How to Collect Rent from Tenants Electronically in 5 Steps

Are you still chasing down rent checks or dealing with the hassle of cash payments? There's a better way. With over 45 million rental housing units in the United States today, property owners are increasingly turning to more efficient rent collection methods.

For a successful rental property business, every landlord needs to find the best way to collect rent. Fortunately, modern online rent collection tools have made the entire process much easier.

This article covers electronic rent collection, including various options and how they stack up against traditional approaches. We'll explore the perks of today's digital rent payment systems and walk you through implementing these tools in your rental business. You'll get details on software platforms that can streamline your rental income process, plus tips for keeping transactions compliant and secure.

Knowing how to collect rent from tenants electronically will save you time and reduce hassle, no matter what size portfolio you have.

Options for rent payments

Landlords have a few options when it comes to collecting rent from tenants:

• In-person: Landlords may visit properties and collect rent directly. Or they might have a drop box or office where tenants can bring their rent. This method allows for personal interaction, but it's inconvenient for both parties.
• Mail: Tenants can mail checks for rent payments. This approach means tenants have to remember to mail the check early enough for it to arrive on time. Landlords then have to deal with depositing checks.
• Bank ACH payments: Landlords can set up ACH transfers with their bank. While this is more convenient than checks or collecting rent in person, it usually comes with fees.
• Property management software: This is the best option because you can set it up to collect rent online without anyone lifting a finger. Tenants can pay from their couch, and the money goes straight into your account. It integrates with accounting systems and financial management tools, and it automatically records all payments.

Advantages of electronic rent collection

Using property management software to collect rent payments online offers many benefits to landlords, including the following:

• Convenience: Using software to collect electronic rent payments automates the entire process. You don't have to meet in person, and you don't have to worry about manually processing checks or cash.
• Timeliness: Tenants can schedule recurring rent payments, which means they are less likely to forget and end up late on rent.
• Security: Electronic rent payment platforms offer secure payment processing, which reduces the risk of theft or fraud associated with cash or checks.
• Automation: The system automatically logs payments, making financial tracking and reporting much easier. It also reduces the time and effort needed to track down tenants who didn't pay rent — or to process checks. Landlords receive instant notifications of rent payments to track rental income in real-time.
• Tenant experience: Tenants appreciate the ease of paying rent electronically, which can help improve landlord-tenant relationships. Landlords can allow tenants to pay rent electronically with multiple options, such as credit or debit card or bank account transfers.

How to collect rent payments electronically

You can start collecting rent electronically in just a few quick steps:

Step 1: Choose an application for electronic rent collection

Look for a solution that is part of an integrated platform. This allows you to handle all operational aspects of your business, like tenant screening, lease agreements, and financial management, from the same interface. For rent payments, choose a solution that is easy to set up and allows you to add options like customizable late fees or not allowing partial payments.

Take the time to review the application's ease of use and customer support to help you and your team maximize its features.

Step 2: Sign up and configure

Sign up for an account with your chosen service. This involves collecting information about your rental properties and business, including the following:

• Business information: Your company name, contact details, bank account information, and tax details.
• Property details: Address, unit number, rental amount, lease start date, property type, and any specific rules or regulations.
• Tenant information: Names, contact details, lease terms, and any relevant notes.

Step 3: Configure payment details

Once you have your account and business details set up, you can now create different payment schedules and options, such as the following:

• Recurring payments: Allow tenants to set up automatic payments for a specific amount on a recurring basis.
• Late fee automation: You can use predefined rules to automatically calculate and apply late fees if tenants are late paying rent.
• Payment reminders: The software can send automated email or text reminders to tenants before the due date.
• Block partial payments: Use this option to enforce your payment policy and avoid complications in the eviction process if a tenant fails to pay the remaining balance.

Step 4: Notify tenants

Communicate with tenants about the new electronic rent collection system. Explain that they'll receive an email with instructions on how to sign up, as well as a brief overview of the system.

Let them know about the multiple payment options available, such as bank transfers, debit card payments, and credit card payments. Point out the benefits of the new system, like convenience and security.

Step 5: Tracking and reporting

Monitor the status of electronic payments to ensure tenants successfully use the new system. Comprehensive solutions offer payment documentation and integrate with accounting and financial management systems. Use these features to track your rent collection and generate reports for financial oversight.

