One of the most challenging tasks for landlords can be collecting rent, which is also an essential aspect of owning a rental property. You may feel that you have to nag renters to get them to pay on time or find that keeping track of rent payments and financial records is a time-consuming process. We compiled a list of different ways for tenants to pay rent and provided the pros and cons of each. Explore some best practices to help you determine the best way to collect rent.
1. Collect rent in person
Collecting rent in person offers several benefits for landlords. First, it prevents a renter from forgetting to send the rent or sending rent payments late. Collecting rent in person allows you to check the property every month and perform routine maintenance tasks as necessary. It also allows you to talk to the renters, build relationships, and keep the line of communication open. Landlords can seem intimidating to renters, making them reluctant to reach out if a personal issue arises.
Collecting rent in person also offers significant drawbacks. First, the process can be time-consuming, especially if you manage several units. You may not live close to the rental property, making it unrealistic to collect rent in person. This task can also become a hassle if the renter is not home, which will require you to go back again and spend even more of your time.
2. Get a rent check through the mail
You can have renters mail you a rent check every month.
However, this approach is the slowest method to collect rent, and there is no guarantee you’ll receive the rent on time. Checks can get lost in the mail, which will require a longer window of time for you to receive rent. If the renter sends a check that doesn’t cover the entire rent amount, you won’t know about it until the check arrives, adding to the hassle of collecting the balance of the rent still due.
Many members of younger generations don’t use checks — or mail. Also, if you choose this option, set up a post office box to receive rent payments so that you don’t have to share your home address with tenants.
3. Set up a drop box for rent payments
Setting up a secure drop box on the property may be convenient if you have several renters in a single unit.
While this approach is more convenient than having renters mail checks, you must go to the drop box location to collect the money. Renters may pay rent late or forget to pay, and you’ll have to make recurring trips. You still may have to contact renters or go to their property to collect the rent. Also, renters may put cash in envelopes into a drop box, which prevents you from maintaining proper documentation of rental receipts.
If you use a drop box, ensure the dropbox is secure. For optimum protection, monitor the drop box with a security camera.
4. Collect rent payments through an online payment app
Several online payment apps exist, and your renters may already be registered with these services. These apps offer a quick and easy portal for landlords, and it may be the best way to collect rent online for some landlords.
However, these simple online payment apps present some disadvantages. While some apps are free, be cautious because some may not provide any buyer or seller protection. Both parties need to have accounts with the app or service. Using these apps generally involves fees, and some apps may have monetary limitations or restrictions. Problems with the apps could result in difficulty in accessing your funds.
5. Collect rent through a property manager
Hiring a property manager is an excellent way to arrange for rent collection, and it could be the best way for a landlord to collect rent. The property manager will be responsible for overseeing many aspects regarding the rental property, such as interviewing applicants and managing leases, scheduling property maintenance, handling problems for renters, and collecting rent.
While hiring a property manager adds many conveniences for landlords, a property management service provider is the most expensive way to collect rent. Some property managers may also require a contract. Once you hire a property manager, you must continue to use the service until the contract term is complete.
6. Set up online payments
One of the best ways to collect rent is to set up an online payment system. Zumper offers online rent collection for landlords to make it as easy as possible.
Zumper’s suite of landlord tools provides the following benefits to landlords:
- Offers free signup
- Allows for bank-level encryption for security
- Permits next-day payments
- Creates a payment status tracking
- Provides lease renewal and cancellation capabilities
- Gives deposit and fee management tools
- Promotes accurate reporting and record of payment history
- Minimizes the hassle of rent collection
- Delivers a flat 2.95% fee
Renters also benefit by being able to:
- Set up AutoPay to make automatic payments
- Receive rent payment reminders
- Pay via debit card, credit card, or Apple Pay
- Enjoy convenient, hassle-free payment
Learn the best practices for collecting rent
- Do not accept cash for payment of rent. Accepting cash does not offer landlords any way to document payments, which could be an issue if a dispute arises with a renter.
- Check your state and local laws for rent regulations, such as when a landlord can charge late fees.
- The lease agreement should clearly state the rent amount, the payment methods, and the consequences of late payment, such as late fees and whether late fees get reported to credit agencies.
- If you choose to collect rent via an online processor, make the procedure as simple as possible to provide the renter access to the system.
As a landlord, collecting rent is something you will do on a frequent and consistent basis. Make it as easy as possible for yourself to manage and settle on the best way to receive rent payments. Simplifying the process also makes it as easy as possible for your renters to pay rent on time. Ultimately, the answer to the question “what is the best way to collect rent?” will vary from landlord to landlord.
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