Posted about 10 years ago

Should You Collect Rent Electronically/ Online?

In an informal survey of landlords, everyone I spoke with said that collecting physical rent checks is a huge pain. The issues are endless: Tenants pay late, checks bounce, you have to physically collect and cash the checks. If renters are late, it's also problematic to assess and collect late payments. Thankfully there is a better way.

Direct ACH Transactions: If your bank allows this, you can set up a direct payment from your tenants to you. This is a decent solution, however, there are two issues: (a) you have to give your account number and routing number to all your tenants which for the most part is safe, but there is some risk in this age of hackers and identity theft and (b) tenants choose when and how much they pay, so it's hard to automatically assess late penalties. This is often a free service from your bank, so that's good.

PayPal: A lot of landlords have resorted to PayPal. I don't like this solution for a few reasons. First, you want to make sure there are no fees, so your tenants have to make sure to choose that their rent payment is a personal transaction that should be funded with their checking account. I would highly recommend that you do not accept rent with a credit card, due to the high fees and the chance of a chargeback (i.e. the tenant asks the credit card company to refund their rent). Second, PayPal is hard to automate monthly. Third, you have to set up your website to collect different amounts of rent from different tenants (or make them enter their rent amount every month). In general, while cheap and easy, it requires that the tenant submit their rent in the right way so it is error prone.

Online Rent Collection: In my opinion, this is the best option. It is simple, easy and automated. Tenants can set up a direct debit from their checking account and it deposits automatically into your checking account without having to give everyone your banking information. My service has several great features:
  • Ability to setup recurring or one-time payments either online or over the phone
  • Ability to assess late fees on whatever day of the month you choose. Penalties can be on a "per-month" or "per-day" basis. My late fee is $20 per day, so tenants have the incentive to pay as soon as they can, even if they are late.

There are two types of online rent payment services -- you can pay a monthly fee, which is the best option if you have a lot of tenants. I am a part-time investor, so I've chosen a service that charges $3 per month per tenant. It's well worth the $36 per year to avoid the hassles of physical checks or PayPal. Here are some of the companies you should consider: http://www.biggerpockets.com/online-rent-payment.html

Any of these three options work well, but collecting your rent through an online service is the easiest and most hassle free so you can spend more time running your business.


Comments (20)

  1. To stop that nominal tiny payment from interfering with an eviction that is underway, you have to use a service like Tellus that allows you to refuse partial payments. So if they pay in full, that could still stop the eviction, but judges tend to do that even if the full payment is made in court.


  2. Greetings!  Fast forward to 2020 and the coronavirus outbreak.  I have a sudden interest in electronic payments so my manager wouldn't have to trundle it all to the bank.

    Here's what I consider the "elephant in the room" on all this stuff.  Say your tenant stops paying, and you have to file an eviction.  What's to stop them from e-paying you ten bucks and killing it?


    1. To stop that nominal tiny payment from interfering with an eviction that is underway, you have to use a service like Tellus that allows you to refuse partial payments. So if they pay in full, that could still stop the eviction, but judges tend to do that even if the full payment is made in court.


  3. I know this conversations is years old, I’m about to place a tenant on my first house. As there are so many options, could a few people share what they’ve been using and how has it been for them? Thank you. 


  4. A word of caution from a long ago banker, and a long time, multifamily landlord- 

    Numerous services have popped up in recent years, and they're very convenient, with some of the most inexpensive the newest services, which means they are also startups, with some even offshore. Here's where the devil could be in the details. 

    The least expensive rent collections companies perform the collections, via ACH, where you get your rent 3-10 days later.  The funds they have collected are often held in pooled accounts, which means the funds are generally not insured, not eligible for individual insurance, FDIC insurance or share insurance normally covering credit union deposits. At least consider the risk of your rent collection company, generally a software operator of your platform, suddenly going out of business on the second of the month, before you get your rents?  At least ask the questions, and have a backup plan before you sign up! 


  5. 20 per day :0 , n mass you cant charge unless is 30 days pass due


  6. has anyone used rentific.com?


  7. Curious to know which service it is that you use that charges $3 per payment.


  8. I charge $10/day late fee after the 5-day grace period. I get most of my rent on day #5 of course.


    1. My $10/day late fee starts on the 2nd. Almost all of my tenants now find a way to pay on or before the first.


  9. I have been taking rent payments through Quickpay from Chase. It is fast and got rid of the hassle of waiting for the check in the mail.


    1. Just this year I've gotten 3 tenants who are paying by Quickpay. It has worked great - and I'm not with Chase. I assume you are? Are you able to set it up so that non-Chase customers can pay you?


  10. How much do you collect on that $20/day late fee?


  11. very timely post. Great insights and thanks for the link. We are setting up ACH for several payments but I like the alternatives as well. $20 a day late fee. Wow!


  12. Sounds like a good way to go. Thanks for also sharing a new resource on Bigger Pockets. I don't think I have stumbled on this yet.


  13. We collect some manually and do many electronically. Electronically is the way to go!


  14. As an out-of-state investor, I'd definitely utilize this if my tenant had a bank account. ;p


  15. I have always thought it was too expensive. I will check this out.


  16. This sounds like a great idea! Except for when tenants are more old fashion...


    1. We have many tenants who previously paid via money orders just bring their rent to our local bank. the bank accepts their payment, writes their name and address on the deposit ticket and scans it. I can see in real time who's paid their rent. I then use the "paypal echeck" method for the rest and will actually be REQUIRING one or the other 1-1-2013 so we can be gone on the 1st without worrying how many "non payments" we're coming back to. I do see the benefit of having an inexpensive online service, especially considering some of them allow paying of rent via phone