.   A plus side of the unbanked though is that they are a credit ghost so they won't be buying anytime soon so that's a plus.  If the 12 units you are closing on is a single property a lock box may be a great idea and you can just pick it up as soon as the late fee kicks in and crank up your late fee under the justification that it is costing you a trip.  If you want rent to be a certain price charge 10-15 over what you want it to be but there is an electronic discount to the price you are actually trying to collect.  If people have an incentive they are more likely to figure electronic payments out but if not at least you are being compensated for your time, this may also work with rent increases on your existing tenants.  

@Pete Harper

Money order gets deposited at the nearest branch of your bank. They're responsible to make sure it arrives by xx:xx on the first as indicated in your lease.

Don’t let the tail wag the dog. Other than sending them the address of your branch and the correct account info to deposit to your only responsibility on the 1st should be checking your banking app to make sure it has been done.

I think 7-11 has a system where they can take in the cash and the money goes in your account.  Or, tenants could just deposit cash into your bank account (altho hard to know who deposited what if rent is same for all units) 


https://home.paynearme.com/

Originally posted by @Kris H. :

@Pete Harper

Money order gets deposited at the nearest branch of your bank. They’re responsible to make sure it arrives by xx:xx on the first as indicated in your lease.

Don’t let the tail wag the dog. Other than sending them the address of your branch and the correct account info to deposit to your only responsibility on the 1st should be checking your banking app to make sure it has been done.

 This is great if there is a branch near the rental. But that is not always the case 

OK, yes, I'm gonna say it. @Pete Harper , I understand your conundrum, but there are few things I love better than a fat little greasy wad of cash sitting pretty in my hot little hand, stinking of sin. I enjoy how fresh new US twenties straight out of the ATM stick together. I love how bills light up under blacklights. I just wish the money here had big, seedy holograms that sparkled in the dark on it, like Euro notes.

I love counting cash rent in front of the Americans who pay it to me. I fold it over my left middle finger the old Balkans way, spit all over my right thumb and forefinger, and count the bills open in Greek. I pretend to lose the count just to lengthen the experience. When the count is right, there's the little nod at the end and the soft grunt of deep satisfaction as I shove it down slowly into my pants.

I have a number of small, private pleasures, but handling cash like this really just makes my day.

Originally posted by @Jim K. :

OK, yes, I'm gonna say it. @Pete Harper , I understand your conundrum, but there are few things I love better than a fat little greasy wad of cash sitting pretty in my hot little hand, stinking of sin. I enjoy how fresh new US twenties straight out of the ATM stick together. I love how bills light up under blacklights. I just wish the money here had big, seedy holograms that sparkled in the dark on it, like Euro notes.

I love counting cash rent in front of the Americans who pay it to me. I fold it over my left middle finger the old Balkans way, spit all over my right thumb and forefinger, and count the bills open in Greek. I pretend to lose the count just to lengthen the experience. When the count is right, there's the little nod at the end and the soft grunt of deep satisfaction as I shove it down slowly into my pants.

I have a number of small, private pleasures, but handling cash like this really just makes my day.

You could be a writer. 

@Mary M. Believe it or not but there is no local 7-11, no Starbucks or Walmart in town. We are talking small town East Texas here.

@Bjorn Ahlblad . I think I’m going to give the lock box a try. I can secure a armored box to the side of the building in a visible location. That way I can collect the rent without having to hunt them down.

@Mary M.

If this is small town as described, I’m guessing a 10 block foot race would get you there and back.

I wouldn’t stick a box full of cash in a visible location against the side of a building under any circumstances. Even if it lasts, first idiot to stick bills in without their name on a sealed envelope is gonna ruin your system when the total is short. This is a tenant problem, not a you problem. Make it easy for them to pay you, don’t make it easy for them to screw you. Point them to the bank, if you bank 4 counties away, grab a local account wherever.

@Pete Harper my box is in the laundry area to which only tenants have access, and I have to drain the coin machines monthly anyway. Try to install your box in an area known only to your tenants. Outside, some idiot meth head will get after it with a big sledge or jack hammer the wall.

All of mine pay directly into the bank account at a branch.  They get a receipt for the deposit, I know when it hits the account from anywhere I am.  None of the check is in the mail excuses.  I tell them they are responsible for knowing bank holidays and hours and must have payment in before the 1st, so if 1st is on a Sunday, they need to pay by Saturday to avoid late charges.  Never had any issue with this.  More of them are finding a way to pay electronically by Zelle or venmo or some service like that.   

