Collecting rent from tenants on time each month is the key to a successful rental business. When you have reliable, high-value tenants, your investment in rental property truly pays off. However, when tenants repeatedly pay late – or not at all – it can create frustration and misunderstandings between landlords and tenants.
Either way, it is always the tenant’s responsibility to pay and to pay on time. However, your rent collection method might make the process more complicated than it needs to be. Let’s go over some basic ways to collect rent from your tenants and discuss some of the pros and cons of each method.
8 Basic Ways to Collect Rent From Your Tenants
Each rent collection method has its advantages and disadvantages. Therefore, it’s important for landlords to choose payment methods that work best for them and the tenants. Here are eight ways you may accept rent payments from your tenants and some pros and cons that come along with each of them.
- Direct Deposit
- Check/Money Order
- Bank Deposit Slip
- Face-to-Face Pick Up
- Rent Collection Software & Services
Direct deposit is an excellent option for collecting rent. Automatic monthly withdrawals from tenants’ accounts simplify the rent collection process, making it convenient for both you and your tenants.
Luckily, property management companies in Washington DC offer tenants direct deposit for rental payments. As a result, it allows management companies to disburse payments quickly to clients. All in all, direct deposit has very little downside but does require some additional setup. Speak to your banking institution about direct deposit and automatic payment requirements.
Accepting checks and money orders are traditional methods of collecting rent. Both offer physical documentation of payments. In addition, money orders are more secure than checks in that they cannot bounce. However, 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In addition, both are quickly becoming outdated.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 only accept 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. Then, they require tenants to make deposits into these accounts to collect rent. Tenants then provide a copy of the deposit slip as proof of payment.
One pro to this method is that your accounts will be documented well. However, 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, and the tenant must run to the bank whenever rent is due.
While it’s 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 and always keep a record of rent payments.
Face to Face Pick-Up
Collecting rent by visiting your tenant has one great advantage–you make monthly checkups on your property. Going to the property allows you to easily assess how well your tenants maintain the unit.
If you live next door to your tenant, face-to-face rent pick-up may not be a hassle. On the other hand, face-to-face rent pick-up can be exhaustive and time-consuming if you own more than one property in several locations.
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.
However, 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.
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. For example, tenants can easily drop off rent on time, and you don’t have to wait for the mailman to arrive to get paid.
On the other hand, 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. Additionally, ensure 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 several online companies that offer rent collection services. Similar to online bill pay, tenants and landlords use these as platforms for exchanging money online. Like direct deposit, tenants can easily pay rent through these online platforms. However, like with any website, there are security risks involved with online rent collection software.
While some of these companies allow tenants also to submit maintenance requests, they do not offer a full suite of Washington DC property management services. At Bay Property Management Group, we handle rent collection and repairs, so you can enjoy all the benefits of owning investment property without worrying about dealing with maintenance.
Is Online Rent Collection the Way to Go?
Of all the payment methods, letting your tenants use software to pay rent online can pose more benefits than others. For example, online rent collection can improve landlord and tenant satisfaction, increase security measures, and save time.
Using software that makes it easy to pay rent, see the payment history, and check balances makes your tenants feel better about sending large payments. Additionally, keeping a record of this information can minimize disputes and payment misunderstandings.
Additionally, online payments are generally safer than physical checks or cash. After all, online payments can’t get lost in the mail or misplaced by landlords or tenants. Instead, online payments are processed safely and immediately.
Finally, paying rent online saves a ton of time for tenants and landlords who don’t want to run to the bank. Efficiency is key in any business, including the rental industry. That said, both owners and tenants can save time by paying online.
General Tips for Collecting Rent from Tenants
No matter what your preferred method of payment might be, here are some general tips for collecting rent:
- Some landlords swear by incentives. In some scenarios, 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. Also, 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 collecting rent from tenants, consider working with a property management company. Bay Property Management Group offers comprehensive management services, including rent collection.
Maximize Your Rental Investments With Property Management
Do you want to expand your rental business, but you don’t have the time to manage it all? Contact your local property management group. Bay Property Management can assist with all the day-to-day tasks of your rental properties, so you don’t have to.
BMG offers tenant screening, move-in/move-out reports, maintenance, rent collection, eviction services, and more. Contact one of our several locations in Baltimore, Philadelphia, Northern Virginia, Washington DC, and more.