Collecting Rent: What Is The Process?
Every person that rents out their home or apartment will need to set up a process for collecting rent from their tenants every single month. The more streamlined this is for both the landlord and the tenant the better it will be for all parties concerned. Typically collecting rent is done on the 1st of every month, so as a solo landlord who owns one or more properties, you might set a time on the 1st of every month where you head out to your property or multiple properties to collect the rent from your tenants.
Some landlords are extremely busy and they might enlist the help of a property management company to help with the process of collecting rent each month. A property manager is good to have because it will take a lot of the work off of you as the landlord and reduce the stress that comes with owning and renting properties.
We will go over in this article some different methods for collecting rent so you have a good understanding of the process, so that you can make your rent collecting process as easy as possible with the least amount of headache and frustration. It is important to note that whichever rent collecting method you do decide to choose, you will need to clearly state in your lease/rental agreement the preferred method of collecting so that your tenants know exactly what to expect when it comes time to pay their rent for the month.
There are also some factors to take into consideration when choosing your method of collecting rent which we will go over when speaking on all the different methods of collecting rent. Let’s dive straight into the different methods right now.
Online Rent Collection
If you are somewhat tech savvy then choosing to collect your rent online will save you a lot of time and money in the long term. You will not have to spend money on gas to get in your car and collect the rent and you will not have to spend any time waiting for tenants or getting caught up in a conversation when you go and collect the rent. This option is great for people that do not like the face-to-face interaction when it comes time to collect their rent. Sometimes it can lead to long conversations and excuses from tenants on why they are not able to pay their rent for the month. This often leads to headaches and frustrations for you as the landlord and it is just an uncomfortable situation to be in and nobody likes to feel uncomfortable.
There are many ways in which you can set this up. You can give your banking details to your tenant and then every month they just need to make a deposit into your account and everything will be good. In some situations you can even set up an automatic payment from the tenant to your bank account and that way you will know that you will receive your rent money directly in your bank account each month, which is good for planning your finances and expenses that are related to your rental property.
There are also online payment services that you can set up if you don’t want to go with the direct bank deposit, we are not going to go into all the details of all the different online rent collecting services because there are so many and it will be up to you which one you will want to go with. A simple Google search for “online rent collection services” will bring up a nice list for you to choose from and then you can go from there.
Other options include PayPal and Venmo. Most people will have a PayPal account and if they don’t then one can be set up in a matter of minutes. PayPal makes it very easy to receive money online and they also include all the necessary reports that you can refer back to, to make sure that rent was paid on time each month by your tenants. This comes in very handy if you own and rent multiple property units.
The only thing to take into consideration when using PayPal as an online payment service is that it can take several days for your payments to process and reflect in your bank account when a withdrawal request is made. They also charge fees for every transaction, which you might want to consider adding to your rental price, even though they are very minimal fees it is worth mentioning. Tenants will also have the option to file a dispute after their payment is made if for some reason they are dissatisfied. This is not very common but it is also worth mentioning in case it does happen to you if you decide to use PayPal for collecting rent from your tenants.
Set Up a Drop-off Location
This is a great option if you don’t like the idea of collecting rent online and you also don’t want to spend hours driving around and picking up your rent each month. The only downside of this method is that your tenants may decide to just not show up at all to drop off the rent. You will have to communicate with them and let them know that they will have to honor their word and drop off their rent money each month.
If you have an office then this method of collecting rent will work great for you. You will not have to be at your office when your tenant drops off the rent if you have employees working for you that will be in the office in the hours that you have set up with the tenant. You can just make sure that someone is there to collect and you will be good to go. This also adds a layer of security for you and your payments because you can lock away the money in your office until you are able to pick it up.
If you do not have an office on the other hand then another option for a drop off location is a P.O box that you might have. Simply supply your tenant with your P.O box address and they will be able to make their way there each month to make the payment. Most P.O boxes are set up with security cameras so if anything does go wrong you will have that extra layer of security. If your tenant says that they dropped off the money in your P.O box but you then go there to find out that it is not there then you can double check the security cameras to make sure.
This all works great because you don’t want to actually give out your home address to your tenants, especially if they are new and a solid relationship has not been formed yet. If you live in the same property as your tenant this will not be possible but most landlords live in a separate home than the property unit that they are renting out.
Setting up a drop off location is however not the safest way of collecting rent each month, because they will have to carry around large sums of money and this opens the tenant up to safety concerns like being robbed. But if you take all the necessary precautions beforehand then setting up a drop off location for your rent could be a good option for you.
Collecting Rent In Person
While this is often the least preferred method of rent collection for landlords it does come with some pretty good benefits that you might want to take into consideration. When you collect your rent in person, sure you will have to take the time to drive to your rental unit to collect or set up a place where you can both meet safely and you will have to spend money on gas to do this. However with all that being said, this method of collecting rent will ensure that you actually receive your money each month.
If your tenant decides that they are unable to pay their rent for the month, you will have the opportunity to discuss this to make sure that they have a valid reason or maybe come up with a solution that you can both agree on. You can possibly come up with an agreement that they have an extra 3-5 days to make the payment before further action is taken. If your tenant knows that you will be knocking on their door each month to collect the rent then they are much more likely to actually pay, it lights a fire underneath them you could say. You just need to make sure that you are strict and on time when it comes to collecting rent because if you go easy on them one month, they can take advantage of your good nature in the future. If you are not able to go yourself each month then you can send one of your business partners or someone that you trust to be able to handle the money and then give it to you.
Sending The Rent In The Mail
While this is an option, it is not the most efficient and safest way to collect your rent. Whenever money is being sent in the mail you will be at risk of not actually receiving the money and it will take a few days to get it after the tenant has sent it off in the mail. There have been many instances where mail that has contained cash or checks have just disappeared so be alert to this if you do decide to collect your rent through the mail.
Another frustrating situation that you might find yourself in is that your tenant doesn’t send the required amount of money on purpose or they could just make a mistake and send the wrong amount. So you would have to wait 3-5 days to receive your money and then on top of that there is a possibility that the amount is incorrect which is not the most ideal situation to be in as landlord because you will have to go back and forth trying to get the right amount and this just wastes a ton of time.
When using the mail as your method of collecting rent you always want to make sure that you ask for a proof slip that the money was actually sent in the mail. This will cost a tiny amount but it is worth it to ensure that you actually get your rent money each month.
Hire A Property Management Company To Collect Your Rent
If you have the budget to hire a property manager then this option will probably be your best bet. It will save you the time of having to drive around and collect rent and this ensures that you will receive your rent money on time each month. Property managers have years of experience in collecting rents and they will be able to make sure you are paid on time each month. Property Management companies will also be able to screen potential tenants for you and make sure that you get only the best tenants in your rental units, who will actually honour the lease/rental agreement and pay on time each month.
These are all the options you have for collecting rent each month. Some options will be better for you depending on your situation and the way you like to do things when it comes to money. You may be well-versed in technology and decide to set up your collection method online through an online payment service like PayPal or your bank account. You may want to take all the stress and work off your shoulders and hire a professional property management company to handle everything for you. Whatever you choose these are in our opinion the best ways to collect your rent each month.
If you have any further questions or concerns then feel free to get in touch with us here. With many years of experience in the property management space, we are more than happy and qualified to help you with anything that you might need.