Rent Payment Options

[Taylor Comer]

Hello again!

As a new landlord, I am trying to figure out the "best" option for my tenants to pay rent each month. I have looked around BP and read some articles and have a few ideas for a system I would actually use..

1. Tenant goes directly to the bank to pay (I saw this on the thread from www.biggerpockets.com/show37 with @Aaron Mazzrillo that said he sets up a separate account with no money other than for rent payments)

2. Tenant sets up and uses Chase Quick Pay to pay from anywhere

3. Set up a business account with Wells Fargo or Chase and give each tenant a "deposit only card" so they can pay at any branch location

4. Tenant mails payment to P.O. Box (although this isn't my first choice since in CA the tenants rent payment is considered "paid" when it is mailed, not when received) 

I may be missing a few, but my goal is to streamline this process and keep my time for myself!

Please chime in with any suggestions on the above or anything I have not mentioned.

[Kyle J.]

Hey Taylor....there are a lot of different options/services when it comes to rent collection, but it is usually a good idea to first consider the type/sophistication of your particular tenant(s). For instance, if you're renting to upper middle class tenants in 'A' class neighborhoods, you will likely encounter a different preference for how the rent is paid than if you rent to lower class tenants in a 'D' class neighborhood. 

To give you an example, a fellow landlord I know has a half million dollar home that he rents in a very nice area to an executive-type renter. In this scenario, rent is automatically transferred from the tenant's bank account to the landlord's bank account on the 1st of every month via ACH transfer. This works very well for both of them since neither have to do anything - it's all automated. 

On the other hand, I cater to slightly lower income/class tenants who don't always have money in their account on the 1st. Some don't even have bank accounts OR Internet. Consequently, this limits the options for how rent can be paid. 

The options I offer are similar to the ones you mentioned. They can mail me a check or money order to my PO Box, or go to any Chase bank and deposit the rent directly into my account. I prefer the second option since there's no concern over the payment getting lost in the mail and it saves me a trip to the bank to make the deposit if they happened to mail me a money order. My tenants prefer the second option too, and all except one choose to deposit their rent directly at the bank.

One thing to note, Chase discontinued their deposit-only ATM's. (More about that here: http://www.biggerpockets.com/forums/52/topics/116033-chase-bank-discontines-the-deposit-only-atm-card-system)  Wells Fargo still offers them though I believe. 

I happen to use Chase and just give my tenants the account number for the account where I want their rent payments deposited. It's not a big deal, but they do have to go into a branch as opposed to just finding the closest ATM. 

Some landlords are worried about giving out their account numbers to their tenants, but I've never had any problems and the info you're giving them isn't something that super secret. It's no more than the info that can be obtained off every check you write. 

Anyway, you've got several options and it sounds like you're on the right track. Let me know if you have any other questions. Happy to help.