Here’s a question we hear a lot… Should I allow rent to be paid through apps, such as Venmo, Paypal, and Zelle? It’s best practice to allow at least two payment options for your tenants. Most tenants still typically pay with a check or money order, but allowing credit card as well gives tenants another avenue should they need it. Another good way to pay is through an automatic payment system in the form of an online platform.
First and foremost, no matter the size, it’s important to remember that your rental property is a business like any other. Although payment applications are convenient, there are several drawbacks. Let’s look at some pros and cons of these more recently automated payment systems.
The funds are transferred quickly, sometimes as quickly as 30 minutes, though it depends on your banking system how quickly the funds may be accessed. These systems are easy and convenient. There are no third parties or middlemen involved, and money can be sent simply with the click of a button. This makes it a great way to send money quickly to a friend or relative for personal transactions.
Through a business lens, allowing apps as payment methods gives more control to the tenant and offers little to no protections for landlords and owners. By initiating the transfer, the tenant is automatically authorizing the transaction which makes it a valid form of payment. This can allow for partial payments which may be especially troublesome should the need for eviction arise.
If a tenant were served an eviction notice and then sent a payment of any amount, even just one dollar, it would be an automatically accepted partial payment. This is considered rent collected which could be a problem in the eviction process. In addition, Zelle has limits on how much money can be transferred at once, which means it is more likely you would be accepting partial payments.
These apps are free for customers and consumers; however, this is not always the case for businesses. If a tenant classifies a payment in Paypal as “goods and services” then fees will be added on the side of the landlord/owner, and you will receive less of that payment. Other apps also charge a fee plus a percentage of the transaction, making it just as costly as charging a customer by credit card. Most apps also have money back guarantee, meaning if a legal dispute were to arise, the application will be likely to side with the tenant, and it will cost you – literally.
Most apps also lack the process of automation for recurring payments, which can be more easily set up for convenience and to ensure payments are made regularly and not skipped.
The best ways to collect rent for both residential and commercial tenants are personal check or money order, ACH bank draft or through an online payment system where fees can be automatically added if necessary. It’s also worth noting that most tenants would have the ability to utilize e-checks with their financial institutions, setting up automatic payments through their banks directly to you, the landlord.
It’s also important to consider that as an owner or landlord, the best way to receive money is also the best way to send money. Your tenant deserves to be treated in the same professional manner with appropriate payment methods when being refunded security deposits or other necessary funds.
Learn more about services offered from Barker Property Management and Commercial Real Estate at www.barkerbr.com.