Choosing the right rent collection app is really important to your success as a landlord. From keep costs down to making it easy on tenants, the best way to collect rent as a landlord is something you have to know. In this guide, I list the best ways to collect rent as a landlord, both old-school and new ideas, so you can find the best for your rent collection needs.
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What’s the Best Way to Collect Rent as a Landlord?
What’s the best way to collect rent as landlord? When I decided to become a landlord, one of the areas that I gave the least amount of thought to was collecting rent.
In hindsight, I should have determined my policy for rent payment and informed the tenant during the vetting process or when I started considering ways to do real estate investing.
Because I left it ‘up in the air,’ I got several suggestions from my potential tenants. Some worked out OK, and others were poor choices. It’s a part of the rental process that deserves much more attention than I gave it.
Ultimately, because I am the landlord, whatever works best for me and my situation is the best way. You want a rental collection process that protects you as a landlord but is still convenient for tenants. I collect rent payments via ACH for free using Avail — it’s convenient for tenants and property owners.
What rent collection options are available to landlords? Let’s take a look at some more traditional ways as well as newer online/app options.
Old Ways to Collect Rents from Tenants
Even if you didn’t use a property manager to vet your prospective tenants, you could still hire one to collect rents and manage maintenance requests for you.
By hiring a property manager, you take the stress of coming up with a rent collection method out of the equation.
Believe it or not, there are advantages to collecting rent in person. I asked Joshua Dorkin, Founder and CEO of BiggerPockets.com, to share his thoughts on rent collection, and this is what he said about collecting in person:
“Collecting in person via an appointment at the property will let you get a chance to see the condition of the property. If you don’t have it written into your lease, the odds are pretty good that your tenants will likely invite you in. If you want to ensure the monthly inspection, you can write this into your lease — something like “rents will be collected in person at a monthly property inspection.”
Joshua went on to say that this is a tactic he would only recommend to landlords that might expect a high turnover or property damage with their unit.
If these aren’t a big deal for you, then it might not be necessary. Joshua also stated that be wary of collecting a lot of cash rents in person, as you’ll become a target for thieves.
Use a Dropbox
If you don’t need to collect your rent in person, place a drop box on the rental property and have your tenant put a check, money order, or cashier’s check in the box on the rent payment day.
This method would allow you to check up on the property condition (at least the outside) while not requiring a specific appointment to meet with the tenant. A friend of mine uses this method and hasn’t reported any issues.
In certain situations, having your tenant mail the payment (check, money order, or cashier’s check) to an address each month may make sense.
Of course, timing becomes an issue (i.e., “the check is in the mail”). If you go this route, it may be wise to provide your tenant with pre-addressed and stamped envelopes to make the process as smooth as possible.
When Mrs. PT and I married, we rented a townhome for a year. We didn’t meet our landlord till six months into the lease because he lived in Long Island, NY.
Because he lived so far away, he couldn’t swing by and pick up his rent. So, he gave us a year’s worth of deposit slips tied to his account with Wells Fargo.
On the first of each month, we would swing by the nearest Wells Fargo branch and deposit our check into his account. As a tenant, I wasn’t too bothered by this method (as I received a deposit receipt as evidence of my payment), and I’m sure our landlord loved the ease of this method.
Direct deposit / Auto withdrawal
Talk to your bank about setting up an automatic online transfer from your tenant’s bank account or paycheck to your checking account.
Implementing this service will likely be a small fee, but I know some smaller banks or credit unions might do this for free. I looked into this with Chase, and it would be $25 a month, which cuts too far into my rental profit margin.
New Rent Collection Apps
Avail is a free property management software landlords can use. Manage all your rentals within Avail. Set up automatic rent payments and track maintenance issues. There’s also an option for digital leases with Avail.
If you manage a large number of rental properties, Buildium might be a good choice. It’s designed more for management companies than individual users but is still an excellent option for property management. A paid plan is required to use Buildium.
Apartments.com (formerly Cozy) is a free property management software. It helps landlords simplify the rental process, view tenant applications, get background checks, and set up rental payments, all within the platform.
These three app just scratch the surface. See our full list of the best rent collection apps.
More Generic Rent Collection Apps
In addition to the online companies listed above, consider two more options: PayPal and Venmo. PayPal is the most popular and oldest online payment service. Venmo is owned by PayPal and allows you to make mobile payments to anyone.
Allowing monthly rent payments through PayPal and Venmo can make life easier for your tenants. It’s all about convenience. There’s a good chance they already have a PayPal or Venmo account set up.
With the convenience of PayPal and Venmo also comes negative aspects of online payment services. Landlords face some risks using these popular services because they lack protection. For example:
There is something called PayPal Purchase Protection, which covers payments made through the website.
However, if you look at the list of what’s not covered, the first item listed is Real Estate. If there is any dispute between you and your tenant, you may end up losing money.
Venmo wasn’t initially created for business transactions. It was designed to send money between family and friends. One look at Venmo’s security information shows that “Venmo does not offer buyer or seller protection.”
If you run into issues with payments, you won’t have Venmo backing you. Also, Venmo opens up the possibility of receiving partial payments because the payments are automatic.
In the end, you’ll need to decide whether the convenience of services like PayPal and Venmo are worth the potential headaches you could face with tenants.
Choosing How to Collect Rent
Selecting a method for collecting rent depends on the individual landlord. These factors can help you decide which rent-collecting is right for you.
Number of Tenants/Units
The more units you own, the more you want to streamline your rent collection method. While a person with two units may not mind knocking on doors and collecting the rent, they may change their mind when they reach 15 units.
Driving long distances to collect rent is not an efficient use of time. Automatic rent collection or hiring a third-party service may serve you better if you live far from your rentals.
Some people are comfortable with in-person rent collection, while others desire to be hands-off. Whichever type of interaction you prefer can determine your method.
Comfort with App Technology
Those who aren’t comfortable with technology may do better with more analog methods or hiring local third-party managers.
So that’s my summary of the different rent collection methods available today. Which one you use will, of course, depend on your particular situation and needs. Be sure to factor in time, cost, safety, and convenience as you decide which method is best for you.