Energy spent chasing down renters' late payments is energy that could be better spent on managing other aspects of your rental business. In an increasingly digital world, there are tools available to landlords that help lighten the load, easing interactions between both renters and landlords.
Although some people still need to pay with non-digital methods, being able to record those payments and maintain high-quality records will help landlords better manage their books in the long term.
We will go over the different methods of transacting with renters, how to ease the process of collecting rent digitally, and how it benefits both renters and landlords.
Different ways to collect rent
Landlords are responsible for collecting rent and providing clear instructions on how to pay rent. Keep in mind that, in some jurisdictions, landlords might not be able to mandate rent being paid in a certain way and still need to offer manual payment options.
For tenants that are not fully banked, cash is still very much a way of life. If this is the case, one way to collect rent is via a money order. Money orders can be purchased in a variety of establishments, including from the United States Postal Service, Western Union, grocery stores, and convenience stores.
Tenants can also pay rent with a check. There are a couple of downsides to paying with a check, though. Bounced or bad checks occur when the writer of a check has insufficient funds in their checking account to cover the amount written on the check. Checks take time to clear as well, typically about two business days.
Direct transfers are another way they can pay. Services like Venmo, Cash App, Wise (formerly TransferWise), and Zelle all fall under this umbrella of money transfer apps. But these services are not built for landlords and using these apps may result in extra accounting work. Additionally, no tenant information is attached to the payments so things can get complex when you have more tenants.
Property management software
An option specifically targeted toward landlords and property owners is property management software like Buildium, Appfolio, or Clickpay. These services, although vast in their offerings, tend to be quite expensive and can cost hundreds or even thousands of dollars in subscription fees a year. Many property management software platforms also charge fees to set up each bank account for rent collection.
Why rents are late and mitigating late rent
Rents can come in late for a number of reasons. We talk about more of the risks here:
Challenges around collecting rent on time
There are several challenges a landlord can face when collecting rent on time.
Lack of a standardized payment system
Tenants can pay rent via a variety of methods like bank transfers, cash, checks, and more. This can get complex to keep track of all the different methods and be inconvenient for tenants. Checks and money orders sent by mail can be delayed or even lost.
Transfer and deposit timing
Even if the tenant pays on time, the rent might not be deposited on time. Property investors using Venmo or other apps know that there’s often a 2-5 business day delay from the time the payment is made to the time the payment is spendable in the landlord account. If the rent is paid at the last day of each month, landlords might not be able to pay their mortgage payments if it’s billed on the first of each month.
If you’re the property manager or investor of a large community or property, it can be challenging to collect rent in person, in a timely fashion, from all the tenants. Staying on top of all the different methods, check clearing, accounting, and follow-ups is a full-time job.
Tenant is unable to pay
Sometimes, the tenant can’t pay for the rent because of a situation like job loss or medical bills. We’ve seen how the pandemic has affected many American’s jobs and livelihoods. Other times, the tenant’s pay date doesn’t align with the first of the month. There can be many systemic issues around the tenant not having the money they need to pay, even if they intended to pay on time.
Mitigating late rent
Late rent is a costly issue for landlords and tenants. Some ways to mitigate late rent include:
Flexible payment options
Landlords can offer flexible rent payment options to mitigate the risk of not being able to receive rental income from their properties. Paying a portion upfront and the rest in installments over time, or offering a flexible rent payment plan that can vary depending on the tenant's situation, can increase timely rent payments.
Upgrading the technology you use
Many of the other tools available still require you to wait many days before you can access your rental income to spend. Since Nophin offers bank accounts, rent collected would be automatically deposited into your bank account once it clears and thus reduce the multi-day lag time.
Digital rent collection
The safest and fastest way of allowing your tenants to make rental payments is to accept digital payments. There are many expensive software options available to landlords but it doesn’t have to be out of reach.
Nophin provides the best-in-class tools, services, and support for landlords and property investors. And it’s free to sign up. Landlords can store security deposits in separate, FDIC-insured bank accounts. There are no monthly fees, transfer fees, or mandatory minimums.
Nophin is a no-brainer when it comes to accepting or holding digital rental payments.
Benefits for the landlord
Landlords can experience many benefits to collecting rent online. Be sure to research your state’s laws regarding digital rent payments.
Saves you time
When landlords collect rent online, you don’t need to manually deposit checks and cash anymore. Digital rent collection means each of your payments are in one place and deposited into the right bank account.
Reminds your tenants to pay on time
With best-in-class software, you don’t need to worry about late payments that are within the tenant’s control. This means you can automatically set up reminders to pay on time and automatically tack on late fees.
Additionally, you get peace of mind. If you manually collect rent, your tenants may take advantage of you and ask you to remove the late payment each time. Digital rent collection means the software is automatically applying the charge and the charge is now “out of your control.”
Digital rent collection means the time it takes for you to get your rent deposited reduces. Since Nophin's rent collection is seamlessly integrated with Nophin banking, you can enjoy your rent up to 5 business days earlier than other options!
Benefits for the tenant
Being able to make rent payments digitally is safer and saves tenants time and energy.
Save tenants time
Tenants can make payments while they’re at work or in the comfort of their homes, making paying rent on time much easier. Some tenants use a digital bank so they don’t need to write a check or spend time getting a money order they don’t have on hand.
Improve tenant experience
Tenants can trust that their check is not going to get lost in the mail. Because Nophin's rent payment portal is linked to the rent collection account, each payment is documented clearly on the landlord side.