Whether you manage one or hundreds of properties, every landlord must decide how they’ll collect rent. One underutilized method is collecting rent online.
In this Baselane article, we’ll compare online rent collection to other payment methods, and look at the pros and cons of letting your tenants pay rent online.
1. How to Collect Rent from Tenants?
There are a few options when it comes to collecting rent payments. Not every collection method is right for every landlord, but the objective remains the same — getting paid on time. Below are five rent collection options.
- Collect Rent by Mail: You can collect rent from your tenants by mail-in checks or money orders. Keep in mind that you might have properties far away, which can delay payments, or worse, the check gets lost in the mail.
- Collect Rent in Person: This method of collecting rent ensures you have a check in your hands on rent day, but will leave you with more record-keeping and miles to travel.
- Drop-Off Location: If you have an office, you can allow tenants to drop off rent payments. You can also use a dedicated drop-box placed in common areas of your rental property. This method could cause disputes if a payment goes missing or is stolen.
- Hire a Property Manager: You can free yourself entirely from the responsibility of collecting rent by outsourcing this task to a property manager. On average, expect to pay between 8% to 12% of the monthly rental value of the property. This fee can vary based on property type, vacancies, and services provided.
- Collect Rent Online: Accepting rent payments online makes it easy to track which tenants are current with their payments and who is falling behind. You can also set up automatic reminders and tenants have the option to enable recurring payments. Tenants can also pay their rent using their credit card.
2. How to Choose a Rent Collection Method?
With so many ways to collect rent, it can be difficult to decide which method works best for you and your tenants.
Looking at these four factors can help determine how you would like to receive rent payments, which include:
- Number of tenants/rental properties
- Distance from rental property
- Desire to interact with tenants (convenience factor)
- Comfort level with technology
Most states have specific laws covering various aspects of rent. The method you choose should be listed in the lease agreement, along with details on late rent fees and penalties per state laws and regulations.
3. What is the Best Way to Collect Rent from Tenants?
Not all forms of rent payment are equal. As a landlord, you want to choose payment options that are easy to deposit and document. Here are four forms of rent payments to consider:
- Check: With a personal check, there is no way to verify if the funds are in the tenant’s bank account. The check could bounce, which will cost extra money and time. Consider establishing a payment history with your tenant using a more secure method first.
- Cash: You will have rent in your hand, but cash can go missing, and, if it does, there’s no way to get it back.
- Direct Deposit: For a tenant to directly deposit their rent in your bank account, you are required to provide them with your account number and routing number. While most people are honest, it’s not worth the risk as they can also use this information to withdraw your money.
- Online Rent Payments: Ease of use and convenience of collecting rent online often results in fewer missed or late payments. It’s fast and secure and offers a better experience to your tenants.
As a landlord or real estate investor, you might have properties in different states or cities. Manually processing checks or bank transfers can create various challenges.
Between bank hours, processing times, and currency exchange, you’re faced with delays, stress, and increased cost. The solution? Online rent collection.
4. Why Should Landlords Collect Rent Online?
As a landlord or real estate investor, you might have properties in different countries, states, or cities. Manually processing checks or bank transfers can create various challenges.
Between bank hours, processing times, and currency exchange, you’re faced with delays, stress, and increased cost. The solution? Online rent collection.
According to Zillow Group’s Consumer Housing Trends Report, the people most likely to pay rent online are younger tenants, who make up 74% of the total renter population. Letting tenants pay rent their way improves your chances of getting paid on time, keeping you and your bank account happy.
How Landlords Benefit from Online Rent Payments?
- Convenience: Eliminate the extra work for yourself with automatic reminders and payments directly deposited into your account.
- Automatic Rent Payments: Tenants can choose to pay rent automatically every month. You can rest easy knowing your money will be delivered on time and in the correct amount.
- Secure Transactions: Online platforms are designed to keep your transactions safe; unlike direct deposit, you’re not required to give your banking credentials.
- Late Rent Reminders: Avoid late rent payments and uncomfortable conversations with reminders to help tenants stay on track.
- Payment Records: The unsung hero of online payments. Having a record of every transaction keeps your finances in check without the extra paperwork.
- Free: Most platforms offer free online rent collection.
