Perfecting Your Rent Collection Process

As a landlord, rent collection is one of the most integral responsibilities you hold. Because the goal of renting to tenants is to be paid for the use of the unit, it’s vital to have an efficient collection process.  

This has become easier as time has passed and technology has improved, and we’re here with the best tips to make rent collection a breeze. That’s why we designed a Rent Collection eBook with all the necessary steps and tools to help you learn all the ins and outs of rent collection, including how to collect online rent payments. 

Before you begin reading, though, it’s important to first have a basic understanding of how to collect rent from tenants. Let’s take a look at some of the baseline information you’ll need to begin rent collection in your business. 

What is Rent Collection? 

Put simply, rent collection is the act of collecting rent and other fees from tenants on a periodic schedule. Monthly, this may include rent, pet rent, parking, utilities, and any other recurring fees you charge. The sum of these payments is collected on a set date, such as the first of the month, but can be on a different schedule as well, such as every two weeks. 

The money made through landlord rent collection is often used to pay other expenses such as mortgage payments or business expenses like repairs or renovations. 

Cash Flow 

An important aspect of rent collection is understanding your monthly cash flow. Cash flow is equal to your income minus your expenses, leaving you with a profit (positive) or loss (negative) for the month or year. Calculating your cash flow can provide insight into whether the rent you collect adequately covers the other expenses your business may encounter, allowing you to cut back on costs or increase the price of rent. 

Methods of Rent Collection 

There are many ways to collect rent and at the end of the day, you can collect rent payments with whatever method works best for you and your business’ needs. However, there are options both offline and online you should consider before making a decision. 

Offline 

There are two main offline payment types often used to pay rent: cash and checks. 

Some people prefer to use cash because it’s a form of payment everyone is comfortable and familiar with. It’s also easy to check for counterfeit payments and is easy to deliver. However, cash is also a riskier way to collect rent, vulnerable to theft if not kept in a safe place and much more difficult to track if a dispute arises.   

Checks are another common form of physical payments that are used to pay rent or other fees. They’re widely accepted and used for payments and are easy to handle because they’re a single slip of paper as opposed to a stack of bills like cash. They’re also easy to cash online into a landlord’s bank account and to track from account to account. They do take several business days to transfer, though, and checks bring the risk of insufficient funds that extend the rent collection process further. It’s also impossible to automate offline payments or set up recurring payments. 

Online 

Online rent collection has been rising in popularity as technology has advanced to allow ease with online payments. In the modern world, electronic rent collection is becoming more and more common, and the list of options for online rent payments is growing. 

Credit and debit are common payment forms since most people already have a credit or debit card in their name and understand how to use them. They also offer a high level of convenience for paying rent since the funds are quickly accessible and are safer than carrying cash. They usually come with higher costs for things like interest fees, processing fees, and merchant services. It’s also more expensive to set up credit and debit payments because it often involves extra services through your bank. 

EFT (Electronic Funds Transfer) payments are also popular because they don’t involve you or bank employees manually transferring funds. They can move these funds without the need for physical money or paperwork and the automation makes it easy for tenants to automate their rent payments. They move quickly and can be easily tracked, but keep in mind that EFT payments can still bounce if a tenant does not have the necessary funds in their bank account. 

Using Property Management Software to Collect Rent 

One of the easiest methods of rent collection online is to use property management software (like Innago). With software built specifically for landlords and tenants, you can easily charge rent and any other fees at the click of a button and view both past and upcoming payments for each of your individual renters. For tenants, they can pay rent online and easily automate the process. This means you can view records of payments from tenants for pets, utilities, or even one-time payments like security deposits.  

With quick and easy ways to pay with property management software, you’ll likely have fewer late payments from your tenants, but if a tenant runs behind or forgets to pay, some software allows you to automate late fees to be charged to the renter’s account. These features help to keep your business running on schedule and will mitigate the stress of rent payments for all parties. 

Conclusion 

Rent collection is one of the most important aspects of running a rental business. Ensuring that the process is simple and accessible for both you and your tenants allows you to breathe easier knowing that payments will be hassle-free every step of the way. Learning to collect rent online is a massive leap in automating your rental payments, interactions with your bank or credit union, and daily record-keeping. 

For more insight on the specific steps and tools you should utilize when collecting rent from tenants, download Innago’s Rent Collection eBook above.