Fastest AND cheapest ways to accept payments from tenants

General Landlording & Rental Properties
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Fastest AND cheapest ways to accept payments from tenants

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The problem is Venmo limits you to $20,000 withdrawn per week.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

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  • Oleksandr IvanovskiyPro Member
    Rental Property Investor · Member since 2019 · 124 posts · 38 votes
    5y

    @Eugene Lavatman

    Try cozy. It’s very convenient.

    0Reply
  • Eugene Lavatman
    OP
    Property Manager · NY · Member since 2019 · 19 posts · 8 votes
    5y

    @Joe Splitrock

    Really interesting! Thank you for providing that information. As I delved deeper, found some more info... Besides ACH there are other payment methods. 

    Venmo, PayPal, Zelle all use the RTP (real time payment) network to get instant payments settled. Check out this article: https://karenmpd.medium.com/fa... RTP will threaten VISA and MASTERCARD, since there will be less of a reason to charge 3% processing fees from SMBs.

    Then there is also eChecks (two formats: RCC and Check21), funds CAN be made "available" same day in the receiving bank as long as the receiving end has good banking relationship + low disputes. But there is always the possibility of NSF (not sufficient funds) where the funds would be reversed.

    A DREAM solution would be to use RTP such as a zelle/venmo but add a reconciliation tool similar to quickbooks that can sync to the bank using PLAID.com, analyze bank transactions and figure out who paid and who still didn't pay for that month and present it via cloud dashboard. Probably have to wait 5 more years for that.

    0Reply
  • Oleksandr IvanovskiyPro Member
    Rental Property Investor · Member since 2019 · 124 posts · 38 votes
    5y

    @Eugene Lavatman

    I agree with you. For your situation you need something different. But I like Cozy since I have only few properties and don’t need to deal with paper checks.

    0Reply
  • Nicki Shelton
    Fort Worth, TX · Member since 2021 · 92 posts · 32 votes
    5y

    @Eugene Lavatman I am new to real estate however you can link an account to the federal ach to receive payments quickly. However there is a monthly fee. I don't remeber how much it is.

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    5y

    I'm probably going to regret this, but...

    There's too much aspirational thinking here in threads like these and arguing about how many angels can dance on the head of a pin. Treating the issue of collecting rent like a logical proof. If A = B, and B = C, then A = C. Syllogisms and conclusion, ὅπερ ἔδει δεῖξαι/quod erat demonstrandum.

    They're tenants. The reason they rent homes is that they don't buy homes. The reason they don't buy houses is that they're BROKE. The largest numbers of them BY FAR live in C and D-class housing. Then there's a much smaller subsection that lives in B-class housing, far outnumbered by B-class homeowners. Then there's an even smaller subsection that lives in A-class housing, even more outnumbered by homeowners in that class of housing. Then there's students, short-term rentals, mobile homes.

    The dream is to Landlord on Autopilot. Man, the guy who published that book made bank on that title. Trouble-free, minimal interactions, passive income streams straight to your bank account. All the wish fulfillment you could want. You'll have these systems and these thoroughly competent property managers who will take care of the problems of owning homes that others who have made less-wise financial decisions live in. But. in this world at least, true passive income through landlording is largely a dream, sadly. You're going to be chasing rent from people who should have it, but don't. That's the way it is -- that's why they're tenants and you're a landlord, because you own the roof over their heads and they made, again, less-wise financial decisions in their lives than to own that roof. They're not suddenly going to wise up, and as soon as they DO wise up, they won't be renting your roof anymore.

    Are there perfectly responsible tenants you can zero in on who pay regularly and without being hounded? Sure. But can we at least admit as a community that they're maybe 15% of the actual tenant population?

    But we still get ten threads a week in the Bigger Pockets forums on the most effortless way to collect rent that tenants are seemingly falling over themselves to pay, and maybe a thread every six months that comes even close to skirting the truth, that we all chase rent and we all have to be more than a bit flexible, because THAT IS THE NATURE OF THE BEAST.

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y
    Originally posted by @Jim K.:

    I'm probably going to regret this, but...

    There's too much aspirational thinking here in threads like these and arguing about how many angels can dance on the head of a pin. Treating the issue of collecting rent like a logical proof. If A = B, and B = C, then A = C. Syllogisms and conclusion, ὅπερ ἔδει δεῖξαι/quod erat demonstrandum.

    They're tenants. The reason they rent homes is that they don't buy homes. The reason they don't buy houses is that they're BROKE. The largest numbers of them BY FAR live in C and D-class housing. Then there's a much smaller subsection that lives in B-class housing, far outnumbered by B-class homeowners. Then there's an even smaller subsection that lives in A-class housing, even more outnumbered by homeowners in that class of housing. Then there's students, short-term rentals, mobile homes.

