Collecting rent is an exhausting and tedious process. Each month, you worry about when and how to collect rent. It is a challenging task as millions of Americans are behind on rent. Real estate would not yield a good return on investment without a robust rent collection method.
Property managers need a frictionless rent collection system. They also need to minimize their tenants’ efforts to pay rent. Brownie points to a system that allows paying rent through credit. You get it. Everything should be easy, which means replacing the old-fashioned way with a new and cashless way.
In this blog, we will tell you:
- How to Pay Rent - The Old Fashioned Way
- Why Do You Need To Collect Rent Online
- Best Ways To Pay Rent
- How To Get Your Tenants to Pay Rent Online?
- How To Collect Rent From Tenants - The iCG Way!
How to Pay Rent - The Old Fashioned Way You Shouldn’t Use
Cash may not be the king anymore. But, until 2016, the most common way to pay rent in the U.S. was cash, followed by checks and money orders. Cash is arguably still the most popular way. However, these methods are now old and may often result in delays. Plus, none of these are instant and frictionless. Many things may go wrong:
- The mail got lost or is late for some reason
- Incorrect information on money order resulting in late payments
- Dispute cases when collecting through cash
- Bounced check
That said, traditional methods still make for an excellent payment option for unbanked or underbanked households. Unfortunately, there’s a possibility that your tenant is one of the 7 million people completely unbanked in the US. Going digital is the best option - even for tenants who are unbanked. You can choose options like eCash for such people.
Why Do You Need To Collect Rent Online?
Digital payments are fast, secure, and straightforward. But, not just that, they come with endless benefits.
- Online rent payments save a lot of time
- You can offer a range of payment methods to your tenants
- You can verify your payment history anytime you want
- You receive instant notification
- It reduces rent collection hassles
- You can send late payment reminders
Digital payments are particularly beneficial for those who manage multiple properties. Most importantly, online payments help your customers pay you the rent on time.
Best Ways To Pay Rent
Usually, landlords and property managers leave the choice to the tenant. However, you should seek a convenient payment method for both of you. There are plenty of payment methods that make paying rent easy.
Method 1: ACH Direct Deposits
Automate Clearing House (ACH) payments are among the most secure ways to collect rent. ACH is an online technology that facilitates automated funds transfer between bank accounts. It requires property managers to do a one-time setup before accepting payments.
Pros of Using ACH Direct Deposits
- Secure Transactions: ACH offers a secured and authorized payment transaction. Nacha monitors every transaction carefully.
- Scheduled Payments: Tenants can schedule recurring payments and ensure paying rent on time.
Cons of Using ACH Direct Deposits
- Payment Processing Time: The new, improved version of ACH allows you to send money in one or two business days.
- Set Up Cost: Depending on your chosen method, you might have to pay a setup cost. Top ACH payment processors justify their higher costs for the technology they bring to the table.
Method 2: Credit or Debit Cards
About 170 million people in the U.S. use credit cards to pay for shopping, groceries, and restaurant bills. However, tenants usually don’t get the option to pay through credit or debit cards. Paying through credit cards is an excellent relief for most consumers.
Property managers need a merchant solution to accept payments via cards. The merchant service provider accepts payments on behalf of the property manager and consecutively transfers the rent to their bank account. Property managers enable both ACH payments and credit card transactions with the help of a reliable payment processor.
Pros of Using Credit or Debit Card
- Fast Payments: A credit card allows you to receive payments within a few seconds.
- Convenient Option: It offers convenience to tenants running short of cash.
Cons of Using Credit or Debit Card
- Processing Fee: Landlords must pay a credit card processing fee to accept payments. The processing fee is usually between 2.5% and 2.9% per transaction.
Method 3: Hosted Payment Portal
Large businesses can set up a customized payment portal. These portals offer a seamless consumer experience by helping tenants pay through their preferred payment method. Property managers can also securely process tenant bank account information to accept payments online with such portals.
Pros of Using Hosted Payment Portal
- Offers Customization: The payment portal designed for you can reflect your branding.
- Multiple Payment Methods: Landlords can accept ACH transactions and credit card payments in a unified solution.
Cons of Using Hosted Payment Portal
- Expensive: Property managers may pay a hefty setup fee if they do not choose the right solution. However, a hosted payment portal by a credible company offers convenience.
Method 4: Rent Collection Apps
Rent collection apps that allow secure transactions. Popular rent collection services include Apple Pay, PayPal, Rentler, and Venmo.
Pros of Using Rent Collection Apps
- Real-time payments: Tenants can pay rent anytime, plus transactions happen merely in a few seconds.
- Built-in Benefits: Most apps allow landlords to take a late fee and offer autopay options; some also have built-in banking services.
Cons of Using Rent Collection Apps
- Hidden Fee: The fee version offers only basic features. Landlords might have to pay a fee to avail of premium features.
- No Purchase Protection: Tenants sometimes may send the rent to the wrong person, and you may not get any payment protection.
Method 5: SMS Pay Link
You can enable the SMS pay link for faster payments. This technology lets property managers send their tenants a link or prompt to pay the rent via SMS text. Property managers can also use it for SMS marketing.
Pros of Using SMS Pay Link
- SMS Reminder: Send a reminder to your tent a week before their rent is due, along with a payment link.
- Setup Cost: SMS Invoicing is very cost-effective and often involves minimal setup cost.
Cons of Using SMS Pay Link
- Payment Link Scam: Large businesses can be a victim of fraud activities if someone sends a payment link in their name.
Whether you choose an app or host your payment portal, collecting rent online is better than collecting it via traditional methods. You can select one or a mix of multiple methods. Your worries don’t end here, though. Another big challenge when collecting rent can be convincing people to pay rent online.
How To Get Your Tenants to Pay Rent Online?
Digital payments are widespread and growing constantly, but many people still rely on cash. You can get your tenant to pay rent online by:
- Offering rewards for paying rent online
- Offering discounted rent for a month or two
- Giving them gift cards to local shops
- Including an online payment in your lease agreement
- Using cash discount
How To Collect Rent From Tenants - The iCG Way!
The iCG Team empowers property managers and their customers by making transactions easy through innovative payment solutions that drive business growth and optimize visibility.
These businesses use digital payments to reduce their rent processing times by up to 65%, with various custom robust technologies, like using ACH and credit cards through one of our uniquely customized hosted payment portal options. We also offer rent collection apps and SMS pay links to create an efficient, secure, and dependable experience for your tenants and accounting departments.
Our sales team consults with you to create a payments acceptance strategy that custom-fits your specific operations based on the number of properties it manages and their locations. When considering the best ways to pay rent, know that our team will aid your need to accelerate payments simply, securely, and reliably. Click below to schedule a FREE consultation.