URGENT: I need payment collection help!

[Stanci March]

BP family, 

I'm looking for some help. I just closed on my first deal; an 8-unit mixed-use and I need to know the quickest way to set up online payment methods for my tenants. 

I don't have a business account set up with my bank yet but am planning to have that wrapped up this week (actually tried to set up on the morning of closing but did not realize how involved it was). The Seller messaged the tenants yesterday (1-day after closing) letting them know of the ownership change. She informed me this morning that setting up payment services can take 3-4 weeks and that tenants are already asking for that information. If true, I'm already behind on that for the first round of rent payments (Feb. 1). 

I am thinking of calling each tenant this evening or tomorrow to introduce myself and explain that the business entity specific to their building was just recently formed, so for the first month they would need to pay in some traditional fashion (by mail, or giving a check to my PM). Another idea I had was to set up a PayPal account and have that routed to my personal checking account for now, and then change it to have future payments routed to the business account once that's set up. I've never received PayPal payments before so not sure if it is possible to change where payments are routed so easily. Does anyone know? Any other thoughts or ideas?

Much gratitude in advance for any suggestions. 

Best, 

Stanci

[Percy N.]

@Stanci March, why did you wait until closing to set this up? 

Is the property in your name or a company's name?

My suggestion is to get a check or better yet a cashiers check from the tenants for the first month and then setup an online payment from cozy.co or other similar providers.

How are you holding the tenant's deposit? Does your state require an escrow account?

[Dana Dunford]

@Stanci March - Congrats on your first 8-unit. A couple of comments:

1. PayPal -- I don't recommend PayPal for 2 reasons. The first is that rent is considered part of the "services" in the Terms & Conditions. If a renter calls and complains that they want the money back, eBay has a money back guaranteed and can claw back the funds. The second is that PayPal allows tenants to pay partial. In many states, accepting partial rent means that the tenant cannot be evicted. I literally just had a landlord complain to me about this the other day -- the day before the court date, the tenant paid $10 in her PayPal account. By accepting that money, the eviction case was thrown out and now she has a non-paying tenant.
2. Personal vs. Business -- You will want to separate these expenses as quickly as possible.
3. Calling each tenant to introduce yourself -- Great idea and good communication is a key in property management

[Lois Ginter]

PopMoney can be set up for onetime and reoccurring payments.  It direct debits from the tenants' accounts and you control what account to post it to.  However, it takes a few days to clear.  

[Stanci March]

@Dana Dunford, that's interesting RE: PayPal's refund policy, thanks for sharing. I'm not sure how a tenant could get away with that trick for longer than a month though, unless I'm missing something. I would be certain to cancel their PayPal option after the first time their tried this, so no more partial payment options after that. I also will have the added protection of renting primarily to military officers attending the military college. Something like this would not go over well with their reporting officers. Of course I may not always have properties with class-A tenants so good info to have. 

@Lois Ginter, thanks for the tip. How do your tenants like it? Any particular complaints from any of them?   

[Scott Weaner]

I use eRentpayment and find that it works well. They charge $3/transaction which I cover.

[Dana Dunford]

@Stanci March - You are correct that they can only get by with it one time, and typically it happens on the last month's rent.

[Bill Hamilton]

Honestly, I am not sure why it would take so long to set up a business account. I have a few of them with a major national bank and it took less than 10 minutes to do so. They also set up a "deposit only" account as a subsidiary account which also took only another 5-10 minutes. I don't know much about some of the epayment accounts but I did set up the ability to accept credit cards through Square.com and it was very simple and fast. But you do lose a percentage of the payments to processing fees so that might not be the right route to go.

[Bryan O.]

@Stanci March if setting up an account is difficult, you're in for a rough ride. It should take 3 things: Articles of Organization/Incorporation, OA, and EIN. 10 minutes if the person that does them isn't asleep at the wheel.

You can use Cozy.co. Each end has to set up their profile. If you change your bank the next month it's okay. But seriously, just set up your account first so that you don't look like the rookie owner. First impressions count, so you want them to be professional and organized.

[William Reid]

Just take cash or money order for the first month then migrate them over to the new payment system.

[Stanci March]

@Bryan O., not difficult at all. Super easy actually. I just didn't have all of the information on me my first trip to the bank. Slight complicating factor was wanting my wife to have ability to control business funds and transfer from personal accounts. Since she is not listed on the AoO with the State they wouldn't allow her those privileges. Found a nice work around by using her for the EIN so all is well. I have no idea what an "OA" is but I would be curious to know if you'd like to share. 

I've heard a few people mention Cozy.co so there must be some merit there, thanks for the tip. Pro and organized...also sound and advice. 

Looks like I am going with the Paypal option for most of the tenants since that is what they are used to. Once client mails checks which is fine, and another still wants to set up ACH, also fine. I may make some change after the next big turnover in the spring but keeping things as seamless as possible for existing tenants for now. 

Thanks to everybody who weighed in. I am in for quite a learning experience I can tell. Excited to develop my landlording skills, put systems in place, and go get some more mutis! Good luck everybody. 

Best, 

Stanci

[Julie Thevenow]

cozy all the way!