Fastest AND cheapest ways to accept payments from tenants

Property Manager · NY · Member since 2019 · 19 posts · 8 votes

Hello BiggerPockets community, we have been accepting payments from tenants using Zelle, Venmo and Paypal. Zelle and Venmo requires tenants to have an American bank account. We can receive the payment INSTANTLY and FOR FREE, no processing fee.

The problem is Venmo limits you to $20,000 withdrawn per week.

Zelle can only be used for folks who use major USA banks (some folks have unsupported banks and cant use Zelle).

PayPal we use as a back-up if tenant does not have an American bank, but there is a 3% processing fee, we require tenants to pay that 3% processing fee if they use PayPal.

All three payment methods allow us to do instant transfers. We have been able scale our business for a while but are now just a bit too big to use these methods for accepting payments. It takes too damn long to do accounting and limitations wont allow us to scale.

We are interested in receiving payments using REAL TIME PAYMENT network from clearing house (push payments) or SAME DAY ACH / NEXT DAY ACH. Venmo recently created Venmo for business but they charge 1.9% + $0.10 per transaction. Traditional gateways like Stripe charge 3% processing fee and Appfolio takes too long to process ACH payments. Please help!

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

Originally posted by @Eugene Lavatman:

@JD Martin we master lease the properties and thus we are treated like tenants, many contracts state payment required by the 5th latest or else penalties. Some landlords are strapped for cash, especially during pandemic and on the first of every month we get a phone call lol.

We are ok with paying processing fees up to 0.75 - 1.00%, its 2021 and the technology that is available is truly remarkable, Real time payments via clearing house only charge banks/gateways $0.01 - $0.10. Same day ACH cost a bit more but definitely not 1.99%. No point of wasting tens of thousands of dollars on processing fees.

Millennials have expectations of instant payments or same day with minimal processing fee and so do we.

Facebook is supposed to launch Diem.com this month (used to be called "Libra", a blockchain stable coin) things are changing but I guess not fast enough.

It's not that the technology isn't available, it's that someone wants to get paid for developing, maintaining and deploying that technology. Millennials can expect all they want; that still doesn't mean that others should work for free. If anything, the expectation (largely brought about by the internet) that everything should be free is causing a lot of economic damage. Let's put it in perspective: if you collect $1 million (since you can't withdraw more than $20k/wk, so there's the 1 mil) on 165 units and pay a 2% processing fee, that means that averaged out you are collecting $6k per unit annually and paying $120 per unit to collect that money. Pretty small potatoes if you ask me.

You know there's an old saying that pigs get fat and hogs get slaughtered. I'm not telling you not to try to save money, but things cost money for a reason: they deliver value. Anything you think is free is either worthless or they are getting paid in some other fashion. If I didn't want to wait 5 days for an ACH to clear I wouldn't have any problem paying what amounts to $10/month in your example to have it same day/next day. I want the company/companies that deliver my money to be healthy and long-lasting, not go out of business because all of its customers robbed it of a few pennies enough so the entire enterprise fails.

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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
5y
That's like $240K in rental income per year. How many rental properties do you have?!
A lot of investors use the Cozy app to manage properties (mostly residential). It has features that organize the properties and payments. It gives you notifications that payments are sent. There is a monthly fee but it's worth every dime.
2 Reply
James Bradin
Rental Property Investor · Destin, FL · Member since 2016 · 91 posts · 55 votes
5y
I have been using Zelle for all of my properties. It has made collecting rent a breeze and allows me to collect rent without incurring any fees or spending gas money to pick up checks.
I inherited 4 tenants that had paid rent via check for 20+ years. They loved switching to Zelle. The ease and convenience is unmatched.

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Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y
We are coliving company (SettleLiving.com) and at the moment we manage 165 bedrooms in NYC, matching zelle and venmo payments to see who paid and who didn't isn’t very professional, easy to make mistakes.
Cozy uses traditional ACH, takes up-to 5 days to receive payment, many landlords expect us to send them rent between the 1st of the month and the 5th latest. Tenants pay between a few days before the 1st all the way to the 5th of the month. 95% pay by the 5th or earlier. Don’t have the luxury of waiting up to 5 business days for traditional ACH. Telling folks to pay earlier reached limited success.
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
5y
Originally posted by @Jaron Walling:
That's like $240K in rental income per year. How many rental properties do you have?!
A lot of investors use the Cozy app to manage properties (mostly residential). It has features that organize the properties and payments. It gives you notifications that payments are sent. There is a monthly fee but it's worth every dime.

