Rent Collection

Rent Collection: Everything You Need to Know

December 23, 2020

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What You Need To Know About Rent Collection

Rent collection is fundamental to the operation of all rental businesses. Landlords and property managers can’t afford to have inefficient or costly collection processes. As the internet has infiltrated all aspects of our lives, we’ve seen that online payments are the best option for rent collection. 

We discuss below the many benefits of online payments, but it’s not difficult to think of a few. Because everything is handled digitally, online rent payments offer automated records, reduce late payments, enable enforceable late fees, and more. If you want to modernize your rental business, allowing your tenants to pay rent online is the way to do it. 

There are a lot of considerations when it comes to online payments. In this article we go over everything, including the pros and cons, offline alternatives, legal issues, and more. And if you’d like to learn more about any of the topics discussed here, we provide links to articles that go even more in-depth. By the end, there should be no question about whether or not you should switch to online payments. 

Advantages of Online Payments 

There’s a reason that more and more landlords are switching to online rent payments — in fact, there are many. Landlords are busy and have lots of responsibilities to juggle. Many online rent collection methods offer landlord-specific services aimed at making your job easier. Let’s go over a few. 

Recurring Payments 

Most methods of online rent collection make it possible for tenants to set up recurring payments. They’re able to customize payment due dates and amounts, so they know their payments will be made on time each month. 

Recurring payments don’t just benefit tenants, though. When tenants are able to automate their payments, landlords don’t have to chase them down to make sure they get paid on time. 

Fewer Late Payments 

Offering tenants the opportunity to make their rent payments online reduces late payments. We’ve just discussed one factor of online payments that results in fewer late payments: recurring payments. When tenants don’t have to remember to pay rent each month, landlords don’t have to worry about them forgetting to make their payments. 

What’s more, online payments can be made at any time and from anywhere. It can be a hassle for busy tenants to drop off payments at times that work for them and their landlords. When they can make their payments from home, there’s no excuse for late payments just because they didn’t have the time to deliver them. 

Flexible Payment Options 

Most online payment methods allow tenants to pay rent with debit cards, credit cards, or ACH payments, which pull funds directly from their bank accounts. Because tenants are able to pay through their preferred method, online rent collection is popular among renters. 

Offline payments are often inflexible for tenants and landlords because both parties have to be available for the delivery of payments. Because tenants can make their payments from home with online collection, there’s no need to coordinate schedules. Everyone can fulfill their responsibilities at times that work best for them. 

Enforceable Late Fees 

It can be difficult for landlords to hold their ground when it comes to late fees. It’s natural to want to be lenient with tenants when they’re late on payments if they’re experiencing difficult circumstances. Regardless, your real estate business can’t afford tenants who don’t pay. Most online rent collection methods allow landlords to set enforceable late fees that are customized to match their lease agreements. This way, you don’t have to have uncomfortable conversations and listen to excuses. 

Automated Records 

Doing your bookkeeping manually takes too much time and leaves too much room for human error. With online payments, all transactions are automatically recorded and documented. This way, you don’t have to worry about writing receipts and filling out your books. All the hard work is done for you. 

Added Transparency 

It’s important for landlords to keep detailed documentation of each of their transactions in case of evictions or other legal inquiries. Online payments enhance transparency for landlords for this exact reason. Here are four ways that online payments offer landlords added transparency: 

  • Online payment tools provide a timestamp. 
  • Online payment tools track IP addresses and login credentials. 
  • With property management software, both parties get receipts, invoices, and notifications. 
  • Online payment tools provide a history of payments. 
  • Bonus: Automation reduces error. 

Disadvantages of Online Payments 

Many of the perceived disadvantages of online payments turn out to be myths. Worries about cost, security, technology, being able to accept offline payments, and more are all misplaced. To learn more about myths of collecting rent online, check out our related article about online payment myths. Let’s take a look at a couple possible considerations. 

Online Payment Fraud 

While online payment fraud is rare, but it can happen. It looks different depending on the payment method. Fraud with ACH payments can come in the form of hackers, deposit schemes, and chargebacks. To protect yourself against ACH fraud, it is important to be aware of ACH return codes and what they mean. 

The main way that fraud is seen with credit cards is through chargebacks, but we’ll discuss that in our next point. For P2P platforms like PayPal and Venmo, fraud and other legal issues are more commonly seen due to the setup of the payment apps. For this reason, landlords are usually advised against using P2P platforms for online rent collection. 

