One of the most time-consuming, yet most important, aspects of being a landlord is collecting rent. You get passive income every month, which you can put back into your real estate investment portfolio to increase your wealth.
That said, rent collection doesn’t always go as planned. It’s critical to collect rent effectively and cover all of your bases to avoid late payments or even messy court issues. Because of the importance of this task and issues that can arise from it, it’s important for a landlord to develop rent collection strategies that work best for them.
Here are five options you can consider for collecting rent from your tenants.
Factors to Consider When a Choosing Suitable Rent Collection Method
Not every strategy of rent collection is appropriate for you as a landlord. A few factors influence which tools are appropriate for property and tenant management. These considerations might assist you in determining the most appropriate technique for you and your tenants:
- Number of Tenants or Total Number of Rental Units – A landlord with 20 rental units does not need to physically walk from door to door requesting rent. They require a more streamlined and effective method of rent collection that will save them time and energy.
- Distance From Your Rental Property – If you live far away from your rentals, it makes little sense to collect rent yourself. Instead, you could be better off contracting a third party to collect the rent or switching to an electronic payment method.
- Desire to Interact With Your Tenants – Whether or not you enjoy in-person interactions with your Snohomish, Washington tenants should also be a factor in your decision. It’s crucial to recognize and adopt a more hands-off approach to managing if you’d like to reduce tenant interactions.
- Your Tech Skills – It won’t be hard to integrate an electronic service for rent collection if you already know the basics of online payment methods. If you and your tenants are tech-savvy or have an understanding of online payment systems this might be best for all parties.
5 Methods for Collecting Rent
No matter what system you choose, you must include a provision in the lease agreement that clarifies the rent collection procedure. Here are five possible collection methods to think about:
1. Online Rent Collection
Collecting rent online saves you the time and hassle of tracking down tenants in person. It always allows tenants to pay from anywhere. What’s more, many of these online collection applications are simple to use.
Note, however, that it may take a few days to process your rent before the money reaches your hands depending on the software you choose. Furthermore, if your principal means of collecting rental payments is online, you will almost always need to provide an alternative method of payment, such as paying rent by mail.
Conduct an online search before deciding on a service to identify the site that best meets your requirements. Some charge different prices depending on the plan you choose. Other websites may offer extra features that you can take advantage of.
Rent can also be collected through money transfer services like PayPal and Venmo. Consider the following:
- Pay Pal is a free service with a longer processing time. It also requires that the tenant follow the specified instructions, or the payment will be delayed and a fee will be charged to your account.
- Venmo offers fast payment, but you must be friends on social media to use it.
2. Collecting Rent Via the Mail
You can choose to allow tenants to mail their rental payments to you in the form of a cheque, cash, or money order. This is another option that saves you from having to collect payments yourself.
However, there are several disadvantages to collecting rent by mail. Even if the envelope is postmarked by the due date for rent collection, you may not receive the cash for several days. Although the rent would not be technically late, you would still not receive it on time. Furthermore, partial rent payment in the mail can go unnoticed for longer.
3. Choosing a Common Physical Drop-Off Location
If you have established a common office for your real estate investing business, you might want to allow tenants to drop off their rent there. Allowing tenants to drop off rent payments at your home address or ever disclosing your home address to your tenants is strongly discouraged unless you reside at the same address as your tenant.
You should also make sure they don’t leave envelopes full of cash, which might be stolen, or a tenant could claim they left a specific amount but the envelope contains less.
4. Collect Rent In Person
You have the option of collecting rental payments from all tenants directly. The advantage is that you will get your payment in your hands right away. If you’re getting paid in cash, this is sometimes the best approach because you can count out all of the money by hand and provide them a receipt of the transaction.
The drawback is that trying to schedule pick-up times with all of your renters is time-consuming and frustrating.
5. Contract a Property Management Company
You could hire a property management service provider to handle rent collection on your behalf. Property management companies not only collect rent payments for you, but they can also handle all tenant complaints, maintenance issues, and fill vacancies.
It’s impossible to run a lucrative rental property without adequate rent collection policies. As a landlord, you have many options at your disposal to facilitate the rent collection process. Property owners can also work with a reputable organization that is well-versed in the complexities and nuances of modern real estate management and investing.
T-Square Real Estate Services, Inc. operates in Snohomish county that specializes in property management of multifamily, complex apartment, commercial, and single-family properties. Our rent collecting processes allow tenants to pay their rent online, ensuring that rent is collected on time, securely, and smoothly each month.
Contact us today to learn more about our property management services!