Actually it's over a million ($20k x 52 weeks).
We use Cozy. It's free but doesn't meet your other criteria. I'm not sure why you (the original poster, not Jaron) think there is a company out there that is going to give you free ACH without living off the float. What could possibly be in it for them? They take responsibility for moving millions of dollars around but don't even get the float to recover their costs?
This is what Cozy does. They live off the float. If you want your money the next day they can do that but they charge you a processing fee. If you don't mind waiting 5 days then they collect 5 days worth of interest and you have your money without fees.

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Nicole Heasley Beitenman
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
5y
I use RentmindMe.
1 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
5y
Originally posted by @Eugene Lavatman:
We are coliving company (SettleLiving.com) and at the moment we manage 165 bedrooms in NYC, matching zelle and venmo payments to see who paid and who didn't isn’t very professional, easy to make mistakes.
Cozy uses traditional ACH, takes up-to 5 days to receive payment, many landlords expect us to send them rent between the 1st of the month and the 5th latest. Tenants pay between a few days before the 1st all the way to the 5th of the month. 95% pay by the 5th or earlier. Don’t have the luxury of waiting up to 5 business days for traditional ACH. Telling folks to pay earlier reached limited success.

Who cares what the landlord expects? If you are just passing through the payment, unless you're going to go to the bedroom and beat the payment out of them, the landlord gets their money when the tenant pays. If they want it next day make the landlord eat the Cozy fee, Stripe fee or Square fee. We have all of these and any of our tenants that want to use the fee models we charge the fee back to the tenant.

Podcast Guest on Show #243
Skyline Properties
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Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y
@Nicole Heasley Beitenman thanks, how long does it usually take for payments to clear in bank account once a tenant sends a payment?
0 Reply
Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y
@JD Martin we master lease the properties and thus we are treated like tenants, many contracts state payment required by the 5th latest or else penalties. Some landlords are strapped for cash, especially during pandemic and on the first of every month we get a phone call lol.

We are ok with paying processing fees up to 0.75 - 1.00%, its 2021 and the technology that is available is truly remarkable, Real time payments via clearing house only charge banks/gateways $0.01 - $0.10. Same day ACH cost a bit more but definitely not 1.99%. No point of wasting tens of thousands of dollars on processing fees.

Millennials have expectations of instant payments or same day with minimal processing fee and so do we.

Facebook is supposed to launch Diem.com this month (used to be called "Libra", a blockchain stable coin) things are changing but I guess not fast enough.
0 Reply
Jonah Kolsrud
Ladson, SC · Member since 2017 · 53 posts · 22 votes
5y
@Eugene Lavatman
Have you considered Appfolio or Rentredi? I would look into their ability to clear payments (might be an issue doing same day), but overall it could be beneficial to be tracking the payment of rents all into the same location rather than collecting rent across multiple platforms as your doing in current state.
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Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y
Found one company so far, its called Simplychecks.com, $49.00 per Month with 0.95% processing fee + $0.50 per Transaction. Same day ACH (echecks)!
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y