Credit Card Chargeback 

Allowing tenants to pay rent with credit cards has many benefits for landlords. Unfortunately, credit card payments are not always guaranteed. Under the Fair Credit Billing Act (FCBA), consumers have the right to dispute charges that they believe have been made in error on their credit card. This type of dispute is known as a chargeback. Thankfully, there are some useful ways that landlords can combat credit card chargebacks

  • Keep detailed transaction records. 
  • Be prepared with the proper documents. 
  • Be clear about fees. 
  • Screen tenants thoroughly. 
  • Remain vigilant for signs of potential chargebacks. 
  • Include online payment authorization in your lease. 
  • Require signatures. 

Why Cash and Checks are not Ideal 

It’s pretty obvious that online payments offer landlords many considerable benefits, but it’s important to understand why the alternatives don’t measure up. Cash and personal checks are the traditional forms of payment for rent. They’re familiar and easily accessible for most tenants. Just because they’re common, however, doesn’t mean they’re your best option. Let’s take a look at why. 

Cash Payments for Rent 

Cash is traditionally the default form of payment for all transactions, including rent payments. Paper money and coins are legal tender in the US, meaning that courts must acknowledge them as satisfactory payments for monetary debts. This does not mean, however, that landlords should or must accept cash for rent. All states have different laws regarding the requirements placed on landlords for accepting cash, so be sure to look into your local legislation. There are, however, many risks related to cash for rent payments

Accounting nightmares. Because cash payments are done entirely offline, all details of cash transactions must be documented manually. Aside from the additional time this takes, it also leaves room for human error and forgetfulness. Additionally, many states require that landlords provide tenants with receipts for offline rent payments, which takes even more time and manpower. 

Security risks. While fraud is less of a concern with cash payments, although the risk is not entirely eliminated, cash is more likely to be stolen or misplaced than other forms of payment. This is especially a concern for landlords managing a greater number of tenants. Whether you collect cash manually and store it in a safe place, or you use a dropbox for collection, cash is always a security risk until it’s deposited at the bank. 

Accountability problems. It is easy for tenants to skimp a little on cash payments and then deny it later when confronted, especially if you use a dropbox to collect payments. The only way to be sure that cash payments are always correct and to maintain accountability is to count each payment in front of the tenant as soon as they deliver their rent each month. This is tedious and requires that someone from your team be available for each payment delivery. 

Efficiency considerations. Because accepting cash payments means that you have to physically be present for each payment, count each payment, manually document each payment, it is an extreme drain on time. And if you assign rent collection to one of your team members, it’s also a drain on money and resources. 

Paper Checks for Rent 

Personal paper checks are a common form of payment for rent. Many older tenants feel comfortable writing checks, but as more Millennials and Gen Z renters enter the market, checks are becoming outdated. Aside from shifts in market popularity, there are many real costs associated with accepting checks for rent payments. It is often perceived that paper checks are more cost effective than online payments, but this notion is incorrect. 

Cost of going to the bank. One major cost comes with the physical nature of checks. Many financial institutions make it possible for checks to be deposited online, but if you’re managing more than a few tenants, this becomes more of a hassle than a convenience. Depending on how often you collect rent and how far you are from your bank, depositing checks adds up to be a considerable cost. 

Cost of waiting. Because rent payments are likely the greatest source of revenue for your rental business, it is important for payments to process as quickly as possible. With paper checks, there are many factors that contribute to longer processing times. If checks are mailed in, you have to wait 1-2 days for them to reach you. After that, you have to wait until you have the time to deposit the checks at the bank. Then the bank has to cash the checks and process the transactions. After all that, you will finally have access to your funds. 

Cost of paper checks. There are many hidden components that hike up the price of checks. All in all, many researchers estimate that paper checks cost about $3 per transaction. Others estimate that checks cost up to $10 per transaction. Regardless, checks are often more demanding of landlords’ time, money, and resources than online payments. 

How to Accept Online Payments 

It’s now evident that landlords should be offering online payments as an option for tenants. There’s one big question remaining: what’s the best way to accept rent payments online? As ecommerce continues to grow, the options available to landlords expands as well. It can be overwhelming to begin accepting online payments. Below we provide a brief guide on how to collect rent online

Types of Online Payments 

The first thing to consider is the type of online payments that you might want to accept. The most common forms of online payments are ACH payments and debit/credit cards. Most methods of online rent collection allow for both types of payment, but it’s important to understand all of your available options. 

