How best to encourage online rent payments?

Question

Hi BP!

New self managing landlord here. I'm going to be signing up with Cozy/Apartments.com and love the idea of tenants paying online. In CA we can't mandate they do so, so how best to encourage them to do so?  Can there be a fee for not using online payment? Or a credit for using online payment? I also want to make sure this doesn't complicate my bookkeeping too much.

Thanks for you advice!

Joe Splitrock · Answer

You cannot charge a fee for using non-online, but you can offer a discount for using online rent payment. Offer a $5 or $10 discount for using online rent payment. Think of it this way, if you charge $2500 rent, just change it to $2510 and offer $10 off for online rent payment. In other words, it isn't coming out of your pocket.

Joe Splitrock · Answer

I suggested a discount for online rent payment, not requiring it or making it the only method. I think state laws only say you can't require electronic payment. What I read in CT statute says it can't be the exclusive payment method.

Sec. 47a-4c. Landlord prohibited from requiring electronic funds transfer as exclusive form of payment. For any lease or rental agreement executed on or after October 1, 2013, no landlord of residential real property shall require electronic funds transfer as the exclusive form of payment of rent or a security deposit. For purposes of this section, “electronic funds transfer” means any transfer of funds that is initiated through an electronic terminal, telephone or computer or magnetic tape so as to order, instruct or authorize a financial institution to debit or credit an account but shall not include any transfer originated by check, draft or similar paper instrument.

Filipe Pereira · Answer

Check your local laws @Greg Hoffmann, because while what @Joe Splitrock is saying is definitely the easiest (and most convenient) solution to this, it's illegal in some states, including my home state of Connecticut, the last I checked.

What we do is point out all the benefits - it can make your credit score go up, you can set it and forget it, no cost for postage, it gets the rent in on time, every time, etc. That's generally been enough to convince tenants to go online for us.

You can also incentivize them other ways - for every 12 months of online rent payment they will get a gift card of $60 - just price it into your rent. It's a bit of a grey area, but I think it's not as obvious as a surcharge or credit.

Justin V. · Answer

@Greg Hoffmann

Most of my tenants see free online rent in payments as a delighter. When we used erentpayments, before knowing about cozy and Rentler- tenants would pay 3$ per payee to use online rent payments.

Our little old ladies who pay with money orders are the only hold out.

If you need to encourage it, the discount approach seems solid.

Patricia Steiner · Answer

Just state that payments be made via your preferred online method and that "all other payment methods are to be reviewed and approved by the landlord at the time the lease is executed."  That way you are not giving options but not ruling out others in violation of state law.  In Florida, we do not have that restriction and the only payment method acceptable is electronic. It has been a relief to the tenants we have inherited and not one objection has been shared.  Hope that's your case as well.

Best.

Tom S. · Answer

@Greg Hoffmann  Agree with the above post, just offer a small discount for using that system.  Although I've noticed most of my tenants just use Venmo now, it's free and convenient for both parties.  I can transfer to my bank account on the next business day for free, and they allow you to export all transactions into a spreadsheet for easy tracking.

Domenick T. · Answer

Another thing you can do is require tenants to use your PM software service to report non-emergency maintenance issues.  This requires them to sign up which is half the battle.  Then keep encouraging them to use the ACH transfer to pay rent.  Some services help tenants build credit as they pay on time.  That's a decent incentive as well.

How best to encourage online rent payments?

Most Popular Reply