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How To Have Tenants Pay Rent Online: Comprehensive Guide

Riddhiman Roy

Rental real estate is lucrative, but manually collecting rent payments while managing daily operations can overwhelm you. With rising rent structures across the U.S., it’s more important than ever to have a clear and organized system for tenants to pay rent.

In this guide, we’ll discuss various payment options and equip you with strategies that ensure your rental business runs smoothly without having your tenants lose sleep over how to make ends meet.

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How To Pay Rent Online Guide

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How To Pay Rent

At the core of every rental business is a leasing agreement that specifies the nature of a landlord-tenant relationship and defines the monetary implications of using a property. A good agreement will clearly outline acceptable methods of rent payment preemptively.

Most of us have rented spaces at some point in our lives. And it isn’t pleasant to incur late payment penalties simply because you don’t know how to pay rent or when the rent grace period ends.

Deciding on terms and conditions before jumping into a lease is crucial. Here are leading payment options you can consider while leasing to avoid confusion and help your tenants clear their dues quickly and easily:

Cash

Paying rent in cash can be convenient. It’s a liquid form of money and doesn’t require tenants to undergo complicated payment procedures. However, there are potential risks and drawbacks.

The primary concern is the risk of loss or theft. On top of that, cash payments don’t inherently have a paper trail or electronic record. Landlords must add an extra step in their already packed workflows to manually account for each rent, late fee and utility payment.

Checks and Money Orders

Checks and money order payments are common and relatively secure methods to transfer funds. A check is a written document instructing a tenant’s bank to transfer the rent amount directly from their account to the landlord’s account.

A money order is a prepaid document. Unlike checks, it will never bounce back due to insufficient funds in the payer’s account.

The primary advantage of these options is that they provide a definite paper trail and transaction records that help solve disputes and spot discrepancies. But the drawback is that it’s a time-consuming process.

Tenants may need to wait in long queues to acquire these money instruments, and landlords must wait for clearance before funds are available. In addition, banks may have extra check cashing fees or money order commissions.

Card Payments

A debit or credit card is an easy way to pay rent without carrying large amounts of cash or waiting in long bank queues. It can also help boost a tenant’s credit score for each on-time payment.

But there may be additional processing fees depending on the landlord’s and tenant’s banks. It’s always a good idea to check if your owner or property manager charges an extra card processing fee before using this option.

Payroll Deduction Schemes

A few states, like New York and California, have special schemes for government employees that deduct the rent amount from their monthly payrolls. It allows tenants to set up automated payment workflows that ensure on-time payment and help avoid late fees.

Most of these programs automatically deduct half the rent and request your permission for the other half.

Rent Delegation to Third Parties

In the case of senior citizens, student housing or disabled residents, a property management business may send monthly rent statements or invoices to an authorized caregiver. The third-party caregiver can choose the preferred payment option to clear bills.

Online Payments

The most convenient option in the list, an online payment portal, allows you to pay rent on the go or from the comfort of your home with just a few clicks.

It can be as simple as creating an account, entering rent and lease details, and inviting your tenants to onboard the platform or download a mobile app. These solutions streamline your rent collection process with unique features like recurring billing, real-time notifications, automated credit reporting and late fee calculations based on user rules.

Property management is a hectic profession, and online rent payment solutions are great tools to simplify routine tasks using automations.

If you still aren’t convinced, a recent industry report found that online payment is the top technology desired by renters of all ages, followed by digital communications and online maintenance requests.

Want to know how to set up online payment for your tenants? Read on.

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How Can Tenants Pay Rent Online?

Here are the best ways in which you can enable your tenants to pay rent online:

  • EFT: Electronic fund transfers are a quick and convenient way to set up transactions between an owner’s and tenant’s bank account. But be wary of the EFT fee most banks charge for transfers to a third-party bank.
  • Mobile Payment Apps: A few landlords and small businesses with a handful of tenants prefer to use mobile-optimized payment processors such as PayPal, Square and Venmo to accept rent payments. These apps allow tenants to add their bank account or use debit and credit cards to transfer funds online.
  • Online Payment Portals: Unlike the previous two generic options, these cloud-based solutions are made keeping in mind the needs of property managers and can do more than just accept online payments. Managers can set up recurring payments, automate late fee calculations, receive alerts and generate monthly reports.
  • Property Management Software: These all-in-one solutions can help you effectively market, manage and maintain the entire property management spectrum from a mobile screen or a unified dashboard. Most systems come with native payment processors, allowing tenants to log in to their profiles and set up payment options using debit and credit cards, ACH, or EFT.