ACH Payments 

An ACH payment is an automated transfer of funds facilitated by the Automated Clearing House, which is a regulated technology representing the partnership between banks and financial institutions across America. Debits and credits are collected in large batches and transferred between bank accounts simultaneously. Otherwise known as eChecks, ACH payments are an efficient and cost-effective way to transfer money. 

In order to accept ACH rent payments, your tenant must authorize the transaction. This requires their name, bank name, account number, routing number, and the transfer amount. Tenants’ bank accounts must then be verified before the funds can be transferred from their account to yours, which is done through the ACH Network. 

Pros of ACH Payments: 

  • Incredibly inexpensive 
  • Easily automated 
  • Highly secure 

Cons of ACH Payments: 

  • Longer transfer times 
  • Difficult to access 
  • Can bounce 

Credit Cards 

Providing tenants the ability to pay rent with a credit card can be good for your rental business. Credit — or debit cards — are a popular form of rent payment among tenants for a few reasons. Most people already have a card in their name, they’re comfortable paying with their cards, and cards are quick and easy to use. 

The traditional way to collect card payments directly from your tenants is to set up merchant services — which can be done through your bank. This method grants you access to a merchant account that is between you and the bank that sponsors the credit card, enabling you to securely accept credit card payments. The payments occur through your account, and then the merchant services provider processes the payment and transfers the money to your business banking account. 

Pros of Credit Cards: 

  • Exceptionally convenient 
  • Quick processing 
  • Attractive to prospective tenants 

Cons of Credit Cards: 

  • Extensive fees 
  • Costly chargebacks 


Cryptocurrency hasn’t yet infiltrated the property management business in a major way, but it has the potential to become common-place in the future. As a result, it’s important to understand how it works. Cryptocurrency (crypto, for short) is a virtual, internet-based currency. Cryptography secures crypto, making it nearly impossible to be counterfeit or double-spent. It exists entirely online, so there are no physical coins, cards, or paper. People can exchange crypto for traditional currency and vice versa. 

Some property managers have already adopted Bitcoin (the most well-known of cryptos) as a form of rent payment. This is possible when the tenant uses Bitcoin, and the property management software converts the currency to dollars using a digital crypto broker. The landlord then gets the rent payment in dollars. 

Pros of Crypto: 

  • Demonstrates innovation 
  • Fastest and cheapest option 

Cons of Crypto: 

  • Typically untrusted 
  • Lacks demand 
  • Converting currency is slow and expensive 

Methods of Collecting Rent Online 

Now that we’ve established the common forms of online payments, let’s discuss rent collection methods. Landlords have lots of options when it comes to the platforms and providers that facilitate online rent collection. In order to choose the best collection method for your business, we’ll cover the major considerations for each method. 

Setting Up with Your Bank 

Your bank can provide more than just personal and business accounts. They also offer tools and services that enable you to accept rent payments through ACH and credit card transactions. You simply contact a representative from your bank, ask them about the services they provide, and let them guide you through the process of setting up the accounts and services you need. 

Landlords who are accepting online rent payments for the first time often feel most comfortable doing so through their bank because it is a trusted and familiar institution. Nevertheless, there are some downsides to working exclusively with your bank to collect rent

Pros of Setting up with your Bank: 

  • Consolidated accounts 
  • Increased security 
  • Automated records 

Cons of Setting up with your Bank: 

  • Costly services 
  • Insubstantial records 
  • Lack of control 

Online Bill Pay 

Online bill pay is a service that enables users to securely pay their bills online. The service pulls funds directly from their bank accounts in order to complete the payments. Online bill pay allows users to consolidate all of their online accounts used for bill payment to one location — their bank. 

Landlords can instruct their tenants to pay rent through online bill pay. You can arrange for them to send you electronic payments (if you’re willing to give them your account information), or you can arrange for them to send you a check from their bank. 

Most banks provide online bill pay as a free service once an account is set up, so the majority of your tenants already have access to it. In order for your tenants to enable online bill pay, they must: 

  • Gather their bills (including account numbers and the addresses where they send payments), 
  • Enter each biller’s information into their bank’s online bill pay platform, 
  • Choose when to send the payment, 
  • Select whether the payment is a recurring or one-time transaction, 
  • And set reminders to track when each bill is due. 

Pros of Online Bill Pay: 

  • Reduces late payments 
  • Accommodates landlords’ preferences 
  • Is widely available 

Cons of Online Bill Pay: 

  • Is easily forgotten  
  • Limits your control 
  • Requires hand–holding 

PayPal, Venmo and Other P2P Platforms 

P2P (peer-to-peer) platforms are quick and simple to use due to their intuitive interfaces. They enable friends to electronically transfer money from one account to the other when they don’t have cash. You’ve most likely heard of either PayPal or Venmo, which are two of the most popular P2P platforms at the moment. 