How Tenants Benefit from Online Rent Payments?
- Payment Options: Having multiple payment options gives tenants the flexibility to pay rent using a bank account, credit, or debit card.
- Recurring Payments: Instead of logging in and transferring funds each month, automating this service allows tenants to relax, knowing rent will always make it into your hands on the due date.
- Secure Transactions: Online platforms are designed to keep your transactions safe.
- Credit Score Boost: Credit Bureaus are now including rent payments in credit scores calculations, helping tenants who pay rent on time buy homes and vehicles earlier in life.
Online rent payments increase transparency and trust between landlords and tenants. When tenants pay rent online, both the tenant and landlord can see what’s going on with the payment.
This transparency decreases the burden of repeatedly communicating with tenants on how to pay rent and when.
Online rent collection streamlines your interactions, reduces confusion, eliminates late-payments, and minimizes the chance of human error. The tenant won’t pay you the wrong amount, mail the check to the wrong address, or forget to pay, which equals more money in your pocket.
5. What Are the Disadvantages of Paying Rent Online?
Like every payment method, online rent collection has some disadvantages.
- Processing Fees – Depending on the services you use, there are various fees or transfer limitations for Tenants.
- Payment Disputes – Tenants might dispute a charge to their account, and payment providers often side with their customers.
While automatic rent collection helps you avoid late payments, it can get you in trouble when you’re trying to evict a tenant. Landlords should stop online rent payments during the eviction process. Accepting even a small payment could impact the proceedings and stop the eviction process altogether.
6. How to Collect Rent Payments Online?
If you’re ready to take the plunge into online rent collection, it’s easy to get started with Baselane. You can put your time and energy into all of the things that make your rental property business successful instead of chasing down payments.
With these simple steps, you’ll be well on your way to automating most of the process and developing a better landlord-tenant relationship.
1. Sign Up
Enter your name, e-mail, and password, and you will be signed up in less than a minute. You can enter your lease agreement details, so you can specify things like monthly vs. annual rent, any fees, like parking or pets, for example, and when late fees should be applied.
2. Connect Bank Account
Using ACH transfers, rent payments will be deposited directly into your bank account.
Simply upload your banking details and Baselane handles the rest. You can also open a landlord bank account directly with Baselane to see all your property finances in one place.
3. Invite Tenants
After you enter your tenant’s information, Baselane contacts them with instructions on creating an account and setting up payments. Tenants can make a one-time or recurring auto-payment via bank transfer, credit card, or debit card.
4. Get Paid
You won’t be forced to remember important dates because Baselane will send your tenants reminders and notify you when rent is paid. Baselane will also remind you if tenants haven’t paid so you can follow up with them if needed.
5. Track & Manage Payments
Send receipts, view payment history and outstanding rent, get notifications when rent hits your account, and edit future invoices in a snap.
Optimization is the name of the game, and Baselane delivers. Putting your banking and bookkeeping in the same place as your rent collection allows you to reconcile your accounts automatically.
7. Final Thoughts: Is Online Rent Collection Worth It?
Paying rent online simplifies the rent payment process for landlords and tenants, and helps make paying rent hassle-free, which is something tenants will likely keep in mind when it comes time to renew their lease.
By pairing online rent payments with automatic account reconciliation through Baselane Bookkeeping, there is no chance of inputting a payment incorrectly, removing costly and time-consuming accounting errors. It’s a more convenient process for everyone involved.
As the landlord-tenant relationship improves, your time will be free to concentrate on other areas of your property management business, like showing vacancies to new renters.
FAQs
Yes and no. It is completely free to sign up for several online rent collection services, like Baselane. But, depending on how many properties you manage or what added benefits you need, you might be interested in paying for a higher tier service.
To collect rent from a tenant’s credit card, you will need to use an online rent collection service. Credit card payments must be processed, and this involves a processing fee, typically from a third-party vendor.
Using a rental portal specifically developed for landlords, like Baselane, will have a larger variety of options including credit card payments.
Most online rent collection services are completely safe. With Baselane, all payments are processed using 256-bit bank-level SSL encryption and deposited directly into your bank account.
A reputable service will offer this information freely, so make sure you do your research before choosing an online rent payment service.