As a landlord, you should carefully assess your unique situation to determine the online payment solution your business and tenants need. Small businesses and single owners without an existing tech stack can consider full-fledged property management software to up their game.

Enterprises that use property management software without online payment capabilities can consider integrating an online payment portal into their operations.

On the other hand, some tenants used to paying rent in cash may not be thrilled about changing their habits. In such cases, you can consider a hybrid rental payment solution with EFT or mobile payment apps along with physical transactions.

Common Features

If you’re in the market for a solution, these are the top features you should look for to offer your tenants a modern and digital payment experience:

  • A mobile app or mobile-optimized portal to send money from anywhere.
  • Automated late fee calculation and charging.
  • An option to make a one-time payment or set up recurring payments at the start of each month.
  • A choice between selecting ACH, debit cards or credit cards.
  • Automated reminders about upcoming dates and dues.
  • Ability to send real-time notifications to landlords or managers for missed or late payments.
  • An option to accept full or partial rental payments.
  • Report on-time rental payments to credit bureaus and help boost tenants’ credit scores.

Benefits of Online Rent Collection

Increased Efficiency

The primary benefit of online payment is its speed and efficiency compared to physical transactions. Once a tenant completes a payment, you don’t need to manually log the transaction in separate ledgers or Excel spreadsheets. The online payment solution automatically records amounts in property and tenant-specific ledgers.

Improved Accuracy

It’s easy to make a mistake while accepting or logging rent payments, but even the slightest of errors could have long-reaching consequences for your business. Online payments completely avoid the scope of errors and ensure accuracy to a T.

Greater Convenience

Tenants no longer need to withdraw large amounts of cash or stand in long bank queues to issue money orders or cash forms. They can pay rent from the luxury of their homes while sipping their favorite beverage.

Enhanced Security

The biggest argument against online payments is the lack of security measures and the scope of fraud or theft. But that was almost a decade ago. Today, online payment solutions go above and beyond to safeguard your money and personal information.

These PCI-compliant solutions ensure that credit card and banking information stays secure.

On top of that, they encrypt transactions, safeguarding data from third parties with malicious intent. With these solutions, you can comfortably sleep at night knowing that your money and information are safe.

Better Record-keeping

Gone are the days of fumbling through stacks of check receipts, trying to decipher scrawled handwriting and guessing who paid what and when. With online rent payment systems, record-keeping is a breeze!

You can neatly store information on centralized dashboards accessible with a few clicks. It saves hundreds of manual hours otherwise spent on logging transactions and eradicates the chance of human errors.

Popular Rent Payment Software

In this section, we’ll discuss some popular options for small businesses and enterprises. You can use them as a reference to kickstart your search for the perfect online rent payment solution for your properties.
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TenantCloud

TenantCloud is a property management solution with a flexible suite of payment features. It offers built-in integrations with PayPal and Stripe to accept rent payments via debit and credit cards. Owners can also allow tenants to pay rent online using ACH through a partnership with Dwolla. It also offers a native mobile app for accessing the management end of the platform remotely.

It has a free starter plan that offers payment processing, late fee settings, a lease template, basic marketing tools and 512 MB of memory space. Then there are two paid monthly plans for $12 and $40 per unit. The fourth plan includes advanced features, and TenantCloud offers customized pricing based on the number of units and features.

Other capabilities include:

  • Tenant screening
  • CRM
  • Lease builder
  • Maintenance management
  • Owner portals
  • QuickBooks sync
  • Team management tools

Track marketing, management and maintenance of multiple units from a centralized dashboard. Source

Rentec Direct

Rentec Direct is a full-feature property management software that can manage small and medium-sized portfolios. The responsive design works well on any platform, including desktops and mobile devices.

Tenants can use their portals to pay rent online via debit, credit cards and ACH. They can also pay rent in cash by visiting one of the 20,000 cash payment network stores across the U.S. It offers new users a 14-day free trial period followed by custom pricing based on portfolio size and features. It also offers:

  • Website designing
  • Tenant portals
  • Property accounting
  • Listing syndication
  • Channel manager
  • Tenant screening
  • Maintenance requests

Stay on top of your operations remotely with the mobile-optimized platform. Source

PayRent

PayRent is a pocket-friendly online payment solution ideal for single landlords with medium-sized portfolios looking for low-cost solutions. It’s free for landlords with less than 10 units, and paid plans start from $19 monthly for more than 10 units.

