Rent Collection - Mail, Collect In Person, or Direct Deposit?

General Landlording & Rental Properties
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Rent Collection - Mail, Collect In Person, or Direct Deposit?

John White
Salem, NH · Member since 2013 · 66 posts · 19 votes

Just curious if you pick up your rent from your tenants (not an option I would ever want to do), have the checks mailed to a P.O. Box (I have no interest in having my tenants know where I live with my family), or have your tenants makes deposits into your bank account? I have a bank account for my LLC, so I'm thinking of just handing them some deposit slips, and putting the onus on them to ensure that the rent money is there on or before the 1st of each month. I'd rather not get into the "lost in the mail routine". I'm just curious how some other go about collecting your monthly rents?

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Aaron Montague
Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
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I have a mix of all 3.  Several of my more annoying tenants are required to hand cash or cashier's check directly to my property manager.  Others mail checks in each month with no issues.

I recommend a service like Dwolla.com.  25 cents and it pulls directly from their bank account into yours.  Nothing in between except the internet.

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  • Aaron Montague
    Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
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    I have a mix of all 3.  Several of my more annoying tenants are required to hand cash or cashier's check directly to my property manager.  Others mail checks in each month with no issues.

    I recommend a service like Dwolla.com.  25 cents and it pulls directly from their bank account into yours.  Nothing in between except the internet.

    1Reply
  • Luis Rosario
    Philadelphia, PA · Member since 2015 · 30 posts · 15 votes
    11y

    Hi John,

    I live in the same building as my tenants so it is a bit of a different situation, but I also value reducing the amount of time I have to physically deal with the rent. For one, I never seek to knock and collect. I set clear standards around my tenants placing the rent in my mailbox on or before the due date. (I say before, because I give a 15.00 dollar discount for early rent.)

    For the most part, I've received the rent on time and without too much trouble, especially since I've been using reminders more often. However, I've also been curious about using an online payment system. There are a number of companies online that offer this service and may offer you the accountability you need for your rentals. Have you taken a look at this option yet?

    Best,

    Luis

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  • John White
    OP
    Salem, NH · Member since 2013 · 66 posts · 19 votes
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    @Aaron Montague and @Luis Rosario

    Thanks for the tips.  I'll definitely explore some of the services.  I only live about 4 miles from this investment property, but still don't want to put the burden on me to collect the rents.  I think I'm going to try to go the direct deposit route and require them to make the deposits into my bank account.

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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
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    I have them mailed to my office. One potential problem with them depositing rent could occur if you start an eviction. If the tenant deposits money (maybe even a partial payment) this could cause a legal issue if you have already filed an eviction. Also, what if you have not started an evictions and they mail in a partial payment? I know these issues have happened. If you receive checks instead of having them direct deposit you have control. 

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  • Roger Vi
    Investor · Everett, WA · Member since 2014 · 180 posts · 76 votes
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    I put one of those lockable mail boxes on site so tenants can drop off rent and any other documents for me. This works great since I live close but I am working on getting electronic payments set up for the future. I found many options but the hardest part is getting the tenants to trust new payment options. It seems a lot of older folks don't trust electronic payment yet and would much prefer personal or cashier's check.

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  • Tony Gonzalez
    Renter · Jersey City, NJ · Member since 2014 · 38 posts · 13 votes
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    Look, Ima be honest...

    I am a renter, and as such, I have a landlord who drives to my place, about an hour or so, the first weekend of every month to collect his checks. He likes to blabber and chit chat and dawdle (he's a great guy, an OK landlord, and a nice chap to be around) but I kinda don't like having to be home waiting for him to pick up his rent on a Saturday when I could be out with the family.

    I've suggested direct deposit to him (we never been late with a payment. Ever.) but he says he prefers this way.

    As someone in the tech field, I'd advise you go with a) requiring certified checks mailed to you, or b) direct deposits. Everyone wins with the last one. It's convenient to both you and the tenant, and trackable...so if someone claims to not have the rent, you can always consult with the banks on either side and ask "Who dropped the ball?"

