Multimedia, Rent Payment

Collecting Rent Online: Video Extra

rent collection video

Chris and Eli from Landlord Gurus talk about the benefits of collecting rent online using property management software. Chris recently wrote an article about the best products available, and how to choose the one that’s right for you and your portfolio.

Read the article: The Best Online Rent Payment Service for Small Landlords

Our winners:

Best Overall (tie):

rentec direct property management software logo | avail property management software logo

Lowest Cost to Landlords (tie):

sparkrental property management software logo | payrent online rent payment service logo

Best for Large Portfolios:

buildium property management software logo

Sign up for any of these and start collecting rent online today.


Transcript

Eli Secor: Hi all, you’ve got Chris and Eli here from landlordgurus.com. Today, we’re going to talk a little bit about the benefits of collecting rent online. There are various software services out there and Chris has just written a great article about those. So we’ll run through real quickly.

The more traditional ways of collecting rent and some of the advantages over that of collecting it online. Cash for one we’ve always felt is dangerous. Just carrying large amounts of cash can be hazardous. Losing it is an issue. Checks or cashier’s checks are subject to clearing times. You’ve got to wait for them in the mail. Sometimes, especially at the beginning of a tenancy, you don’t know if they’re good.

There’s direct deposit bank account, bank account, or a standing order. There’s a lot of coordination there where you got to share bank account and routing numbers between a tenant and a landlord, possibly go to the bank. There are payments services like Zelle and PayPal and Venmo. And we have found that those often make it too easy for a tenant to drawback or dispute the transaction. So we’re not really in favor of those. In fact Chris, what has your experience with Zelle been?

Chris Lee: Yeah, I’ve used Zelle before and there were daily transaction limits, so I had tenants that were unable to pay the full amount in one transaction. So they had to split it up over a couple of days. It was not very convenient.

ES: So advantages to taking rent electronically through some of these online software providers, namely convenience. We do it and, you know, it’s very simple to set up where you just send an email to a tenant. They go and they submit their bank account information to that third party service. You don’t have to have it and you’re off and running. Renters really like it, especially younger renters who are really used to doing things on apps and on the go. safety, like we talked about cash but in this day and age, there’s a social distancing as well. There are fewer late payments quite significantly we’ve found since people can set up their accounts and put it on auto pay.

Also very valuably, there is a paper trail or electronic trail of all payments. You can see in one dashboard who’s paying paid, who’s late and, you know, serves as a set of receipts as well for the tenants.

So Chris you wrote an article recently about collecting rent online. So what did you compare and what did you find about collecting read online? And what factors did you look at?

CL: So the first factor we looked at was payment options. You know, the ability for tenants to pay using ACH or EFT, which essentially is a bank transfer from they’re checking your savings accounts, or whether they could use debit and credit cards, or in some cases, some of the providers offer the ability for tenants to pay in cash through their partnerships, with the PayNearMe network, where tenants can go to a physical retail location, pay with cash, and then that money is directly deposited in your account. So we felt like more flexibility that a software offered would make it more convenient for the tenant, easier for them to use, which would lead to probably a greater chance of the landlord getting their rent paid on time. So I thought that was an important factor.

Another factor we looked at was, and you’d mentioned this before with the automated or recurring payment set up. So, you know, whether a service allowed a tenant to set up recurring payments each month and how flexible those payment dates are, for example, does the payment have to occur on the first of each month or can landlords and tenants schedule different dates and from multiple parties as well, for example, like in a roommate situation if you’re going to collect rent from multiple different people. And can the tenants schedule multiple payments each month which, for example, if a tenant gets paid on say the fifth and the 20th of every month, if they can schedule their payments to occur on those days, so that your rent is paid before they have the chance to maybe spend their paychecks on anything else.

ES: Sounds good. I know that speed of payment is an issue with some of these services and that the transactions can take a bit of time. What did you find out about that?

CL: Yeah, generally most of the software says that they can get a payments to the landlord within three business days or so. You know, three to five, I guess.

ES: I’m okay actually with the service I use. It takes about that three to five days to land in our bank accounts. But you know, if I’m somebody who wants to get my payment earlier and more quickly, what can someone do about that?

CL: Yeah. Some of the services offer an expedited payout option where you maybe pay anywhere from 50 cents to a dollar, $1.50 per transaction in order to receive those payments faster than the three days. So we found that Rentec Direct was one of those and they can get you your payment same day for an extra 50 cents per transaction.

ES: And what about fees? What does it cost the landlord to collect rent online?

CL: Well, the pricing is handled kind of differently across the different providers. Some require a monthly subscription in order to access their rent payment services. Others you know, maybe have a one time fee or a set up fee, but most allow landlords to pass that transaction fee, if there is one, onto the tenant directly.

ES: And what about the transaction costs? How much are they generally?

