Depending on your tenants, collecting rent is either your favorite time of the month, or your worst nightmare.
When you have reliable, high value tenants, your investment in rental property truly pays off, but when tenants repeatedly pay late – or not at all – it can take the joy out of owning real estate.
It is always the tenant’s responsibility to pay and to pay on time, but your method of rent collection might make the process more difficult than it needs be.
8 Basic Ways to Collect Rent from Maryland Tenants
Each rent collection method has its own advantages and disadvantages.
PRO: Direct deposit is a great option for collecting rent. Automatic monthly withdrawals from tenants’ accounts simplify the rent collection process, making it convenient for both you and your tenants.
We offer landlords direct deposit for rental payments as part of our property management services in Howard County, MD. It allows us to disburse payments quickly to our clients.
CON: Direct deposit has very little downside, but does require some additional set-up. Speak to your banking institution about the requirements for direct deposit and automatic debit.
PRO: Accepting checks and money orders are traditional methods of collecting rent. Both offer physical documentation of payments. Money orders are more secure than checks, in that they cannot bounce.
CON: These two methods have some serious drawbacks. A tenant can write a check that will bounce, and money orders require more steps for renters to obtain them.
In addition, both are quickly becoming outdated. People are relying more on debit check cards than on physical checks. If you are only accepting paper checks or money orders, you might be making it more difficult for your tenants to pay rent.
Bank Deposit Slip
Some landlords prefer to set up separate bank accounts for each property they own. To collect rent, they require tenants to make deposits into these accounts. Tenants then provide a copy of the deposit slip as proof of payment.
PRO: Your accounts will be well documented with this method.
CON: Besides the amount of paperwork involved, this method can be just as inconvenient as requiring checks or money orders. It requires you to keep track of multiple accounts. The tenant must run to the bank whenever rent is due.
CON: While an option, we cannot recommend accepting cash for rent. With cash there is no record for you or your tenant to keep as proof of payment. Beware of tenants who insist on paying in cash.
Face to Face Pick-Up
PRO: Collecting rent by visiting your tenant personally has one great advantage: you make monthly checkups on your property. This allows you to easily assess how well your tenants are maintaining the property.
CON: If you live next door to your tenant, face to face rent pick-up may not be a hassle, but it still may not be a great idea. If you own more than one property in several locations, face to face rent pick-up can be exhaustive and time consuming.
PRO: Having tenants mail rent payments can be useful if you live far from your rental properties. To make it easier, some landlords provide self-addressed stamped envelopes to tenants. You can purchase these in bulk from the Postal Service to reduce the added cost.
CON: While the USPS boasts about its dependability, tenants are less reliable when it comes to mailing rent checks. They may take liberties, like waiting until the payment date to drop their check in the mail, preventing you from depositing it into your account until after it arrives days later.
PRO: If you own an apartment community or building, providing a designated drop-off location for rent is a suitable option. It is a convenient means for both you and your tenants. Tenants can easily drop off rent in a timely manner and you don’t have to wait for the mailman to arrive to get paid.
CON: You must be diligent in checking the rent box at the same date and time every month in order to keep track of late payments.
Be sure that your drop-off location is secure, as it could become a target for theft. Rather than a rent box, we recommend using your leasing office as a drop-off location.
Rent Collection Software & Services
There are a number of online companies that offer rent collection services. Similar to online bill pay, tenants and landlords use these as platforms for exchanging money online.
PRO: Like direct deposit, tenants can pay rent quickly and easily through these online platforms.
CON: As with any website, there are security risks involved with online rent collection software.
While some of these companies allow tenants to also submit maintenance requests, they do not offer a full line of property management services. At Bay Management Group, we handle rent collection and repairs, so you can enjoy all the benefits of owning investment property without the worry of dealing with maintenance.
General Rent Collection Tips in Maryland
No matter what your preferred method of payment might be, here are some general tips for collecting rent:
- There are some landlords who swear by incentives. This means discounting rent if the tenant pays early or sets up automatic payments. However, it makes more sense economically to charge a late fee if the tenant fails to pay rent consistently.
- Always enforce rent policies. Forgiving a late fee or accepting payments more than five days late can make collecting the rent even more difficult the next month. If you make an exception for a tenant once, he is more likely to be late on his rent again (and may pass the word on to his neighbors).
- If you would rather not worry about rent collection, consider working with a property management company. Bay Property Management Group offers complete services, including rent collection, for property management in Howard County and throughout Maryland.