Rent collection is an important part of being a landlord. Collection methods in the past were very limited, with only a couple of options to choose from. Now there are many different ways that you can choose to collect monthly rent payments. As with anything, each channel has its own advantages and disadvantages. However choosing one or two as your preferred methods will make collecting rent less of a hassle in the long run.
In Person and Mailed payments
In previous years, this was the main approach to rent collections. Receiving payments in person or through the mail were the main available options. They are still an option for receiving payments. Setting up a day and time to go by your rentals in order to collect rent can give you an opportunity to see your property once a month and even do a quick inspection if you choose. The downside to this, however, is that it can cause a safety issue for you or your property manager if you have one. If you have multiple units, it may not be safe carrying the rent payments with you from unit to unit.
You can also receive payments through the mail. If you decide to have payments mailed to you, I would suggest having them mailed to your business office. If you don’t have an office, set up a post office box at the local post office. This will keep you from having to divulge your home address to each of your tenants. Keep in mind that it is possible for mail to get lost. Mailed payments may be harder to keep track of and more difficult to receive on time.
Having tenants place monthly payments in a locked drop box is another option. Drop boxes should be placed in a mutual location. They can be placed on the rental property or at a business location. Regardless of where the drop box is placed, make sure the box is fully secured and located in a safe place. With all of these options, you will have to decide how to get each tenant a copy of a receipt for payment which could cause unnecessary difficulties in the end.
Banking services have helped make rent collections a bit easier in recent years. By using a bank service, you can collect rent each month without having to leave your house. There are a couple different options that can be utilized. These services are automatic bank drafts or bank deposits. Both of these options require you to have an open bank account.
If your tenants have a bank account of their own, you could set up automatic payment withdrawals. You will have to obtain written authorization from the account holder and also speak with your bank to finalize the arrangement. This will set the rent payment to be automatically pulled from the tenants account and transferred to your account on a set date each month. There is a fee for this service which varies from bank to bank and it does take a few days for the transactions to complete. Talk to your bank about these fees and the amount of time it will take for the money to become available before you decide to use this service.
Another bank choice is to have your tenant deposit the money directly into your account each month. This is an option that I have personally used and so far I haven’t had any issues. You either provide each tenant with a handful of deposit slips or an account number for deposits only. They go to your bank each month and deposit rent directly into your account. The bank provides them with a receipt for their deposit and the money is made available in your account immediately.
There are numerous online services available for rent collection. These services allow you to collect rent without giving out your banking information while giving tenants the flexibility and convenience of paying rent anytime from their computer or smartphone. It also provides a record for both you and your tenant, allows for recurring payments to be set and gives 24/7 access to these services. Each available company has their own terms and fees associated with their service so if you choose to use one of these collection tools, be sure to do you research before choosing the one you want to use.
If you have multiple units and want to simplify the process altogether, you can always hire a property manager to take on this task for you. If you choose to do this, you can eliminate the stress of the rent collection process completely. However with hiring a property manager, you will have to make sure that you go through a vetting process. Be sure to do your research on property managers to ensure that you are placing your trust in the right person. Make sure to discuss all the fees upfront. In my next article I will go into more detail on the vetting process of property managers.
The rent collection process is an easy topic to overlook when getting started in the real estate rental business. But rent collection is a very large part of being a landlord. Doing your research and selecting one or two collection methods when you are setting the terms of your lease is important. Having everything set up and in place will make the process easier for everyone involved.