@Eugene Lavatman just keep in mind that with Zelle, you need a business account to receive rent. Some banks charge money to receive payments at a business. Most landlords are using personal accounts to collect rent, which violates terms of service and is not recommended. Zelle is a bank to bank service that uses ACH. Most ACH transactions clear same day, so the banks make the money available instantaneously. The reason Cozy takes several days to clear ACH is the routing. They also float it to make sure it clears and doesn't get returned. The member banks of Zelle have made an agreement on the service that money cannot be returned, which is different than typical ACH which transacts more like a digital check.
Venmo is similar to Zelle in that a standard account cannot be used for business. You need a merchant account and there are fees. I realize many landlords use Zelle for rent collection, but it is a violation of the terms of service. It could result in your account being frozen or shut down. One of the reasons Venmo only allows person-to-person is because they lack consumer protections.
https://help.venmo.com/hc/en-u....
In my opinion it is better to use rent collection services that are purpose built for collecting rent. They all use ACH, as does every other utility and mortgage bill pay service. That is how business is run. I am sure Zelle and Venmo will build out their business services over time, but right now they are really more person-to-person focused. I suspect the business version of Zelle and Venmo will incorporate consumer protections and charge more fees over time. If you are using those services, based on the size of your business, you should make sure you are using a business account. It is one thing if you are collecting rent from one customer, but having your account frozen with hundreds of customers could be really bad for a business.
3 Reply
Chad HalePro Member
Property Manager / Investor · San Jose, CA · Member since 2013 · 779 posts · 301 votes
5y
@Eugene Lavatman Have a look at Zego
https://www.gozego.com/
I've been happy with them and their integration into RentManager.
I think you can use standalone too?
1 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
5y
Originally posted by @Eugene Lavatman:
@JD Martin we master lease the properties and thus we are treated like tenants, many contracts state payment required by the 5th latest or else penalties. Some landlords are strapped for cash, especially during pandemic and on the first of every month we get a phone call lol.

We are ok with paying processing fees up to 0.75 - 1.00%, its 2021 and the technology that is available is truly remarkable, Real time payments via clearing house only charge banks/gateways $0.01 - $0.10. Same day ACH cost a bit more but definitely not 1.99%. No point of wasting tens of thousands of dollars on processing fees.

Millennials have expectations of instant payments or same day with minimal processing fee and so do we.

Facebook is supposed to launch Diem.com this month (used to be called "Libra", a blockchain stable coin) things are changing but I guess not fast enough.

It's not that the technology isn't available, it's that someone wants to get paid for developing, maintaining and deploying that technology. Millennials can expect all they want; that still doesn't mean that others should work for free. If anything, the expectation (largely brought about by the internet) that everything should be free is causing a lot of economic damage. Let's put it in perspective: if you collect $1 million (since you can't withdraw more than $20k/wk, so there's the 1 mil) on 165 units and pay a 2% processing fee, that means that averaged out you are collecting $6k per unit annually and paying $120 per unit to collect that money. Pretty small potatoes if you ask me.
You know there's an old saying that pigs get fat and hogs get slaughtered. I'm not telling you not to try to save money, but things cost money for a reason: they deliver value. Anything you think is free is either worthless or they are getting paid in some other fashion. If I didn't want to wait 5 days for an ACH to clear I wouldn't have any problem paying what amounts to $10/month in your example to have it same day/next day. I want the company/companies that deliver my money to be healthy and long-lasting, not go out of business because all of its customers robbed it of a few pennies enough so the entire enterprise fails.
Podcast Guest on Show #243
Skyline Properties
View Page
5 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Originally posted by @Eugene Lavatman:
@JD Martin we master lease the properties and thus we are treated like tenants, many contracts state payment required by the 5th latest or else penalties. Some landlords are strapped for cash, especially during pandemic and on the first of every month we get a phone call lol.

We are ok with paying processing fees up to 0.75 - 1.00%, its 2021 and the technology that is available is truly remarkable, Real time payments via clearing house only charge banks/gateways $0.01 - $0.10. Same day ACH cost a bit more but definitely not 1.99%. No point of wasting tens of thousands of dollars on processing fees.

Millennials have expectations of instant payments or same day with minimal processing fee and so do we.

Facebook is supposed to launch Diem.com this month (used to be called "Libra", a blockchain stable coin) things are changing but I guess not fast enough.

