While tenants are required to pay rent to the landlord every month, how rent is paid and subsequently collected has changed drastically over the years. At the time, the ideal method of collecting rent was either cash or a check.
Although these methods of
collecting rent are acceptable, they have risks and inconveniences. Today’s article will go over the process of collecting rent, the methods available to collect rent, and the best way to collect rent for you.
We’ve mentioned cash and checks, and while these are viable ways to collect rent, there are some downsides. With money, for example, there are security and accountability issues. Cash lacks a clear paper trail; you’ll have to run the risk of handling the cash before being able to deposit it, and there is the factor of time spent to collect and deposit the money. Checks can solve some security issues, though other issues make them less than ideal. Checks have processing times and can be an administrative burden if you go out of your way to deposit them. Moreover, a personal check risks insufficient funds, leading to additional bank fees and tenant disputes.
Some of the best ways to collect rent don’t involve much interaction from landlords. Setting up automatic bank withdrawals affords you and your tenant peace of mind, knowing they’ll not risk late fees, and you’ll receive the rent on time. Though not free, mobile apps such as Zillow Rental Manager can help keep track of payments and make it easier for tenants to improve their credit scores. Property Management Companies will always offer a service to collect rent from a tenant. They use as many options as possible to make paying on time easy for your tenants.
Unfortunately, there is no best way to collect rent. After all, every landlord and every tenant has different needs. It's best practice to make it easy and streamlined for tenants to pay; however, some of the methods discussed may take some time to understand and learn, especially for landlords who aren’t tech-savvy. Hiring a property management company may be the best way to collect rent in these cases. Some investors prefer a standardized process approach. This way, rent is collected on time, reducing administrative burden to ensure consistent cash flow. However, this can reduce the pool of potential tenants and cause unnecessary stress to tenants who need to change their methods of paying rent.
Regardless of which method you prefer, it's essential to establish a well-defined rent collection process. It must be consistent throughout all your tenants and properties if you manage your properties yourself. This reduces your downtime when collecting rent and is recommended for those who want to collect rent promptly. It also promotes a healthy landlord-tenant relationship. Consistency in collecting rent encourages good tenant habits, ultimately benefiting your bottom line.
When the new month rolls around, there are many worries for both tenants and landlords alike. This doesn’t have to be the case. If you need help setting up various methods to collect rent or need help managing your properties, we invite you to call us today at (562) 888-0247 or fill out our Owner Application online.