It also has à la carte pricing for additional features like rent collection enforcement and automated late fees. Its features include:

  • Credit bureau reporting
  • Renters insurance
  • Partial payments
  • Credit and debit cards
  • ACH
  • Late fee calculation
  • Accounting

Simplify your rent collection workflow with the intuitive cloud-based solution. Source

Avail

Avail is a complete suite of property management tools that help market units across online sales channels, accept applications, screen tenants, design and sign eLeases, manage maintenance requests, streamline tenant communications, and automate accounting.

Unlike paying rent via ACH, which takes up to three days to deposit the amount in the owner’s account, Avail’s native payment processor, FastPay, deposits funds within one day of tenants making the payment. It also offers a built-in accounting suite that handles property and tenant-specific ledgers.

It has a free starter plan that includes listing syndication, online rent payments, a state-specific lease template library and maintenance request handling for an unlimited number of units. The Plus plan charges $5 monthly for each unit and includes FastPay, an accounting suite, website designing tools, an ACH fees waiver and more. Other features include:

  • Tenant portals
  • Credit reporting
  • Rent price analysis
  • Rental property calculator
  • Utility billing

Use labels and filters to improve payment tracking. Source

DoorLoop

DoorLoop is an all-in-one property management solution ideal for mid-sized portfolios and large enterprises with multiple units and staff. Its RapidRent module, powered by Payrix, can accept debit and credit cards, ACH, and eCheck payments. It also offers a built-in CRM module that allows owners and managers to build long-lasting relationships with tenants and prospects while minimizing vacancies.

The platform connects directly to your bank account and offers QuickBooks integration that lets you manage accounting and rent payments from within the software interface. It also offers HR and team management tools to create staff profiles, assign work and define access levels.

Its other capabilities include:

  • Website designing
  • Listing syndication
  • Application portals
  • Tenant screening
  • Mobile app
  • Document storage
  • Owner portals
  • Maintenance management

Get a birds eye view of your business’s finances and work orders from a unified dashboard. Source

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FAQs

What are some options when you can’t afford your rent?

Rent prices have been on the rise since 2021 across the U.S. In fact, median monthly rent in the U.S. crossed $2,000 for the first time in May 2022. It increased 15% year-over-year to reach a record high of $2,002.

It’s a general rule of thumb to spend a maximum of 30% of your income on paying rent. But that’s not feasible for everyone under current conditions, especially for low-income groups whose resources are stretched thin due to the rising costs of everything!

If you’re struggling to pay rent, consider the following steps to ease the strain on your finances:

  • Nonessential expenses: The foremost step is to rethink your budget and cut down on nonessential expenses.
  • Landlord negotiation: Talk to your property owners and managers. You can request to waive late fees and pay rent in installments. Most landlords will agree if you’ve a history of on-time rent payments.
  • Assistance programs: You can consider government assistance programs like the emergency rental assistance program for American families and workers. You can also check if your local government is enlisted in the rental assistance program for state, local and tribal governments. A few states, like New York and California, offer rent relief benefits in which the state sponsors a significant section of your rent.
  • Non-profit organizations: Local non-profit and religious organizations like the United Way, Transparent Hands or Resident Relief Foundation may be able to help you cover your rent. But you should be wary of limited resources in times of emergencies. In such cases, you can call 211 to find active NGOs with available funds to help you.
  • Savings and investments: If none of the above options work out, you can consider dipping into your savings, selling stocks from your taxable brokerage account or withdrawing from 401(k) or individual retirement accounts. Using money meant for your future isn’t advisable, but these aren’t typical times and “normal rules” do not apply.
  • Least expensive debts: Lastly, you should consider low-interest debts like borrowing against a credit card limit to fund your rent and living expenses. A few banks also facilitate paying rent directly from your credit card against a nominal processing fee. But you must ensure that you pay back the full amount within the billing cycle to avoid incurring APR interests.
  • Cash advances: This should be your last resort to acquire operating expenses quickly. Be aware of the steep interest rates that accrue the moment you withdraw cash from a bank or ATM.

On the brighter side, in the third quarter of 2022, asking rent prices declined by 0.4%, signifying a shift from the increasing rental price trend. Experts suggest that in 2023 rent increases are not only going to slow down but may also decline.