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  • Ken P.
    Rental Property Investor · Northville, MI · Member since 2013 · 263 posts · 183 votes
    11y

    We have 21 properties that we self-manage, and we have a mix of rent collection methods, including mail to a PO box, tenant direct deposit, and auto debiting from checking accounts.  

    For older tenants that we inherited, many of whom are actually older people and aren't comfortable with direct debit, we gave the option of depositing to a bank account or sending rent by mail.  Many of them chose to deposit to the bank account, because we have a zero tolerance policy for late rent, but two still mail money orders to the PO box.

    All new tenants are required to sign up for ACH automatic payment.  We use the Forte payment system that is tied in with Rentecdirect.com's tenant management system, which is $20/mo + $0.75 per transaction, so our per-tenant cost is dropping as more and more of our tenants use ACH, and will eventually reach $1.75/each.

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  • Andrew Bosworth
    Rental Property Investor · Harrisburg, PA · Member since 2013 · 161 posts · 62 votes
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    There are a lot of great online payment options, such as www.rentalutions.com.

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
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    I just this month added an incentive for tenants to pay electronically $10 rent discount. I am going to start out with it next turnover.

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  • Luis Rosario
    Philadelphia, PA · Member since 2015 · 30 posts · 15 votes
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    Thanks for all the valuable insight everyone! I have been a landlord for a little over a year, and some of these digital rental collection systems seem like they can really simplify documentation! 

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  • Aly W.
    Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
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    www.eRentpayment.com all the way! They have a ton of options, great customer service, and it's only $3 per transaction, which I pay - although I could have the tenants pay it. Great, reliable service isn't free or cheap, and this is worth it.

    I also have a few tenants that deposit their rent directly into my business account every month. It's a good mix.

    1Reply
  • Kelly N.
    Investor · SE, MI · Member since 2013 · 1k+ posts · 461 votes
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    I accept check or money orders mailed to my PO Box, but prefer Intuit Payment Network.  I can e mail invoices through them and it only charges me $.50 per transaction.  You can accept credit cards too, though I choose not to use that option.

    Kelly

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  • Rob Beland
    Investor · Leominster, MA · Member since 2011 · 1k+ posts · 589 votes
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    I think direct deposits to bank accounts by tenants is too new and I wonder if it has been tested in housing court. I'm in MA and it may be different in other states but as @John Thedfordmentioned, what happens when you have started the eviction process? If somebody electronically deposits rent into your account are you then accepting it and therefore starting a new tenancy? Also, if you have multiple tenants and you have a few that all pay the same monthly rent, how do you know who deposited the rent into your account? I'm talking about people walking into a bank branch and making a deposit as opposed to some electronic rent payment system. 

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  • Aly W.
    Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
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    @Rob Beland, the eviction and partial payment process is state specific, and yes, landlords should be aware of it.

    As for the direct deposit into my bank account - you are correct, and I only allow tenants who have a unique rent amount to do that.

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  • Rob Beland
    Investor · Leominster, MA · Member since 2011 · 1k+ posts · 589 votes
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    Yes @Aly W. I have been looking into the direct deposit method and after speaking with my bank it was determined that there is no way to know who made the deposit unless they deposit a check or money order. Cash deposits can not be traced. For the time being I will pass on direct deposits and try and get people to mail them in or I will continue to drive around picking them up for those tenants I don't mind stopping in to see. There is really no one size fits all solution for this problem unfortunately...

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  • Aly W.
    Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
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    @Rob Beland - correct about not knowing who made the deposit if it's the same as another one. Some landlords make similar rents a little different like, $1000 for one tenant and $999 or $1001 for another.

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  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
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    There is an issue with (going to a bank branch) direct deposit in that you can't track it properly, and tenants can make partial payments that you may or may not wish to accept.  And if two tenants make partial payments, how do you know who is who?

