The Best Ways to Collect Rent from Tenants
Depending on your tenants, collecting rent can either be your favorite task, or your worst nightmare.
Rent is the lifeblood of the rental business. When you have great tenants that pay on time, your rental business will truly take off.
However, when you have delinquent tenants who cause all sorts of problems including not paying rent, then owning the rental property can feel frustrating.
That’s why it always pays to have an elaborate lease agreement from the beginning. At a minimum, your lease should spell out key rent rules like:
- The rent amount. You also want to make sure that the rent amount is in line with your state’s limit.
- How tenants should pay rent. Usually credit card, cash, money order, and/or check.
- When rent is due. Also, state what should happen if the date falls on a weekend or holiday.
- Where rent is due. For example, your business address.
- The grace period.
- The consequences of paying rent late.
Clearly stating these details on your lease agreement will help prevent confusion and misunderstanding in regard to rent issues.
Factors to Consider When Choosing the Best Way to Collect Rent
What works for one landlord may not work for another. It’s therefore important to consider certain things prior to choosing the best way for your tenants to pay rent.
Here are some key factors you should consider:
- The number of rental units or tenants you hav. Obviously, the more units you have, the more streamlined and efficient you would want to make rent collection. Imagine personally knocking on 20 doors to collect rent if you have 20 rental units.
- How far you live from the rental units. If you live miles away, it would make sense to hire help or set up online rent payments.
- How comfortable you are with technology. Technology has made it easier for landlords to do all manner of things. From improving security inside their buildings to screening tenants to rent collection. That said, not every landlord may be comfortable with online rent payment services.
With this in mind, let’s now look at the best ways to collect rent from your tenant.
Five Ways to Collect Rent From Tenants
Collecting cash rent from your tenant can be rather tempting. You don’t have to wait for the payment to clear, and there is no risk of a bounced check.
However, accepting cash as a form of payment has its risks. You can easily lose it or mishandle it. In addition, it doesn’t leave any paper trail like other forms of payments
If you must accept cash rent payments, then here are some tips to help you avoid any issues:
- Provide your tenant with a detailed receipt, every single time. Include things like the amount collected, date, property information, and their name.
- Always count the money out loud in from of the renter.
- Have the renter deliver the money to you in person.
2. Direct Deposit
This is a reliable way to collect rent from your tenants. Setting up Direct Deposit for rent, however, can be a bit tricky. As such, you may need a third party to set it up for you.
With Direct Deposit payments, rent will be automatically deducted from your tenant’s account. The rent will then be directly deposited to the
In addition, you won’t have to chase late payers, check your bank account to see what has cleared, or visit your bank to cash checks.
This tenant payment option also makes it incredibly easy to manage rental payments from multiple properties under your portfolio. This is because it has a detailed schedule highlighting who paid what and when.
In the modern world of Direct Deposit payments and online banking, checks can seem rather old-fashioned. Nonetheless, some tenants still prefer paying their rent through checks.
Like cash payments, checks also have their problems. To begin with, they open up the door to potential excuses as tenants will usually mail the check to you. As such, a renter may give you the excuse that “it must’ve gotten lost in the mail!”
So, how would you know whether the excuse is genuine or not?
Also, once you receive the check, you’ll need to take it to your local bank for depositing. Then, you’ll need to wait up to five days for it to clear.
4. Credit Card
Allowing tenants to make rent payments via credit cards has its pro s and cons.
Let’s start with the pros. First and foremost, credit cards make rent payments very convenient. And, more convenience for your tenants means more on-time payments and more tenant satisfaction.
Secondly, credit cards are quick and guaranteed. You’ll usually have the funds in a matter of a few business days. Plus, you won’t need to chase down money or worry about bounced checks.
Much like cash and check, accepting rent payments through credit cards also has its drawback. A tenant may make the payment and immediately lodge a claim that the payment was fraudulent.
While your renter may not be able to do this month after month, the inconvenience can be stressful. It can also be risky if the payment was due for the last month of the lease term.
5. Online Rent Payments
Accepting online rent payments via online portals can be a convenient and efficient way to receive payments. Here’s why:
- Payment records are documented for you.
- You don’t have to do any extra work.
- Payments are automatically withdrawn from your renter’s bank account.
- Online accounts clearly indicate how much is due, and when.
- They are convenient. Your tenant only needs an internet connection to make the payment.
The only drawback is that your tenants need a bank account or credit card to make this happen.
So, what’s the best way to collect rent from a tenant? As you can see, the answer is not that straightforward. Your situation, as well as the number of properties you manage, will affect your choice of payment.
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