Other tips for electronic rent collection

There are a few other considerations for collecting rent electronically to help landlords and property managers maintain compliance. These include the following:

• Legal compliance: Stay informed about local, state, and federal regulations regarding electronic rent collection, including consumer protection laws and data privacy requirements.
• Data security: Protect tenant information by using secure payment platforms that use encryption and other advanced security protocols.
• Fee transparency: Communicate any fees associated with electronic rent payments to tenants if they choose to pay by credit or debit card.

Platforms for electronic rent collection

As you look into solutions for electronic rent payments, here are a few of the top options to consider:

Azibo

Azibo's integrated platform provides everything landlords need to manage their rental business. Key features include the following:

• Tenant screening: Comprehensive background checks include rental history, credit, and criminal reports. Landlords and property managers can quickly identify reliable tenants, reducing risks of payment issues or property damage.
• Lease agreements: Create state-specific, legally compliant lease agreements. This protects everyone's rights and reduces legal risks.
• Electronic rent collection: Use Azibo's platform to automate rent collection electronically, send automatic payment reminders, and add fees for late payments. This increases cash flow and reduces the time you spend managing payments.
• Accounting: As you collect each tenant's rent payment electronically, Azibo automatically records the transaction and updates your property's income and expense tracking. This simplifies bookkeeping and provides insights into each property's financial performance.
• Maintenance: Make it easy for tenants to submit maintenance requests so you can address repair issues promptly, maintaining tenant satisfaction and property value.
• Document storage: Keep all tenancy records, including lease agreements, records of online payment, and other documentation, in one place so you can access key information quickly.

Azibo's online rent collection is free for landlords. Tenants pay a 2.99% convenience fee for credit or debit card payments, and each ACH bank transfer is free.

Avail

Landlords can collect electronic rent payments using Avail's property management software. The basic plan is free for landlords, and tenants pay $2.99 per bank transfer and a 3.5% processing fee for credit or debit card payments.

Buildium

Buildium's property management platform supports collecting rent electronically. Pricing starts at $55/month. Landlords pay $1.25 for each incoming EFT transaction and 2.99% per credit card transaction.

Turbo Tenant

Property management companies and landlords can use Turbo Tenant's software to collect rent electronically. In the free tier option, landlords pay $2.00 for bank transfers and 3.49% for debit and credit card transactions.

Consumer payment apps: PayPal, Venmo, Zelle

These apps have several drawbacks for landlords. They lack comprehensive financial management features, and they don't offer the level of control landlords need. There's no way to automate late fees, track partial payments, or generate detailed financial reports. Plus, there can be higher transaction fees, limits, and potential security concerns.

Here are some real experiences shared by landlords and tenants on the r/realestateinvesting subreddit:

User alkbch points out a major drawback with Zelle:

"You can't refuse payments on Zelle. That's a major drawback when dealing with evictions."

From the tenant's perspective, these apps can also cause issues. User DontMessWithMyEgg shares,

"My landlord wants me to pay using Zelle, my credit union daily limits won't allow it. I'd have to break it into three days of payments. He told me I needed to switch banks, I declined."

Electronic rent payments

Electronic rent collection helps landlords simplify monthly collection tasks. The best systems do more than just process payments. They help you maintain accurate financial records, reduce late payments, and improve tenant satisfaction. More importantly, it frees up your time for other aspects of property management.

Transitioning to electronic rent collection may take some initial effort, but the long-term benefits are worth it. Start by choosing a system that fits your specific needs and property portfolio size. Some platforms, like Azibo, are free, while others offer trial periods, allowing you to test their features before committing.

As you implement electronic rent collection, communicate clearly with your tenants about the new process. Provide them with step-by-step instructions and highlight how it will make their rent payments more convenient.

Electronic rent collection can lead to better financial oversight, improved cash flow, and a more successful rental business. It's a practical step toward modernizing your property management approach.

How to collect rent from tenants electronically: FAQs

How to set up ACH payments for rent?

To set up ACH payments for rent, use a property management platform that offers ACH processing. The tenant will then authorize regular payments from their bank account to yours.

What is the safest method to collect rent?

The safest way to collect rent is through online payments via ACH transfer or a secure property management platform.

What is EFT rent collection?

EFT rent collection electronically transfers rent payments directly from the tenant's bank account to the landlord's account.