When it is time to collect rent from your tenant on the first day of the month, you need to make it easy for the tenant to pay you. Your tenant shouldn’t have to hunt you down to pay the rent each and every month. Nor should you have to go knock on doors every month just to collect the money you are owed.
The 4 best ways to collect rent from your tenants include:
- Online Payment
- Certified Check
- Cashier’s Check
- Money Order
Online payment methods are very popular with my tenants because it is incredibly convenient for them and it is a great way to collect rent. After all, we live in a digital age and everyone has a debit card or a credit card. This allows the tenant to pay from their cell phone, no matter where they are at.
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The funds usually take at least two days to hit your account so I am sure to explain this to the tenant when they ask to pay this way. I count the money as received the day it hits the bank, not the day the tenant made the transaction. Late fees may come into play if the money hits the bank after the 5th day of the month.
A certified check is issued by the tenant’s bank and will “certify” that the funds to pay the rent are available at the time the check is issued. But, there is no guarantee that when you try to deposit the certified check that the money will actually still be in the bank.
Getting a cashier’s check is almost like getting a money order but it costs more for the tenant to get and you can only get one if you have a bank. I have found that a lot of my tenants don’t actually have a bank account for various reasons. But, the beauty of a cashier’s check is that he bank will guarantee the funds in the amount that the check is written for.
Most of my tenants pay with a money order that they buy at a gas station or the post office. Banks accept them easily which makes them a great way for landlords to collect rent. They are great because the funds are guaranteed and the cost to the tenant isn’t very much, usually a couple of dollars.
Other Payment Methods
Checks are a very common method for paying the rent. I tend to get more checks from tenants that live in our nicer properties. These tenants tend to have better jobs, are more responsible with money and have better credit which means they can actually get a checking account.
The draw back to this payment method is that the funds are not guaranteed and when the check is presented for payment, it could bounce. Have a written policy that covers bounced checks and make sure that you allow for the extra fees YOU will be charged by your bank. It is also a good idea to not accept any future checks from this tenant.
Tenants try to pay using cash all the time and we don’t accept it. I don’t believe that it is never a good idea to accept cash. However, that being said, I know of a lot of landlords that do. Disputes can occur when the tenant leaves an envelope of cash in the drop box. It can’t be counted in front of the tenant and it may not be the right amount.
Many landlords that I know love when the tenant pays cash! I can argue with them until I am blue in the face about how bad it is to accept cash and they just laugh at me! The biggest problem in my area with cash is that it can be counter fit money. Guess when you find that out? If you don’t check, at the bank. Then you have to get more money from the tenant. Your tenant will usually not know it is bad and will now be short.
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If you do accept cash, do not accept it unless it is handed to you in person and you can count it right there! Always give the tenant a receipt for the cash and keep one for yourself. I have a duplicate receipt book so I always have a copy. I then have the tenant initial the amount on the receipt so that the tenant can’t easily dispute the amount paid at a later date.
If you find cash in your drop box or mail box, DO NOT OPEN IT! Call the tenant and say you can’t accept any cash unless it is handed to you. Tell the tenant to come back to the office, open the envelope and count the money out in front of you.
Think long and hard before you agree to accept cash. There is no paper trail and no matter how careful you are, it can cause problems down the road. Consider yourself warned!
I personally think that credit cards can be a great way to get your rent and I know a lot of other landlords that accept them with only rare problem. But, I have had a lot of readers point out there can be issues with accepting credit card payments.
First of all, it does cost you more to accept payments in this manner because there are additional fees that apply. There also may be a situation where the tenant disputes the charge. Then what happens? You potentially could lose the rent payment for a month. I don’t worry about that because if that happens, I just file an eviction and get rid of the tenant for non-payment.
There is one big advantage of using credit cards that I love. Let’s say you have a tenant behind on rent. Ask them if there is anyone that can help them out. Point out that you accept credit card payments. You will find that they can often get someone else to pay their rent using a credit card. Most people don’t consider a credit card as “real money” and will willingly whip out a credit card to settle up the past due rent. Mom, dad, Aunt Betty, Uncle Bob, etc. may be willing to pay the rent so that their family member is not evicted and potentially living with them!
Direct deposits are another popular method for tenants to pay the rent. You don’t need an office and your tenants feel safe making a payment at the bank. The biggest headache for you is that if you have more than one making a direct deposit every month, you may not know who paid. So, for that reason one tip is to make the rent a little different. Instead of $850, make it $851 or some odd number so you know which tenant paid.
Some landlords worry that the tenant can steal money from them which may be a problem in some areas. I know several landlords that have never had any problems but there is always the first time.
Many property management companies collect rent using a payment processing company. Yes, it will cost you more in the long run. But the convenience of online payments for tenants and ease of collecting your rent will help diminish the sting of extra fees.
How Do You Collect Rent
In the end, you have to decide what works for you and your tenants. If you deal in low end houses, you won’t get many checks because they won’t qualify for a bank account. These are the tenants that will try to pay cash or will give you a money order. Tenants that live in nicer homes will be more likely to pay with check, cashier’s check, certified check or online banking.
I am sure that if you ask twenty different people how they collect rent, you will get 20 different answer. If you ask what they think, at least one person will shoot down every payment method listed! Everyone has different experiences. In time, you will find that you prefer one payment method over another. You may also change your mind about a payment method over time.