Most all ACH is transacted between the banks same day. It is just how it routes or if it is held in the middle. When a service is free, it just means the company is making money other ways. For example, holding your cash is one way they make money. Selling other services is another way to make money. Zelle isn't a money maker by itself for member banks, but it requires you to have an account with them. They do make money on you as a bank customer and holding your money.
I am not familiar with what Facebook has planned, but check if it is a business service. Also keep in mind Facebook may offer it for free, but only because they sell your personal data and target advertisement to you. Some people happily trade privacy for a few dollars and others don't. I think millennials have been too willing to give up privacy and I believe there will be a social awakening on that in the coming years. I could be wrong, maybe they were just raised that way and don't care about privacy.
Bottom line, NOTHING is free. Whether it is advertising, collecting interest on money held or selling other services, any financial transaction has a cost. I am all about minimizing fees, just understand what your trade off is. Use business services in business to avoid risk.
3 Reply
Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
5y
Check out Aptexx, this might work for you guys!
With the volume of your payment processing, you guys might have to develop your very own payment processing app lol
1 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Originally posted by @JD Martin:
Originally posted by @Eugene Lavatman:
@JD Martin we master lease the properties and thus we are treated like tenants, many contracts state payment required by the 5th latest or else penalties. Some landlords are strapped for cash, especially during pandemic and on the first of every month we get a phone call lol.

We are ok with paying processing fees up to 0.75 - 1.00%, its 2021 and the technology that is available is truly remarkable, Real time payments via clearing house only charge banks/gateways $0.01 - $0.10. Same day ACH cost a bit more but definitely not 1.99%. No point of wasting tens of thousands of dollars on processing fees.

Millennials have expectations of instant payments or same day with minimal processing fee and so do we.

Facebook is supposed to launch Diem.com this month (used to be called "Libra", a blockchain stable coin) things are changing but I guess not fast enough.

It's not that the technology isn't available, it's that someone wants to get paid for developing, maintaining and deploying that technology. Millennials can expect all they want; that still doesn't mean that others should work for free. If anything, the expectation (largely brought about by the internet) that everything should be free is causing a lot of economic damage. Let's put it in perspective: if you collect $1 million (since you can't withdraw more than $20k/wk, so there's the 1 mil) on 165 units and pay a 2% processing fee, that means that averaged out you are collecting $6k per unit annually and paying $120 per unit to collect that money. Pretty small potatoes if you ask me.
You know there's an old saying that pigs get fat and hogs get slaughtered. I'm not telling you not to try to save money, but things cost money for a reason: they deliver value. Anything you think is free is either worthless or they are getting paid in some other fashion. If I didn't want to wait 5 days for an ACH to clear I wouldn't have any problem paying what amounts to $10/month in your example to have it same day/next day. I want the company/companies that deliver my money to be healthy and long-lasting, not go out of business because all of its customers robbed it of a few pennies enough so the entire enterprise fails.

Nothing on the internet is free. Whether it is advertising or selling personal information, everything on the internet is monetized. Beyond that, all these companies have massive control over users. They can shut any account they want for terms of service violation and users have no recourse, because you agreed to their TOC. No big deal when doing a Google search, but when collecting tens of thousand of dollars, a business needs to be careful. What would happen to a property manager if February rent all disappeared or was frozen? I doubt most PM have enough cash in the bank to cover that. The problem is if the PM collected it on their chosen platform, they are responsible.
3 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
5y
In God we trust, all others pay cash.
3 Reply
Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y
@Chad Hale I stumbled onto Gozego yesterday, just reached out, thank you!
0 Reply
Hai Loc
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
5y
@Eugene Lavatman
Cashapp
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Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y
- @Joe Splitrock
- There is definitely risk with Venmo P2P, might force us to switch to the business account.
- Zelle we do have a business account, its free to accept instant payments (they really are ahead of the curve), but unfortunately not the best for accounting purposes. There is NO risk of shutdown with Zelle.
- In regards to privacy I think we'll all be ok, Apple is taking away facebooks ability to acquire data from mobile devices. GDPR cracked down on all companies who operate in the EU. CCPA definitely making big changes for USA privacy. There is more and more privacy every year, If you compare America 2016 and 2021 its a very different world when it comes to privacy standards.
- The lack of same day ACH and RTP by "MOST" management companies just means one of these days a company will come in and disrupt the market and everything will be flipped upside down.
- The reason why most platforms do offer same day ACH for accepting tenant payment is because real estate payments are considered high risk transactions, due to possibility of NTF (Not sufficient funds). It's also another reason why PayPal does not allow you to dispute payments related to real estate.
1 Reply
Eugene Lavatman
OP
Property Manager · NY · Member since 2019 · 19 posts · 8 votes
5y

@JD Martin
In coliving and corporate rental industry a lot of big players got caught with their pants down due to covid. Every dollar counts, it's the difference between having good units economics and failing unit economics. An extra 5% in rent price is the difference between a tenant saying your rental is out of their budget vs signing the lease. Saving 2% in processing and 3% elsewhere is what is required to survive and/or thrive, while competitors are shutting down or being bought out.

