The best way to collect rent is to accept payment methods that are convenient, universal, and most likely to result in on-time payments.
How To Determine the Best Way To Collect Rent
Determining the best way to collect rent as a landlord may vary from person to person. Here are a few questions to consider:
- How big is your rental portfolio? – If you only have a few homes to collect from, collecting cash or a check in person may be fine. However, if you have twenty renters to collect from, picking up in person would be time-consuming and likely unrealistic.
- Which options are best for you? – Depending on your business style, you may prefer to do things old-school and collect cash/check payments, or maybe you like the paper trail of online payments. It’s important to consider which option works best for your preferences.
- Which option is best for your renter? – Landlords also need to consider the preferences of their tenant(s). Approximately 61% of millennials and 42% of seniors pay their bills online. Paying a bill online with their preferred method of payment is much more convenient than heading to the bank to get cash or a cashier’s check.
7 Ways To Collect Rent as a Landlord
Here are the top 8 ways to collect rent as a landlord.
1. Rent Collection Software
Several property management software platforms offer online payment portals for landlords and tenants. These services enable landlords with larger portfolios to collect rent efficiently without excessive oversight. Rent collection software systems often have a fee for landlords but offer many perks, including:
- Payment reminders
- Instant payment records and receipts
- Reduced payment errors
- Ability to add late fees or prorated rent prices
- No limits for sending/receiving money
A few options include:
- TurboTenant
- Avail (Realtor.com)
- Apartments.com
TurboTenant
This platform enables landlords to collect rent payments online and have the funds deposited into their bank accounts. Tenants can set up autopay options, which help ensure timely payments every time.
This service is free for landlords. Tenants are charged 3.49%% for credit and debit cards, and $2 for ACH (bank transfers). The ACH fee is waived for landlords with Premium subscriptions.
TurboTenant also offers free rental listing posts, tenant screening, rental applications, and more. When you put all these services together for free, TurboTenant presents itself as one of the best ways to collect rent as a landlord.
Avail (Realtor.com)
Using Avail’s landlord software, landlords can request payments from tenants using their email address. The money is then directly deposited into the bank account of your choice. You can also request a security deposit or other fee.
Their unlimited plan is $0, and tenants using credit/debit payments pay a 3.5% fee or $2.50 for a bank transfer. The Unlimited Plus plan is $7 per month per unit and doesn’t charge any additional fees.
They also offer tenant screening tools and simple lease signing software.
Apartments.com
The Rental Manager from Apartments.com offers a free rental collection service to landlords. You can bill tenants for rent payments, repairs, security deposits, and late fees.
Tenants can make payments for free from their bank account or pay a 2.75% fee to pay with a credit or debit card.
Their services also include a rental application portal, tenant screening, online rental leases, and more.
2. Payment Apps
There are several online options tenants can use to pay rent. It is a great option for those who have a smaller portfolio. Just be aware of any fees the tenant or landlord incurs in the process.
Apple Pay
Apple Pay is a convenient option for many iPhone users. Money can be easily sent by a credit or debit card from your phone in a text message. This would allow both the tenant and landlord instant confirmation of the payment and how much was paid. However, the app doesn’t automate payments or stop partial payments.
There are no fees to send or receive money from Apple Pay.
Zelle
Zelle partners with mobile banking apps (or has their own app) to help people send money quickly. Most transfers happen in minutes, and Zelle doesn’t charge fees.
However, Zelle isn’t built for rent payments. There is a maximum transfer of $5,000 a month, so depending on your portfolio size, it may not be the best option. It is important to be cautious that a tenant could pay only a partial rent payment. Consider rent collection software instead if you want the best way to collect rent as a landlord.
Venmo
Venmo offers an app to send and receive money. It doesn’t charge for user-to-user payments, but it does charge approximately 2% for business transactions.
Transfers happen in 1-3 days or you can pay a small fee for an instant transfer. However, it doesn’t offer a way to send automatic or recurring payments. It also doesn’t stop tenants from sending only a partial payment. Money can also be sent accidentally (via user error) to the wrong person – with no way to get it back.
With a transfer limit of $2,999 per week, this may still be an option that works for you.
PayPal
PayPal is a user-friendly app that only requires an email address or phone number to send money. Tenants can pay with a debit card, credit card, or link a bank account. They can also set automatic payments.
Landlords can use a business account which allows for transactions up to $10,000. However, the service charges a transaction fee of approximately 3% to receive funds.