Therefore, even if you’re struggling to pay rent, the light at the end of the tunnel draws closer each day. Hopefully, the above-mentioned steps can help weather the storm until normalcy returns.

What are hybrid rent collection strategies?

A hybrid rent collection strategy is when you use multiple sources and formats to collect rent. A few tenants prefer online payment, while others in close vicinity would like to knock on your door and hand over cash. You can adopt a hybrid strategy to accept cash payments and online money transfers in such cases.

You can also allow economically weaker tenants to pay rent in installments and help offset rising rent structures across the country. A unique hybrid rent collection strategy could be accepting the full rent from those who can afford to pay it and breaking the rent down into two or three monthly installments for low-income tenants.

What are the drawbacks of paying rent using credit cards?

Credit cards allow you to borrow funds from the bank on a short-term basis. But there are some adverse effects of using a credit card to pay rent like:

  • Fees: Withdrawing any amount via credit cards comes with an additional processing fee. For example, if you pay rent of $1500 and your card charges a 2.99% processing fee, it results in an extra $45 payable monthly.
  • Interest Payment: If you fail to clear your dues on time, the consequent interest, along with the processing fee, can result in you paying a much larger amount than the one borrowed initially.
  • Credit Score: It can increase your credit utilization ratio, negatively impacting your overall credit score. As a general rule, you must keep your credit utilization ratio below 30% to positively impact your credit score.

How can you handle rent payments during evictions?

A landlord may issue a tenant eviction or quit notice for various reasons. It’s noteworthy to remember that accepting rent during an eviction process leads to a reset. You need to start the process all over again if you want tenants out of your property.

For example, if you issue a quit notice on Monday due to a terms and conditions violation and then accept full or partial rent on Wednesday, the notice becomes null and void. You no longer have the right to file an eviction in court with the same notice. You must issue a new notice with updated deadlines.

What is ACH?

Automated clearing houses (ACH) are electronic payment networks facilitating direct deposits and automatic bill payments.

When you wake up on the first of a month to find your salary automatically deposited in your bank account, that’s ACH. When you pay a bill online or automate insurance, mortgage and other recurring payments, that’s ACH.

What is Zelle?

Zelle is a digital payment network owned by Early Warning Services LLC. The Zelle service enables you to transfer funds to third-party bank accounts without fees. It offers quick processing times, and funds transferred through Zelle appear instantly in the payee’s account.

Depending on your bank, it has $1000 and $5000 daily and monthly transaction limits. You should also note that Zelle doesn’t partner with every bank and offers its services to selected banks.

Is Venmo a good rent payment tool?

Venmo, PayPal, Zelle and Stripe are all popular peer-to-peer (P2P) payment solutions that offer a quick and intuitive way to collect rent. Most platforms don’t have processing fees, and funds show up instantly once tenants send their rent.

That said, there are a few drawbacks to using these generic payment solutions:

  • They don’t offer property management-specific features like late rent charges, rent grace periods and partial payments.
  • Once a tenant confirms a transaction, it becomes non-refundable. This can be a problem during evictions. For example, if you issue a quit notice and the tenant sends you half the rent three days later without your permission, you’d be legally obliged to waive the notice and start the eviction process anew.
  • While accepting income via P2P solutions, you must report it as personal funding to the IRS instead of revenue generated by your rental business. This creates tax reporting complications and leaves you susceptible to IRS audits.
  • Most solutions don’t integrate with rental property accounting software. You must log each transaction manually, leaving the door ajar for human errors and mistakes to creep in.

All in all, Venmo and other P2P solutions aren’t the most optimized rent payment tools for larger firms with multiple properties and tenants. But they are convenient for single landlords and small property managers with a handful of tenants.

You must ensure you use a business account to accept rent via Venmo. Even though that levies a 3% processing fee on each transaction, Venmo has strict policies to cancel any account disguising a business transaction as personal funds transfer.

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Wrap Up

Rental income is the primary revenue source for property management businesses and shouldn’t be collected hastily. Nobody likes a complicated and rigid rent payment process, especially during tough economic conditions across the country.

Hopefully, this guide can help you identify and implement the best strategy your tenants need to pay rent. You can use our free and in-depth comparison report to analyze and determine the best rent payment options for your business.

Did we get all your queries? What’s the ideal rent payment strategy for your business? Let’s start a conversation in the comment box below!

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