Some landlords have begun allowing tenants to pay rent with venmo and other P2P apps. In order to do this, landlords must set up business accounts in order to comply with the platforms’ regulations. Then tenants and landlords must connect their bank accounts (or cards, depending on the platform), and once the proper accounts are created, they can send and receive rent payments through these platforms. 

It is not recommended that property managers collect rent through P2P platforms due to the serious legal concerns and hefty fees. 

Pros of P2P Platforms 

  • Extremely convenient 
  • Trendy 

Cons of P2P Platforms: 

  • Legal concerns 
  • Costly fees 
  • Loss of control 

Property Management Software 

Property management software is designed specifically for landlords. Management platforms tend to provide all of the collection features that a landlord might want or need in order to maintain an effective and efficient rent collection process. Because the software is created with landlords in mind, you’re able to customize all of the payment requirements to match the terms of your lease agreements. 

Landlords often prefer property management software over other payment methods because it offers additional landlord-specific services such as online lease signing, tenant screening, maintenance requests, tenant management, proration and more. 

Pros of Property Management Software: 

  • Cost-effective 
  • Landlord-specific services 
  • Automatic detailed reports 
  • Advanced support 
  • Quicker transactions 

Cons of Property Management Software: 

  • Requires research to find a good fit 
  • Can be time consuming to set up 

Online Payments for Commercial Properties 

Commercial property management companies often oversee larger operations than residential landlords. As such, it can seem that tips and tricks for residential properties don’t apply to commercial property managers. With online payments, however, this is not the case. In fact, it may be more advantageous for commercial property managers to accept rent payments online. The more rent payments a property manager receives, the more documentation and manpower is necessary. Because online rent collection does much of the work for you, commercial property managers will benefit from switching to online payments. 

Online Payments and your Mobile Phone 

We truly are living in the age of smartphones. Research shows that 81% of American adults own a smartphone, and 96% of those aged 18-29. Smartphones facilitate easier communication, allow us to surf the web from anywhere, and make online payments simpler than ever. There’s no reason why landlords can’t also use their mobile phones for rent collection. Here are a few ways mobile friendly property management software can simplify rental collection for landlords and tenants. 

  • Track your business from anywhere. 
  • Send and receive notifications from your phone. 
  • Accept rent right from your pocket. 
  • Automate messages, records, and payments. 

Legal Issues Concerning Autopay 

Throughout this article, we’ve discussed the benefits of autopay more than once. The advantages of tenants being able to literally set it and forget it with their rent payments are undeniable. Nevertheless, it’s important for landlords to be aware of the legal issues concerning automatic rent collection. Below are some of the major legal issues to consider. 

Providing tenants with multiple rent payment options. Many states require that landlords offer tenants multiple rent payment options, so it’s not always possible for landlords to require autopay in their leases. That being said, there are currently no laws requiring property managers to accept cash for rent. Some judges may expect that landlords accept cash if a tenant has absolutely no other available options, but that’s not a common scenario. 

Issues pertaining to eviction. Accepting even a partial payment can nullify a landlord’s right to eviction. If you aren’t being vigilant, you can unknowingly accept an automated payment from a tenant who you are in the process of evicting. If you choose to allow autopay, you must learn how to reject and reverse payments that you don’t want to accept. 

Concerns with data security. If you decide to accept payments through autopay yourself (instead of doing it through software), you’ll be responsible for managing your tenants’ private data carefully. NACHA — The Electronic Payments Association, has strict rules regarding security for both the business accepting autopay and the payment processor that the business has chosen. As such, it is necessary for landlords to learn and understand these rules before choosing to accept payments through autopay. 

Switch to Online Payments 

As a landlord and property manager, rent collection is of the utmost importance. Whether your rental business is your full-time job or just a side hustle, rent payments are the fundamental source of revenue for your business. As such, you must collect rent as efficiently and effectively as possible. 

It’s also true that landlords have many responsibilities to juggle. To simplify and streamline your rent collection process, you must switch to online payments. You and your tenants will be thankful that you did. 

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2 thoughts on “Rent Collection: Everything You Need to Know

  1. Can the owner/landlord configure his/her preferred payment processor for online payments?

    1. Hey Alexis,

      When you use Innago, you use our payment processor, so the short answer is no. You can of course record payments in Innago that happen outside of Innago though!

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