Other trends in 2021:

- Paying existing tenants to conduct showings before vacating, thus not needing to pay real estate brokers

- No office, be completely remote, save $$$$$ by not having an office space

- Virtual team: pay $5 per hour to an expert European consultant instead of $20 to an entry level American.

- Your property photos = marketing content, professional photoshoot / videos / 3D walk-throughs = major change in demand generation
1 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
5y
@Eugene Lavatman assuming you only have 1, 3 props, pay pal, cash app etc, or simply have them make direct deposit at the bank, KEEP IT SIMPLE , If many props, set up Buildium ,
Good Luck
2 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Originally posted by @Eugene Lavatman:
@Joe Splitrock
- There is definitely risk with Venmo P2P, might force us to switch to the business account.
- Zelle we do have a business account, its free to accept instant payments (they really are ahead of the curve), but unfortunately not the best for accounting purposes. There is NO risk of shutdown with Zelle.
- In regards to privacy I think we'll all be ok, Apple is taking away facebooks ability to acquire data from mobile devices. GDPR cracked down on all companies who operate in the EU. CCPA definitely making big changes for USA privacy. There is more and more privacy every year, If you compare America 2016 and 2021 its a very different world when it comes to privacy standards.
- The lack of same day ACH and RTP by "MOST" management companies just means one of these days a company will come in and disrupt the market and everything will be flipped upside down.
- The reason why most platforms do offer same day ACH for accepting tenant payment is because real estate payments are considered high risk transactions, due to possibility of NTF (Not sufficient funds). It's also another reason why PayPal does not allow you to dispute payments related to real estate.
My wife works at one of the largest ACH processors in the country and their transactions post same day. The difference when you involve rent payment services is that the ACH has four parties involved. The payment website, the sending bank, the ACH processor and the receiving bank. They would rather have the payment fail to send, before you even get it in your account. ACH can be pulled without transaction consent. That allows tenants to schedule autopay. Unless they fundamentally changed how ACH works, there is really no way to disrupt that model and financially make money. ACH has consumer protections and is a federally regulated system. Ultimately Zelle, Venmo and PayPal all use ACH to get money from your tenants bank account and into the landlords bank account. Zelle is fastest only because it is a bank to bank transaction, with the account owner authorizing each transaction. Venmo can take 1-3 days to get money from the tenants account into the service. It sends to you "immediately" only because the delay already occurred getting the money in.
Ultimately what you lose with Zelle, Venmo or PayPal is a rent payment specific portal. When you use a service like Cozy, you can setup autopay and the transaction sends every month on the first. A landlord can force the tenant to make only full rent payment through a service like this to avoid partial rent being sent. You can add late fees on to the account. Landlord and tenant can both view payment history (without reconciling in a third party software). Most of my Cozy payments clear in 3-4 days, which for me is no big deal. I have found it depends on the bank how fast it clears.
I am surprised how fast you pay owners. I know a new trend with PM companies is holding money until the end of the month, so maintenance expenses can be deducted faster and to retain cash.
Great discussion. This is an evolving area worth watching. Any way to get money faster, easier and more secure is good in business.
1 Reply
Timothy White
Realtor · Boston, MA · Member since 2019 · 91 posts · 60 votes
5y
@Eugene Lavatman I use direct bank transfers. No cost for tenants or my company
1 Reply
Nicole Heasley Beitenman
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
5y
Originally posted by @Eugene Lavatman:
@Nicole Heasley Beitenman thanks, how long does it usually take for payments to clear in bank account once a tenant sends a payment?

@Ben Lynch can answer that. He's the founder. I've never paid attention. I only go into my account about once a month to pay utilities, and that's before rent is due.

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