With today’s technology, consumers have several different ways to pay for goods and services. For instance, many transactions are done online using peer-to-peer payment methods like Venmo or PayPal. However, although these are great ways to send money to friends and family or pay bills online, there are some risks when it comes to paying rent. Keep reading as we review different payment methods and why Venmo and PayPal are not the best way to collect rent.
Collecting Rent with PayPal
PayPal is great for making quick, simple online transactions. If you use PayPal, it’s as simple as sending a payment. Then, it arrives instantly at the receiver. However, it’s not exactly suitable for landlords or property managers as a rent payment method.
If you’re considering using PayPal for your rental business, here are some of the pros and cons to consider first.
Pros of Using PayPal
- Extremely User-Friendly- PayPal is straightforward to use and helps prevent fraud by using security features. Luckily, they keep your bank and credit card information secure using encryption.
- Business Account Options- You can create a PayPal business account to keep track of invoices. Additionally, a business account offers protection plans. However, there is no protection for real estate payments.
- Multiple Payment Methods- When you pay with PayPal, you can use your credit card, debit card, or PayPal balance.
- Sending Limits- PayPal only gives a few limits on how much money you can send. For instance, you can send up to $60,000 in a single transaction. But, sometimes, they can be limited to $10,000.
Cons of Using PayPal
- Fees for Rent Payments- Family and friend transactions on PayPal are free. However, rent payments are considered “goods and services,” which include a business fee. So, when you collect rent money through PayPal, they will take out business fees first.
- Charges for Instant Transfers- PayPal charges a 1% fee for instant transfers. However, if you want to transfer the money to your bank for free, it takes a few business days.
- Limited Features for Landlords- Landlords cannot enforce late fees or tenant rent payment reminders. Additionally, you can’t block payments, which can make the eviction process quite challenging.
- Not Enough Protection- PayPal often takes the sender’s side, which can be tricky when payment disputes arise between landlords and tenants.
- Unable to Report Payments- PayPal doesn’t have features to send rent payments to credit bureaus. As a result, reporting rent payments often acts as an incentive for tenants to pay on time.
Collecting Rent with Venmo
Just like PayPal, Venmo is excellent for sending peer-to-peer payments quickly. However, when it comes to rental payments, Venmo isn’t the best way to collect rent. Here are the pros and cons of collecting rent with Venmo.
Pros of Using Venmo
- Easy to Use- Once you download the app, you can send and receive payments on Venmo quickly and easily.
- Free Money Transfers- Tenants can make instant transfers from their Venmo account to yours for free.
- Credit and Debit Card Payments- Venmo offers debit and credit cards without charging fees annually. However, it may add 3% to the tenant’s credit card payment.
- Modern Features- Venmo offers modern social media features like likes, comments, and messaging, allowing parties to communicate and enhancing the user experience.
- Allows Tenants to Split Payments- Tenants can split rent payments between roommates with Venmo. Each roommate can send their share of the rent with instant transfers.
Cons of Using Venmo
- Business Transaction Fees- Person-to-person fees are free on Venmo. However, rent payments are counted as business transactions with a 1.9% processing fee, plus a $0.10.
- Instant Transfer Fees- For instant transfers on Venmo, there is a 1.5% fee with a minimum fee of $0.25 and a maximum fee of $15.
- No Recurring Payments- Tenants cannot set up recurring payments with Venmo. Therefore, late payments may become more common.
- Dispute Policies- Venmo generally does not get involved with disputes between payment senders and receivers. However, if they do, they will often favor the sender.
- Unable to Report Payments- With Venmo payments, you cant report it to a credit bureau, which can affect the tenant’s credit score.
- Impossible to Cancel Payment- Venmo does not allow cancellations or refunds to the tenant in case they send the incorrect amount. This can be a hassle for landlords and tenants trying to figure out rent payments.
As you can see, the cons of PayPal and Venmo outweigh the benefits for landlords and property managers in Philadelphia. As such, these are not the best way to collect rent from tenants. So, what should you do instead? Next, we’ll go over several ways you can collect rent payments.
Different Ways Landlords Can Collect Rent Payments
Venmo and PayPal are just two potential options people may use to pay rent. However, there are several different ways tenants can pay rent that is more secure and beneficial for landlords. Let’s review some of the main ways landlords can collect rent payments.
- Direct Deposit
- Bank Deposit Slip
- Face-to-Face Interaction
- Drop Off Box
- Rent Collection Software
Direct Deposit
One of the most secure ways to collect rent is through direct deposit. Since payments are automatically taken from your tenant’s account and sent directly to yours, the process is straightforward and quick.
Bank Deposit Slip
Landlords sometimes make separate business accounts to keep track of rental payments and other business transactions. Then, they’ll have tenants deposit the money into these accounts to collect rent. Finally, tenants can provide you with a copy of the deposit slip for proof of payment.
Requiring a bank deposit slip is helpful for landlords because keeping track of business expenses is simple. However, landlords must keep track of multiple accounts at once.
Face-to-Face Interaction
Visiting your tenants to pick up rent payments can be convenient for a few reasons. For one, you can check up on the rental property and create a better landlord-tenant relationship. Additionally, you can feel rest assured you have the payment in hand on the day rent is due.
However, if you don’t live near your tenant or have multiple properties, collecting rent at each one can be time-consuming.
Drop Off Box
Landlords with multifamily buildings like apartments, townhouses, or condos sometimes will provide a drop-off box for tenants to pay rent. Typically, the drop-off box will be located conveniently for tenants and landlords to quickly drop off and collect rent payments.
One downside to this method is that landlords should monitor the drop-off box closely for late or missing rent payments. Additionally, the container should be secure to avoid theft. As such, it’s best to make your drop-off location at your leasing office.
Rent Collection Software
Several online companies offer online payment collection. Tenants and landlords can use online rent collection software just like any other online transaction. Like direct deposit or other instant payment methods, tenants can pay rent online. However, when it comes to online transactions, there are security risks involved.
How Can Property Management Help Your Business?
Whether you’re a landlord with one rental property or multiple, keeping track of rent payments, lease agreements, and every other aspect of running a business can be difficult. Luckily, you don’t have to do it all alone. Many busy landlords hire property management to help with the day-to-day tasks of running a rental business.
Bay Property Management Group provides comprehensive rental management services such as tenant screening, maintenance, and rent collection. Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, and Washington DC.