Landlord on his laptop taking a look at online payments made by tenants.

How to collect rent from tenants

There are many ways to collect rent from your tenants. It's important to consider the one that best suits your needs.

Rent collection can make up a significant portion of a landlord’s annual income. With such high stakes, it's no surprise that the non-payment of rent by tenants can be very concerning to a landlord. What many may not realize, however, is how closely tied the method of rent collection is to the likelihood of receiving it on time.

Today, there are many ways to collect rent from your tenants. But it's important for you to consider the one that best suits your needs as a busy landlord who's running a small business. Think about reliability, security, convenience and transparency, which can help limit issues with late payments. These qualities will help decrease the likelihood of another rental story about late rent payments arising.

Payment methods to consider avoiding

Unfortunate rental stories typically start with a landlord who allowed their tenants to pay rent offline. This is why The Balance Small Business suggests that landlords avoid accepting the following types of payments:

  • Cash — It may be difficult to keep a clear record of cash payments by the recipient. When you receive rent in cash (commonly in an envelope), there's a risk of the amount not being enough.
  • Check  While checks may seem like the next best option for collecting rent from tenants, they may be worse than cash. With cash, there is certainly a risk of not getting the full amount, but there's a good chance you're at least receiving some amount. Checks, on the other hand, have no immediate indication of whether funds are available.
  • Bank-to-Bank Transfers — While it may seem convenient to allow rent to be deposited directly to your account from your tenant's bank, it can be risky because it requires you to share your bank account and routing number with them. No matter how much you may trust your tenants, the risk of your sensitive information being mishandled might not be worth the convenience of bank-to-bank transfers.

The benefits of online rent collection

Online payment systems have been replacing traditional payment methods in recent times. With today's online payment solutions becoming more secure and reliable, it’s understandable that landlords and tenants might transition to online rent payments, especially with the range of benefits for both parties.

Benefits for tenants

According to a 2022 consumer survey, nearly 90% of people living in the U.S. are using some type of digital payments. Many tenants are accustomed to this method of paying bills, so it's important to meet their needs and expectations. The benefits of online payments are: 

  • Convenience — Tenants don't need to go through the hassle of making a trip to their bank or landlord. Similar to their other bills, they just want to pay rent each month with the simple tap of a button on their phone.
  • Minimized risk — They don't need to remember to schedule or mail in their rent in advance each month because they can schedule recurring payments with AutoPay. They also don't need to worry about mailed payments possibly getting lost in transit.
  • Consistency — Setting up recurring payments eliminates the guessing game of when rent will be withdrawn from their account and how much will be withdrawn each month.
  • Affordability — The cost of an Automated Clearing House (ACH) transaction is equivalent to, if not less than, the cost, time and energy tenants spend mailing cash or checks to their landlord.

Benefits for landlords

While collecting rent online may seem like a complex and unfamiliar process catered towards making tenants' lives easier, here are some ways landlords can benefit as well:

  • Reliability — With capabilities like automated rent reminder emails or late fees, there's a significantly reduced chance of your tenants forgetting to pay rent on time. Tenants can also set up AutoPay to further reduce this chance. Unlike mailed payments, online payments also don't deal with the risk of unnecessary delays such as weather, traffic or accidents during transportation.
  • Security — Online payment companies typically provide secure encryption to make sure all personal and banking information is kept private and never exchanged.
  • Convenience — There's no need for you to sit around and wait for mail deliveries or visit the bank to deposit checks anymore because rent payments can be deposited directly to your bank account.
  • Transparency — The mystery of not knowing when your rent payment will be deposited has been eliminated. You can now track the status of a rent payment from when it's scheduled to the exact date it deposits to your bank account. Because of this, there's no longer a question of when and where payments are going to arrive.
  • Credibility — Collecting rent online shows your professionalism in running a business. This may naturally bring about an increased level of respect from tenants and might result in a higher likelihood of receiving your rent on time.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm nor its agents provide tax or legal advice.

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