    The dream is to Landlord on Autopilot. Man, the guy who published that book made bank on that title. Trouble-free, minimal interactions, passive income streams straight to your bank account. All the wish fulfillment you could want. You'll have these systems and these thoroughly competent property managers who will take care of the problems of owning homes that others who have made less-wise financial decisions live in. But. in this world at least, true passive income through landlording is largely a dream, sadly. You're going to be chasing rent from people who should have it, but don't. That's the way it is -- that's why they're tenants and you're a landlord, because you own the roof over their heads and they made, again, less-wise financial decisions in their lives than to own that roof. They're not suddenly going to wise up, and as soon as they DO wise up, they won't be renting your roof anymore.

    Are there perfectly responsible tenants you can zero in on who pay regularly and without being hounded? Sure. But can we at least admit as a community that they're maybe 15% of the actual tenant population?

    But we still get ten threads a week in the Bigger Pockets forums on the most effortless way to collect rent that tenants are seemingly falling over themselves to pay, and maybe a thread every six months that comes even close to skirting the truth, that we all chase rent and we all have to be more than a bit flexible, because THAT IS THE NATURE OF THE BEAST.

     Nice use of Greek & Latin :)

    Every month about the 29th/30th/31st I send out a bulk e-mail to my constant offenders reminding them when rent is due (literally the day and date, i.e "Tomorrow, January 1st") and how it needs to be paid. This e-mail goes out to about 40% of my tenants. The other 60% are either on auto payment on Cozy or pay early. So your point is well taken, though maybe the percentages are a little off depending on your rental class (all of my rentals are B and above). 

    Podcast Guest on Show #243
    Skyline Properties
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  • Alexander Szikla
    Real Estate Agent · New York City · Member since 2020 · 819 posts · 641 votes
    5y

    Zelle is my favorite - seems like everyone has it on my end

    1Reply
  • Eugene Lavatman
    OP
    Property Manager · NY · Member since 2019 · 19 posts · 8 votes
    5y

    @Nicki Shelton do you happen to have the website for federal ACH?

    0Reply
  • Sofia Sharkey
    Property Manager · Kansas City, MO · Member since 2018 · 280 posts · 221 votes
    5y

    @Eugene Lavatman

    0Reply
  • Nicki Shelton
    Fort Worth, TX · Member since 2021 · 92 posts · 32 votes
    5y

    @Eugene Lavatman I will look tonight when I get home but I'll let you know in the next day or two. Also the nice thing about using their system is you can input your accounting method so that can be beneficial for you as well.

    1Reply
  • Aaron F.
    Investor · US · Member since 2017 · 71 posts · 80 votes
    5y

    A number of my tenants prefer to pay cash. They go into the branch of my bank where I hold my business account and they deposit it there directly. There are no fees or hassles. 

    2Reply
  • Eugene Lavatman
    OP
    Property Manager · NY · Member since 2019 · 19 posts · 8 votes
    5y

    @Chad Hale thank you very much! https://www.gozego.com/ integration with Rentmanager allows for 24 hr settlement. The company essentially takes on the risk for not sufficient payments, they send you all the money before the money even settles in their account.

    0Reply
  • Chad HalePro Member
    Property Manager / Investor · San Jose, CA · Member since 2013 · 780 posts · 301 votes
    5y

    @Eugene Lavatman  Welcome.  I believe if there is a NSF, they will pull the money back out of your account. However, assuming the payment is not NSF'd or disputed, you get access to the funds quickly.  I typically see payments made today deposited in my bank tomorrow.

    There is a flat transaction fee of $1/ ACH transfer.  Not sure if that is still their rate?

    Personally, I absorb that cost as I want all my tenants to pay online and with Rentmanager integration, all rent charges, accounting are automated.  Nothing for me to do other than a scan a report for unpaid rents.

    One other benefit for tenants, is that they can elect to have their rent payments reported to the credit bureaus thus helping them build their credit profile.

    1Reply
  • Eugene Lavatman
    OP
    Property Manager · NY · Member since 2019 · 19 posts · 8 votes
    5y

    @Chad Hale its $2.99 per ACH now, but thats ok, glad I made this post.

    0Reply
  • Nicki Shelton
    Fort Worth, TX · Member since 2021 · 92 posts · 32 votes
    5y

    @Eugene Lavatman the website is dtcc.com however you will need an agreement with a lawyer who can set up the account. They can make trade with them directly since they can have access the the federal discount window on your behalf or the trust Or llc behalf. Hope that helps. Sorry for the delay.

    0Reply
  • Nicki Shelton
    Fort Worth, TX · Member since 2021 · 92 posts · 32 votes
    5y

    @Eugene Lavatman or yoy could set up your own cash app and that company have direct access.

    0Reply
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