A big part of investing in rental properties is deciding whether you want to be a landlord.
And once you’ve decided to become a landlord, one of the things you’ll need to figure out is how you’ll collect rent from your tenants.
Not every method of rent collection works for every landlord. Consider these factors when deciding what sort of rent-paying service – if any – you want to use:
- The number of tenants you have – If you own a whole neighborhood of rental units, you may not want to knock on a few dozen doors every month
- How far you live from the rental properties – You might own rental units in another city or even another state. If so, having a third party collect payments or collecting rent electronically might be the way to go
- Your comfort level with technology – If you feel uneasy with the notion of using a rent-paying app or another online service, you might want to stick to in-person collection
Here are a few options you might want to consider.
1. Online collection
There are many online rent-paying services and rent-paying apps that allow landlords to collect from their tenants electronically.
Some of the more notable online rent paying services include:
- Rent Perfect, a leading background check organization that allows landlords to screen prospective tenants, but also includes a payment system
- Avail, which lets you set up monthly rent due dates for individual tenants, as well as late fees and security deposit payments
- Buildium, a rent-paying service that boasts the ability to cut landlord’s processing time by up to 70 percent
- ClearNow, which deposits rent directly into your bank account
- eRentPayment, which doubles as a property management tool
- RadPad, great for landlords who demand payments in checks from tenants who may not use checks. Renters just pay online with a debit or credit card, and RadPad sends the landlords a paper check.
If none of these work for you, you can always collect rent using services like PayPal or Venmo. They’re easy to use and chances are your tenants will have used them before, but there’s a couple of drawbacks: Venmo requires you to be friends with the person you’re collecting from on social media, while PayPal payments can take days to process.
2. By mail
Having tenants send you their rent by mail can save you time, but it does also come with some drawbacks. The payment envelope might be postmarked by the due date, but you might not actually get the check until a few days later.
The rent wouldn’t technically be late, but it also wouldn’t arrive on time. And a tenant who was behind on their payments could use the mail to buy some extra time, telling you something was “in the mail” when it really wasn’t. A good way to avoid this is by requiring tenants to get a certificate from the post office to prove the rent was sent when they said it was sent.
3. In person
If you have the time and/or the inclination, you can collect in person. This way, you’ll have your rent money right away. The downside here is that you’ll need to coordinate with tenants to make sure they’re home when you come to collect. If tenants decide to pay in cash, make sure you give them a receipt for the transaction.
4. Offer a drop-off place
If investing in rental properties has become a full-time job and you’ve set up an office, you can have your tenants drop off rent payments in person.
Be careful about allowing tenants to drop off payments at your home address – unless you live at the same address – and make sure they aren’t dropping off cash payments, which might get stolen.
5. Property managers
Of course, you don’t have to collect the rent at all. You can hire a property management company to do it for you. This company can do more than just collect rent. They can deal with complaints, address maintenance concerns and find new tenants when the old ones move out.
The life of a landlord can be as rewarding as it is challenging. But you don’t need to face that challenge alone. DIG – the Diversified Real Estate Investor Group has spent more than 40 years working with landlords like you.
Our members have spent years dealing with landlord-related issues and can help you determine the best rent paying service for your property.
We typically meet on the final Thursday of each month and will offer courses on land-lording through our DIG University educational service. We hope to see you soon.