For property managers or landlords, one of the most important things to do is accept rent payments.
Not only is it the backbone of any property management company, it is what allows the property manager to keep their job.
So, it is natural to want to know if your rent collection method is the best and most efficient one.
In this guide, we will be explaining why accepting cash payments for rent may not be the greatest idea, as well as some alternatives that should be considered.
To get started, let's go over how cash rent payments work and why some property managers prefer that kind of rent payment.
Collecting Rent In Cash
There can be a couple of reasons why a property manager may want to collect rent in cash. Usually, the process consists of the property manager going to the rental property to accept the payment, or vice versa.
This can become extremely tedious for the landlord, especially if they have many properties, which we will discuss further below.
Another way that tenants can pay rent in cash is if the landlord sets up a drop box. This is a very common method of rent collection in properties with multiple units, as the property manager just has to visit the drop box instead of each individual unit.
So, as you can probably already tell, there are various advantages and disadvantages to accepting rent money in cash. Below, we will discuss these advantages and disadvantages in further detail.
Pros & Cons Of Cash Rent Payments
In this section, we will discuss some of the pros and cons of accepting cash as rent payments.
Pro: May Be Easier For The Tenant
If a tenant never pays their monthly rent on time, personally going to the property and asking for the payment may make them pay up. It may also be the tenant's only option if they do not have a bank account.
However, this would require the property manager to travel to the rental property, which may be a problem if they live far away.
Pro: Easy To Track
When a property manager receives a cash payment, they can just count it and record it. They do not have to wait for the payment to clear, pay any transaction fees, or depend on an online system to put the money in the right place.
Pro: Lower Risk Of Fraud
When dealing with cash payments, property managers do not have to worry about checks bouncing or cards being declined. They also do not have to worry as much about fraudulent payments.
This is because it is much easier to spot fake cash than it is for a check.
Con: Easy To Lose
Unlike an online payment that can be cancelled and sent again, when a cash payment gets lost, it's lost. This can create a real headache between the landlord and the tenant, which can put a strain on the landlord-tenant relationship.
Con: Vulnerable To Theft
For property managers who work alone, this isn't really a concern. However, for property managers who work with a larger team or a property management company, they can be at risk of the cash being stolen.
However, with a proper bookkeeping system, theft should be quickly identified and taken care of.
Con: Possibility Of Illegal Activity
Everybody knows that most criminals try to avoid leaving a paper trail with their money. This is why they choose to pay everything in cash.
This can be problematic for the landlord, as they may be housing a criminal that is covering up their actions by making their monthly rent payments in cash. If this is found to be true, the landlord or property manager should immediately contact the authorities and seek an eviction.
So, now we know all of the pros and cons of accepting cash payments. All in all, it can be effective for a small portion of the property manager population, but there are definitely some better alternatives.
Below, we're going to talk about some of the things that should be considered when choosing a rent payment method, as well as some of the best choices with everything considered.
What To Consider
Before we get into the discussion of accepting cash payments as rent, let's talk about some of the most important considerations for property managers.
These are all very important factors that can help determine which is the best method for paying rent. However, this is not a complete list, as there may be other considerations based on specific circumstances.
Number Of Properties
One of the first things that needs to be considered when choosing a rent payment method is the number of properties that pay rent. If the property manager only has to collect rent from one or two properties, then cash maybe won't be such a big deal.
However, when the number of properties continues to increase, property managers may want to start accepting rent payments online.
Another very important factor to consider when choosing a rent collection method is the location of the properties. If the properties are very close together, then accepting cash may not be the biggest hassle.
However, if the properties are very far apart, and take a couple of hours to get to, it can become very tedious.
Even if you have a small number of properties that are close by, you still may not want to personally collect rent.
This is important to acknowledge because some landlords simply do not have an interest in forming a personal connection with the tenant. If this is the case, a more technical solution may be the best.
So, now that we know about some of the most important considerations when choosing a rent collection method, let's talk about some of the alternatives to cash rent payments.
Cash Rent Payments Alternatives
In this section, we're going to talk about some of the best alternatives to cash payments when it comes to accepting rent.
If your tenants are adamant on paying rent in cash, you may be able to get away with asking for a money order instead. Although money orders share many of the same drawbacks as cash, they are a bit more secure as there are receipts for the transaction.
However, as mentioned, you will still have to deal with some of the drawbacks that exist with cash payments.
Online Rent Payments
Out of all the methods in this list, collecting your tenants' rent payment through an online system is the easiest. Using this method, there is little to no interaction between the tenant and the landlord.
This means that your tenant can send their rental payments straight from their house and you can receive them from yours.
Also, if you are renting out to younger generations, this is the method that they will be expecting to use. This way to collect rent also allows the landlord to set up reminders so that the tenant will never miss a payment.
This method is also very convenient for the tenant as it usually allows them to set up recurring payments. These online payments allow the tenant and the landlord to completely automate the rent payment process.
Another way to collect rent payments is by collecting rent online via ACH payments. ACH uses online payment services to easily send money from one bank to another. This method requires a one-time setup with the tenant and they must authorize bank information.
This method is also very convenient because of how secure and easy it is. Since they go straight from one bank account to the other, there is no human interaction whatsoever. The only drawback is that the payment typically takes around 3 days to arrive after being sent.
Property Management Software
The last method that we will be discussing is to use property management software. Using property management software not only allows you to quickly and easily collect rent from the tenants but also allows you to streamline various other aspects of your business.
By paying for property management software, you can facilitate electronic payment via bank transfer, credit card, debit card, or ACH. The software will also grant the tenant their own tenant portal, equipped with automatic payments, payment reminders, and much more.
Interested in investing in property management software?
Then you should check out DoorLoop.
DoorLoop is an all-in-one property management solution that covers all aspects of the property management scene. This software provides all the tools and functionality that any property manager will need to transform their property management business.
Some of DoorLoop's best features include:
- Maintenance Management System: DoorLoop's maintenance request management allows you to create and track maintenance requests.
- Tenant Portal: DoorLoop's full tenant portal allows for quick and seamless communication between the tenant and the property manager. The tenants can also pay rent and other fees from this same place.
- Full Accounting Suite: Manage all of your property accounting from one place, even with QuickBooks integration.
- Stellar Customer Support: Around-the-clock customer service available to assist with any issues or concerns with the software.
Interested in these features? Visit DoorLoop to get started today!