    I have a locked rent mailbox and I pick up the rent monthly, but that is my choice, because it forces me to go to the property to check condition.  I have three tenants who use the billpay option in their bank software so that I get paper checks in the mail generated by the bank.  Another tenant requested to direct deposit, however, every time he does it, I get an email saying that I will be receiving a deposit from Joe Tenant.  

    I have thought about setting up an electronic payment system, since I'm all about electronic whenever possible, but I'm afraid I'd skip the visit to the property.   All my properties are within a 2 mile radius, so it's easy.  

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
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    Originally posted by @Tony Gonzalez:

    ...

    I am a renter, and as such, I have a landlord who drives to my place, about an hour or so, the first weekend of every month to collect his checks. He likes to blabber and chit chat and dawdle (he's a great guy, an OK landlord, and a nice chap to be around) ...

    but he says he prefers this way.

    ...

    He probably prefers this because it gives him an opportunity to do a quick inspection of the place - to see if any blatant damage occurred, and to see if grass is being cut, and to see if he needs to do any maintenance or repairs. And he may have been doing it that way for so long that he considers it a good habit that's hard to break :)

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  • Pete T.
    Real estate investor · Las Vegas · Member since 2013 · 798 posts · 171 votes
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    If you are smaller scale, you can also have multiple accounts for each unit that the tenants can make deposits into. It can also make it easier for tracking what is paid in and paid out.

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  • David H.
    Real Estate Investor · Harvey, LA · Member since 2015 · 119 posts · 80 votes
    11y
    Originally posted by @Aly W.:

    www.eRentpayment.com all the way! They have a ton of options, great customer service, and it's only $3 per transaction, which I pay - although I could have the tenants pay it. Great, reliable service isn't free or cheap, and this is worth it.

    I also have a few tenants that deposit their rent directly into my business account every month. It's a good mix.

     Aly, How do you know who made a payment if two tenants have the same rent?

    0Reply
  • Shawn Thom
    Investor · McKinney, TX · Member since 2012 · 588 posts · 224 votes
    11y
    David Hoang you get an email saying it went through or the process is starting with the address, name, time and transaction Id. There is no question whose it is. I use it and love it. There customer service is so fast it's baffling.
    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    11y

    I had a conversation with Eric from NoNonsenseLandlord.com a while back. He said he makes it as easy as possible for his renters to pay him. He has a lockbox onsite, the renter can mail it to him, and he even takes Paypal. He sends a text message reminder before rent is due. He is usually 100% current on rent. He has a great system. He also writes for BP.

    [email protected]Podcast Guest on Show #261
    BiggerPockets
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  • Aly W.
    Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @David H.:
    Originally posted by @Aly W.:

    www.eRentpayment.com all the way! They have a ton of options, great customer service, and it's only $3 per transaction, which I pay - although I could have the tenants pay it. Great, reliable service isn't free or cheap, and this is worth it.

    I also have a few tenants that deposit their rent directly into my business account every month. It's a good mix.

     Aly, How do you know who made a payment if two tenants have the same rent?

    David, www.erentpayment.com sends me an email when a tenant has paid the rent, so I always know which one is which. As for depositing directly into my business account, if 2 tenants have the same rent, only one can use that method. The other has to use erentpayment.

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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    11y

    Tenants drop their checks off in the mailbox at my home. Maybe its because I have good tenants in class A properties, but I don't have a problem with them knowing where I live. 

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  • Kari Piecuch
    Rental Property Investor · Mobile, AL · Member since 2013 · 14 posts · 3 votes
    11y
    Originally posted by @Aaron Montague:

    I recommend a service like Dwolla.com.  25 cents and it pulls directly from their bank account into yours.  Nothing in between except the internet.

     I use Cozy.co (not .com) it is FREE for both tenants and landlords. Cozy makes money by running credit reports. I've been using it 3 months now and its GREAT!

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