No way would I want to pick up cash or checks from each door.  Too much time, too much chasing people around, maybe risky.

@Bruce Lynn To use any of these services you need to have a bank account, smartphone or computer. None of these guys have any of this. I spoken to them about it. I explained it costs them more money to buy a money orders while online is free. I might as well be speaking Greek. I have the 20 somethings set up on the online system. Older folks no way. Money orders are the best solution. Drop box would be for checks and money orders. No cash.

@Pete Harper   If they pay cash or money order into your bank account at the bank, they don't need account.  They get a receipt, you get notification they paid.  We do every lease like that.   The ones that don't like having to go to the bank figure out some way to pay online.   We put in the lease the place of payment is "Any Wells Fargo to the account of Your Name, Acct #23042308428340"  Works like a charm.   I advise each owner to set up a separate account for each property and it is easy to run the accounting out of it too.  Pay expenses out of the same account for that property.   There's your income/expense statement.

I suppose the law varies by state, but around here it needs to be in my hand no later than the 5th, due on the 1st, they get a 5 day grace period. Then I don't care if it's in the mail or anywhere else, it's late if it's not in my mailbox on the 5th day.

I offer them online payments to be as quick and easy as possible, but if they insist, I make sure they understand by the 5th does not mean postmarked on the 5th. And I charge maximum legal late fee, literally at midnight. (I had someone miss it by 37 minutes last month, got a late fee) You're a grownup, you can figure out what day to put it in the mail so it gets there on time. If not, late fees are how you learn.

I simply won't take cash period ever. I make this clear at any showing. I have nowhere to put cash, and I don't want to make a special trip to the bank just for you. I don't ever spend cash because my plastic always gives me more cash back...and I can't pay the mortgage on the house with cash without a special trip. I still haven't found a laptop that has a slot to insert cash and buy stuff off Amazon.

I mean it is possible to collect money orders or have a 7-11 service where they can pay there. Never take cash payment as you are aware. ACH as mentioned works well. Maybe give them a little encouragement to get at least the payment tech up to date so you can automate it. 

Originally posted by @Pete Harper :

Ok, I have a dilemma. How is the best way to collect rents if the majority of your tenants don’t have bank accounts. I know it is hard to believe in this day and age but there are a significant number of people who do not have a bank account. They are used to doing everything in cash. Most don’t have smartphones or other gadgets. All the latest Gee-wiz technology is foreign to them.

I’ve finally convinced everyone that I don’t take cash. Their solution is to buy a money order at the corner store. I tried getting them to mail in payments but it takes over a week to travel the two miles from the apartments to my PO Box. I know we’ve all heard the check is in the mail but in this case it is true. All local mail is sent 70 miles North to Dallas where it is processed and sent back to the same post office where it was sent. Finally a postmaster places the envelop in my PO Box. With the time lag we are well into the month before I can be sure rent was payed.

My current solution is to stop by and pick up rent in person. This works for four units but Isn’t going to scale to the 12 units I close on at the end of the month. What are my options? I don’t want people coming to my house, I don’t have an office. What are your thoughts on a lock-box on site? Any other suggestions?

 Pete, I feel your pain with local mail delivery. It is exactly the same in my small town. They send our mail 70 miles west to be sorted, then they drive it back, past our town to the PO in the next town. A worker there brings it back to our PO, then it goes in our box. Such a great improvement over the old system. :-(

Here is my solution:

#1 - Rent is due in my hand on the 1st, late fee applies after 12 noon on the 5th. The only exception is Cozy. I consider that received when paid, even though it doesn't hit my bank account for several days. (I consider it an incentive for paying online.) I make a firm point of explaining this to the tenant at lease signing. If they want to mail a check or money order, send it a week early.

#2 - Our postmaster is sympathetic to our struggle with delayed local mail service. If the tenant takes the envelope in to the desk and asks, they will put it directly into our box instead of sending it off to be sorted. I asked the postmaster if this was a nuisance for them, because the last thing I need is for them to be annoyed at me. She assured me that they do this for a lot of tenants in town, and it was okay. We are a small town - about 2100 population.

I know that some allow/encourage tenants to deposit directly into their bank account, but I do not. The receipts our bank prints out have our account balance and my tenants don't need that information.