CL: Generally we found anywhere from 99 cents to $5 per transaction. Some also charge a large flat fee for the first debit, but then each additional one comes down in costs. You know, maybe something like $15 and then the second one is only $2. And after that, it’s also, you know, a $1.50 or something like that. You know, there are others that charge, like Buildium charges a one time set up fee of around a hundred dollars. Other services like Rentec Direct can offer free transactions, but you have to be a subscriber to one of their services.

The ones that offer credit card payments, obviously there are credit card transaction fees that you would find kind of standard everywhere, but find anywhere from two and a half to 6%.

And then those that offered that cash payment service that we talked about before generally have a setup fee plus a transaction fee as well. So it kind of depends on how many units and how many transactions you have every month to know how much your overall rent payment collection costs will be. But you know, it might be worth it to pay per transaction, or maybe it’s worth it to pay a monthly fee if your transaction fees come down.

ES: Yeah. I know your article goes into that and helps out with showing landlords what it’s likely to cost them depending on their units.

CL: We go into more details and exact costs there.

ES: Yeah. Okay, great. I know you looked at payment tracking and financial reporting and that type of thing. Can you talk about that?

CL: Yeah. So most of the software providers generally offer some level of integration from the rent payments into your accounting and reporting tools. Some will also send reminders to tenants a few days before the rent due dates and maybe send another email on the date or reminders if it’s late. Landlords can receive emails knowing when the tenant paid or get a notification if they’re late.

Most platforms allow owners and landlords to set up automatic, late payment billing. So you can set what your late fee is going to be. And  if there’s any grace period before that payment gets charged. Others still, will connect and sync with your bank or with QuickBooks so that you can get reporting integrated directly in them. They may also generate income and expense reports or tax schedules like the schedule E. At the very least most of them, or all of them, you have the ability to download excel or csv files for your records.

And again, like what you talked about before, this gives landlords the ability to see at a moment’s notice or the push of a button, how much each tenant owes, or if they’ve been on time or late and tenants oftentimes can see that as well.

ES: Yeah. I think it helps to avoid any kind of confusion, and there’s a trail so everybody can see it. What about standout features? I think you awarded some extra credit to a couple of the providers.

CL: Yeah. We included a bonus point for the software that reports payments and missed payments to the various credit reporting agencies like TransUnion and Experian. And we find that this can help incentivize your tenants to make their payments on time. If they know that that’s going to affect their credit score, or if they in the past have not had a very good credit score and they want to improve that, that they know that if they pay their rent on time, that it’s going to improve their score so they can make that easier in the future for themselves. So I know that ClearNow did that for tenants who opt into that service, and SparkRental has also said they’re in the process of rolling this out as well.

ES: Alright. So after you dug into all of that who wins? Who provides the best product if you want to collect rent online?

CL: Yeah, so we broke it up into a few different categories, but our overall winner is Rentec Direct. While we generally favor services that don’t require a subscription to use the rent payment services, Rentec Direct, makes up for it by offering the most payment options like we talked about before, including cash along with the fastest deposit times and the ability to expedite your payments. So for those reasons alone, Rentec Direct wins our best online rent payment service overall.

We also had a winner for the service with the overall lowest cost for landlords. So, if reducing your out of pocket expenses is an important aspect, take a look at SparkRental. If you only have one unit, you can sign up for their free plan and they only charge 99 cents per ACH transaction, which can be passed on to the tenant directly. And no set up fees so that if you have one unit and only one unit, that option can be truly free.

ES: What about landlords with larger portfolios or even property managers? What did you find was a good service for them?

CL: If you do manage a large building or several properties, collecting rent online might be a top priority. We think Buildium warrants a look. It may look expensive, but you can spread those upfront costs out over dozens or even hundreds of units. They offer multiple payment options like we talked about before, as well as many options for scheduling recurring payments so it doesn’t have to be on the first or the fifth. It can be sort of any given time, whatever works best for you and for your tenant. So it should make it pretty effortless for your tenants to get their rent to you on time. And Buildium also offers a lot of robust tracking and reporting tools that larger property managers and owners find useful.

ES: Yeah. Kind of owner portals, where there’s sharing and accounting, I think as well. Alright. So it sounds like what you found was that the right or the best software for collecting rent online will really depend on who you are and the nature of your portfolio.

So we’re going to post a link below to the full rent payment comparison article that Chris wrote. There’ll be links to relevant software options, some of the options that we’ve been talking about here. So you can go directly if you want learn about those. You know, we’ve got lots of content on landlordgurus.com to help out smaller and do it yourself landlords. So we hope you’ll come and check out what we’ve got. Let us know what you’d like to see, and we’d just like to thank you for visiting. So thanks for watching and we’ll be back with more. Thanks.


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About Landlord Gurus

Here at Landlord Gurus, our commitment is to provide expert advice on the complex and important issues faced by landlords and property managers. Together we have over 30 years of experience in residential property ownership and management. In addition to sharing our own expertise and experiences, we call on specialists in fields including maintenance, law, tenant management, and more. Where we see topics that require more in-depth discussion, we create insightful articles that provide valuable information and guidance.
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