Rent Collection Strategies for the Modern Landlord

Modern landlords are always in the market for tools that complement their innovative ideas.

An independent landlord is a jack-of-all-trades, responsible for tasks as broad as managing tenant relations to ones as specific as applying real estate tax laws or repairing a leaky faucet. Any tool that can make these tasks easier is a win for landlords.

Online rent collection is one such tool. Property managers have united with software engineers to harness the internet's power to automate payments, keep records, and regulate the entire rent collection process. Taking advantage of these tools as a landlord in 2023 is a no-brainer.

In the past, landlords collected rent by hand, in person, or by mail. You may still collect rent this way. However, once you see the benefits that online rent collection can offer, you'll never go back.

In this article, we first discuss the downsides of traditional rent collection and then present alternative methods for the modern landlord.

Downsides of Traditional Rent Collection Methods

Two traditional methods of rent collection include cash payments and paper checks. You may have used these methods for years and don't understand why you should give them up.

As it turns out, paper options are highly vulnerable. Paper cash or checks can easily be misplaced, stolen, or destroyed and must be driven in person to the bank each month. You may not realize this as a big deal, but the time and gas money you waste with trips to the bank is significant.

Traditional rent collection also makes it your responsibility to track down rent payments. If you don't receive a rent check in the mail by the due date, it's your job to call, text, or otherwise track down the rent. If you have multiple properties and dozens of tenants, this can quickly become an overwhelming job.

Finally, traditional rent collection forces you to engage in record-keeping by hand. Tenants need monthly invoices by mail or email and receipts after each rent payment. Also, you need to log each individual payment in your own records. If you're trying to enforce and apply late fees, things get even more complicated. Not only do you have to track down rent, but you also have to remind tenants to add the late fee to their bill and keep track of who has paid what in your records.

What Modern Online Rent Collection Does Different

As you can see, traditional rent collection places a large burden of responsibility on the landlord. Landlords need to track down payments, keep records, apply fees, make trips to the bank, and otherwise regulate the entire rent collection process.

Modern rent collection, however, solves many of these problems. With the right technology, you can now take rent collection off your plate of responsibilities while maintaining close supervision of the process.

What methods are we talking about? Read on to learn about three modern rent collection methods (as well as which one we think is the best!).

Bank-Based Methods

If you've never used online rent collection, you might start by setting up the process with your bank. Many banks allow you to organize rent collection via ACH payments, merchant services, or online bill pay. You'll be able to track rent payments directly from the bank you're most familiar with and already trust. You can consolidate your accounts, ensure top security, and view the records your bank automatically generates.

However, be forewarned that your bank may charge you for this service each month, and you'll also lose some control when it comes to enforcing late payments and sending targeted reminders. You can't necessarily set up auto-charges for late fees or reminders for the same, so you'll have to handle this part yourself.

P2P Platforms

Some landlords are now collecting rent on peer-to-peer (P2P) platforms like Venmo and PayPal. These platforms are very attractive: they're intuitive, familiar, trendy, and simple to use.

However, we would caution against using this modern method due to significant legal and control issues. First, you'll need a business account to collect rent on Venmo, which usually requires a monthly fee. According to new tax laws in 2023, Venmo also requires business owners to provide their tax ID, or else the platform will send 24% of every transaction over $600 to the IRS for backup withholding. As most rent payments are over $600, you won't be able to get out of this unless you disclose your sensitive tax information.

Another downside is that you won't be able to reject payments, which could become a problem in an eviction situation when you don't want partial payments to delay the lawsuit. You have no control over which payments you receive, and you're also unable to enforce late fees on P2P platforms.

Property Management Software

Finally, let's discuss the most highly recommended rent collection option for modern landlords: property management software.

Property management software is an all-inclusive landlord tool designed to streamline many aspects of rental management. It offers key features like tenant screening, digital leasing, maintenance management, tenant communication, financial reporting, and, most importantly, a rent payment portal.

Here's why property management software is the best choice out of all the ones discussed here: For an affordable price (or none at all!), it gives you a balance of the most control over the rent collection process while automating practically every part of the process.

No other rent collection service gives you the freedom to apply late fees, reject partial payments, keep detailed payment records, and the ability to automate it all. Once you set up your account and preferences, rent collection runs on its own. Plus, if you haven't heard, digital payments (such as those from credit or ACH transactions) are much safer and more secure than traditional methods. eChecks are one of the most preferred rent collection methods among younger tenants for a reason. It's the only option that provides it all.

Modernize Your Rental Business with Online Rent Collection

Collecting rent online is just one way to modernize your rental business. But it's a big one. Tenants in 2023 want to pay rent online, and there are a dozen reasons why landlords should want, too. It's a win-win for all parties, and that's exactly what you need to stay competitive in the 2023 rental marketplace.