Again, this service can be used for rent payments but it doesn’t offer features to collect late fees or stop partial payments.
Cash App
Cash app is an easy-to-use instant digital payment option. Both the landlord and tenant will need to have the app and can send money with a phone number, email, or $cashtag.
There are no fees to send or receive money. Users can receive up to $25,000 per direct deposit and up to $50,000 in 24 hours.
3. Direct Deposit/Debit
Landlords can also request direct deposit from their tenants. This route requires the tenant or landlord to provide their bank account and routing numbers, along with written consent to deposit or withdraw funds from the account.
A direct deposit, also referred to as an ACH payment, is set up to be recurring to help ensure that rent is paid on time every month. However, these payments can take a few days to hit your bank account.
Some tenants may hesitate to give out their banking information. Landlords must also be cautious if they give out their banking information as money can be taken out using the account information.
4. Cash
Many landlords like to receive rent payments in cash. It is easy to get, easy to account for, and unlikely to be fraudulent.
However, cash does have a few downfalls. Unless the tenant hands you the money and you count it in front of them, there is no way to prove how much was given to you. A tenant could also claim they gave you a rent payment in cash, but never actually did. That makes it a tough candidate for the best way to collect rent as a landlord.
If you do choose to collect cash payments, it is essential to count the money with the tenant and provide them with a receipt. This is likely only a good option for those with a small number of properties where you can collect rent in person.
5. Check
A check may be an easy and effective way to collect rent. Landlords can collect a certified check, cashier’s check, or money order in person or a drop box.
A certified check, a cashier’s check, and a money order are all available from a bank. A cashier’s check or money order is the most reliable, as the funds are insured. A certified check is proof that the funds are available when the check is written, but if other bills are paid after the check is written but before you cash it, it may not be available.
Accepting a personal check can be a risky move. Even if you know the tenant, there is no way to verify if the tenant has the money until the check is cashed and cleared. If you decide to accept a personal check, do so with caution and always double-check the dates.
6. Mail
Some landlords and tenants prefer to mail rental payments. This can be convenient if you do not live close to your rental property.
However, be aware that the US Postal Service loses an estimated 3% of mail, and mail theft rocketed to more than 250,000 complaints in 2023.
Landlords also have to wait for the mail to arrive. If tenants wait for the due date to mail their checks, it may take several days to receive and deposit the funds.
7. Drop-off Box
Landlords who own several properties or apartment communities may provide a secured drop-off box near the property office. Tenants can drop their payment when it is most convenient for them.
However, you would need to consistently check the box and document the day each payment was received. This can help you to avoid theft and keep track of any late payments.
How To Ensure You Get Paid as a Landlord
- Set Expectations on the lease – When your new tenant signs the lease, it is essential to explain how and when rent is collected. Discuss rent policies and let them know what day rent is considered late, and what to do if the due date is on a weekend or holiday.
- Explain what happens if payment is late – Many landlords offer a grace period for rent payments, so if rent is due on the 1st, it must be paid in full by the 5th. However, if there is no payment made, most states allow landlords to collect late fees if rent isn’t paid by the 5th day of the month (if rent is due on the 1st).
- Explain the detailed process if rent isn’t paid – This may include a “pay-or-quit” notice and filing an eviction action if they don’t pay. Landlords can also offer a cash-for-keys deal to avoid a costly eviction.
- Offer automatic payment options – Landlords can also offer or request that tenants pay via automatic payments. This helps to ensure a tenant doesn’t “forget”.
- Provide the tenant with a copy of the payment policies and procedures – Offering both a physical and an emailed copy of the payment policy and procedures ensures the tenant has a reference point in case they forget. Be sure to include the rent price, where to pay, and when to pay it as well as any instructions for downloading/logging into an app (if applicable)
- Don’t make it difficult – This may seem obvious, but keep the payment process simple and consistent. Changing methods of payment or due dates can be confusing, so keep the policy and procedures the same throughout the life of the lease.
Final Words: Best Way to Collect Rent as a Landlord
If you’re looking for the best way to collect rent, it makes sense to consider rent collection software. Aside from the convenience of online payments, landlords can manage all they need to manage from a single dashboard.
Ultimately, the best tools for you will come down to how many units you manage and your comfort with each option available. For modern landlords, choosing a platform that automates rent collection will result in massive time savings.
