One of the main challenges landlords face when managing their own properties is establishing a system for rent collection. Cash and checks are outdated, slow and insecure, so that automating rent collection becomes an appealing option.
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However, finding a suitable software solution to collect rent via bank transfers, direct debit, credit card payments, or ACH can be a challenge. A rent collection app that allows tenants to initiate online payments from their mobile phone makes paying rent far easier.
Tenants can pay from anywhere and payments are delivered directly into the landlords bank account. Online rent payments made via apps are more secure, easier for the tenants, and are proven to dramatically reduce the likelihood of late and missed rent payment.
Whether you are a new property investor, a new manager, or considering transitioning to automated rent collection, there are several things you should know when opting for automatic rent payments.
Due to multiple benefits, automated rent payments have become increasingly popular with property managers and tenants alike. Property managers, landlords, or self-managing property owners are responsible for selecting rent collection methods.
So, if you are thinking about automating your rent collection, reflect on these benefits and considerations before selecting which property management or rent collection software you prefer.
Benefits of Automating Rent Collection
Automating rent collection involves monthly transferring funds from a tenant’s account to your rental business account. This procedure may be arranged through a bank, property management, or rent collection software.
Automated payments are slightly different from paying bills online. When you pay recurring bills online, you ask and permit your bank or financial institution to pay these sums for you to your creditor’s account. Automated rent collection can involve a tenant giving the property manager permission to debit their financial account each month.
Automated rental payments offer property managers and tenants a variety of benefits, including:
- Monthly payments are guaranteed, eliminating the need to chase payments and improving cash flow.
- Late fees can be avoided. Automated rental fee payments can ensure that rent is always paid on time to prevent being charged for forgetfulness or for something unexpected preventing timely payment.
- Problems or stress remembering to pay are eliminated.
- No need for a payment grace period.
- Secure payment methods. Automated rent collection generally uses secure gateways for payment, increasing security for landlords and tenants. Secure payment reduces the risk of theft of sensitive information and financial fraud.Identity theft, bank account theft, and the need to pull out a debit card or log into a bank account are automatically reduced in number. The use of a rent collection app will involve MFA or biometric identification adding an extra layer of security.
- Better record-keeping. Automatic rental collection platforms produce detailed records of all transactions, which aids in record-keeping. Good record-keeping facilitates compliance issues and tax reporting.
- Convenience. There can never be too much convenience. Automatic rent collection is convenient for everyone involved and allows tenants to set up their rent payments flexibly. Many people prefer to pay early, and automated rent collection can aid tenants in budgeting more effectively.
Automatic rent collection offers significant advantages for both parties. Landlords can eliminate manual procedures. Printing and mailing rent invoices, collecting checks and cash, and entering data into ledgers or accounting software have become a thing of the past. Efficiency is increased, and time is saved.
Property management or rental collection software can be programmed to include the amount due, date due, lease terms, grace periods, and late fees so that all are automated.
Systems can notify tenants when the rent is due and overdue, and these systems can integrate the convenience of a rent collection app for those who prefer to program payments on the go.
Implementing Automated Rental Payments
When implementing or transitioning to automatic rent collection, there are a few things to remember when setting up your payment system.
- Tenants should not be required to use the automatic payment option.
In some states, obligating tenants to use this method is illegal. In states like California, property managers must offer at least one offline payment option, such as accepting checks or cash.
- Consider older tenants and fair housing rules.
Even if the state where your property is located does not forbid required automated rental collection, you still should consider fair housing regulations.
In states where tenants are protected against age discrimination, requiring automatic payments from citizens who may have difficulty with digitalization might be viewed as discriminatory. Requiring older tenants to pay only using online methods could also induce older tenants to look for another rental property.
- Arrange for automated payment rejection or interruption.
The option to reject payments is essential to have both online and offline. Some states view the reception of payments, even when partial, can slow legal questions such as eviction processes.
In such cases, payment acceptance can require you to file an entirely new complaint, restarting the legal process from the beginning. If you choose an automated rental collection software, ensure you can interrupt accepting payments, especially when rental leases end.
- Ensure sensitive data regulatory compliance.
Like merchants, landlords and property managers must have a security policy that guarantees the confidentiality and integrity of sensitive data storage. Data security regulatory compliance should be extended to your payment processor as well as to any rent collection app provided.
- Be aware that tenants may have insufficient funds even with automated rental payment collection.
Even if your tenant has opted for automated rental payments, payments will only be guaranteed if their account has funds.
If the bank account does not have sufficient funds, the automated payment will bounce, and the rental payment will be late. In this case, you should know how much of a late fee you can charge in your state.
Selecting A Property Management or Rent Collection Software
When choosing a software for automating rent collection, consider the features and functions offered. The system should include the payment methods and options that you prefer and the integration of a rent collection app for maximum payment convenience.
It should also be able to integrate seamlessly with the business platforms that you are already using such as accounting software, and your business website.
Consider if the use of a specific rent collection software increases your ROI through savings of time and employee engagement. Test the system’s functionality, ease of use and updates. Finally consider the reputation of the software provider’s reliability. Read the feedback.
FAQs on Automating Rent Collection
How long does it take for rental payments to arrive in the property management account?
Depending on the financial institution it may take 3 to 5 business days, although instant payments are a possibility.
Can tenants program recurring payments?
Yes, auto-pay options are usually a part of management software.
Can tenants unprogram recurring payments?
Yes, tenants can interrupt automatic payments at any time opting to log in manually to pay.
What if the tenant has insufficient funds?
Generally, if a tenant has insufficient funds, the programmed rental payment will fail or bounce and the landlord or property manager will receive a notification.
In conclusion
Automating rent collection aims to ease procedures for landlords and tenants. Not only are rental fees paid on time, but digitized rental fee collection can aid tenants in building their credit while protecting their identities during financial transactions.
A rent collection app can offer further convenience to tenants on the move. Rent collection doesn’t need to be problematic or stressful, and thanks to automatic rent collection, it just became a lot easier.
