It can be easy to lose track of which renters are paying rent on time and those who are late on payments if you don’t have a strategy for collecting monthly rent. Every landlord must determine their own method of rent collection.
Here is some advice from Minneapolis’s leading property management company, MN Property Nerds.
Not every method of rent collection is appropriate for every landlord. These four considerations may assist you in determining the strategy that will work best for you and your tenants.
If you own 20 rental properties, you probably don’t want to go door to door on the first of every month to collect rent. You’ll want to collect rent in a more streamlined and effective manner.
If you live a long distance from your property or properties, having a third party collect the rent or an electronic payment system may be preferable.
You may just have two rental units and live less than a mile away from your rental property, but you prefer a hands-off management style. In this instance, receiving your rent via electronic funds transfer or mail may be the best option.
You may want to collect the rent in person if you’re not comfortable with technology and electronic payment systems.
You may collect rent from your tenants in a few different ways. Four of these options are personal rent collection and one involves outsourcing rent collection to a third party. Here are five possibilities to think about.
Remember: you must include a paragraph in the lease agreement that clearly defines the rent collection procedure when you choose a rent collection method.
Online rental payments are a convenient option.
Landlords can pay their rent online using a variety of websites or a customized software program. You can conduct an online search for rent collection services to find the one that meets your requirements.
The cost will differ depending on the plan chosen. Some sites or plans are quite basic, with merely basic rent collection as a service. Other websites may offer extra features, such as an online rent roll, the option to upload vital paperwork and papers for your tenants, and the capacity to send messages to your tenants.
Other ways for collecting rent payments include PayPal and Venmo. Venmo offers fast payment, but you must be friends on social media to use it. PayPal is a completely free service. The disadvantage is that payments made through Pay Pal might take several days to process, and the tenant must adhere to strict guidelines for the payment to be processed on time or without incurring any cost.
Zelle, a service that allows you to send money directly from your bank account to someone else’s only by having their email address or phone number, is becoming increasingly popular.
However, there are possible issues with online rent payments. Suppose your primary means of collecting rent is online. In that case, you may need to provide an alternative option for renters who don’t have access to the internet or aren’t comfortable with technology.
You have the option of allowing tenants to mail their rental payments. You’ll save some time by not having to collect payments yourself. There are certain drawbacks to this strategy, however.
For example, the envelope may be postmarked on the specified date, but the money may not arrive for many days. Although the rent would not be technically late, you would still not receive it on time. In your lease, you’ll need to specify when rent payments should be sent.
Furthermore, if the tenant only pays part of their rent, mailing it will buy them a few more days before you find out.
Allowing payment by mail also gives tenants the tired excuse that the check got misplaced in the mail. To avoid this, your tenant can pay for a certificate of mailing. This certificate verifies that the mail was delivered when the tenant claimed it was. It does not, however, verify the actual amount in the envelope.
If you have an office for your real estate investing business, you might want to allow tenants to drop off their rent there. Unless you reside at the same address as your tenant, it would not be recommendable to let your tenants drop off payments at your home address or ever give your tenants your home address.
Ensure they don’t leave envelopes full of cash, which might be stolen.
You have the option of collecting rent payments from all tenants directly. The advantage to this is that you’ll get your payment in your hands right away. The bad news is that trying to schedule pick-up times with all of your renters can be time-consuming and frustrating.
However, if you’re being paid in cash, this is sometimes the best approach since you can immediately count out all the money by hand and provide them with a receipt of the transaction.
Finally, you might hire a property manager to outsource rent collection. This allows you to establish a barrier between yourself and tenants, as your property manager will set up rent collection systems, manage payments, and, if necessary, handle evictions.
Another key issue that a property manager will handle is the eviction process. Tight restrictions govern this process, and executing it incorrectly can be a costly mistake. A professional property manager is informed about all eviction laws and works within the boundaries of them for a quick and compliant eviction.
You’ll need to sign a contract with the company and pay a set fee based on the services you want.
Owning and managing a rental property presents a number of difficulties. That’s why many landlords often use a property management business to take care of things like locating good tenants, collecting rent, and arranging routine maintenance.
Where can you find a reputable and experienced property manager in Minneapolis? Get in touch with MN Property Nerds today and take advantage of our experience and expertise in the MN real estate market.