When it comes to managing a rental property, let’s face it…
Nothing is more important than knowing how to collect rent from tenants.
But it’s not so simple as asking your tenants for rent and automatically getting it on time every month reliably in a way you can effectively track.
You need to put systems in place that handle each of those areas, from:
- Collecting rent on time
- In addition to other tenant financial responsibilities
- In an organized way that’s synergistic with your accounting system
- And with as little manual work as possible
There are a lot of ways to collect rent from tenants, a few better than others.
Below, we’ll cover a few important things to consider if you’re looking to improve your rent collection methods.
Then, we’ll cover the most common ways to collect rent, including a method for collecting rent that checks off all of the boxes above with spades.
First, let’s talk about some important factors to keep in mind.
3 Factors to consider when improving rent collection
While many properties have unique demands and every landlord is different, there are certain universal points to consider when working on improving your rent collection.
Use these to help you decide what systems will be most effective for you to put in place to improve your rent collection:
1. Number of tenants + properties
If you have a single property and just a few tenants, you may not mind having a simple dropbox somewhere on the property.
However, if you have a decent-sized property or multiple properties, having to physically collect rent each month can be a pain.
We’ll talk about this more later, but something like property management software makes rent collection for fifty tenants at multiple properties nearly as easy as it is for only a handful.
2. Communication preference
Some landlords like to be a bit more hands-on.
If that’s you, you may look forward to using your monthly rent collection rounds as an opportunity to look over your properties.
But if you’re like most landlords and that sounds like a waste of precious time to you, you’d probably much rather prefer to keep your communication digital as much as possible.
3. Distance from the property
Some rent collection methods depend entirely on your ability to show up physically, while others allow you to fully automate rent collection online.
While efficiency really should be the prime concern, even if you’d prefer a more hands-on approach, your distance from the property might mean otherwise.
How to collect rent from tenants: 6 Ways to collect rent
Now that we’ve covered the main points to consider when deciding on what rent collection method you go with, let’s talk about ways to collect rent.
These will range in effectiveness and other factors, but we’ve included the gamut of options to clearly show the difference between each (and whatever pros/cons exist).
If you have a small portfolio of one, two, or three properties (particularly if the properties themselves have just one or a few units), this may be the method you currently use.
Its main benefit is in the ability to check on the condition of the property while you’re collecting rent.
However, as you may have already noticed, collecting rent in-person is both time-consuming and ineffective.
There is reason to consider this, however, if you’re having issues collecting rent from a particular tenant.
Though if that’s the case, the real issue is tenant quality more than how you collect rent.
The next step up above in-person rent collection is a standard dropbox.
If you’ve owned a small number of properties for a while, you may have experience using this method.
With reliable tenants a dropbox can be a relatively simple rent collection method that’s somewhat convenient. Plus, as with in-person collection, it allows you to review the property at the same time.
However, it’s not an effective method by any means.
This way isn’t just less reliable as a method of collecting rent, having to collect a large amount of cash or checks each month isn’t exactly safe.
As with in-person collection, you need to physically travel to the property each month as well.
3. Property manager
Hiring a property manager is a great option to consider because it’s one of only a few that allow you to truly streamline your rent collection.
By streamline we really mean the ability to pass off those rent collection duties to a professional party who manages properties for a living.
Plus, you have flexibility in how you choose to use a property manager.
You could get one to handle all or most of your property management needs. Or, you could hire one that only handles rent collection, while you retain control over your marketing and leasing.
The only drawback here is that hiring a property manager can be expensive depending on your number of properties and profit margin.
4. Direct deposit
Direct deposit is a simple but highly effective rent collection method as it not only allows you to do it digitally, therein collecting rent remotely without the need to physically visit the property.
It also allows you to automatically collect rent to a degree, collecting those rent payments automatically each month once the monthly direct deposit has been set up.
This is a big step forward from any physical rent collection method because you save on the travel time and general hassle every month.
However, it’s important to consider that direct deposit is different depending on the bank that you and your tenant use.
So, each tenant is likely to be a different situation and can create for a somewhat confusing system to track and show rent payments on your accounting.
5. Money transfer platforms
Money transfer platforms like PayPal and Venmo are also options to consider, particularly if you’re looking for the ability to set up automated payments digitally without having to depend on a bank.
Both platforms function similarly, with the ability for tenants to set up either one-time or monthly payments that are paid from their own PayPal or Venmo accounts.
One of the drawbacks of this method is that your tenant needs to have one of said accounts.
Another and the major drawback is that these types of platforms– PayPal and Venmo included– don’t offer protection of any kind like a typical bank.
If there’s an issue or dispute of any kind, platforms like PayPal aren’t much help to you.
So, while money transfer platforms like PayPal are better than most traditional methods, they aren’t quite bulletproof.
6. Property management software
The sixth and final way we’ll cover that you can collect rent from tenants is with property management software.
With property management software, you get the convenience of using a digital payment solution along with the ability to set up automatic payments.
However, one major benefit that neither direct deposit or money transfer platforms offer without extra effort: the ability to centralize all payments into a single platform.
This makes it super easy to see all your rent payments and incredibly simple to keep track of your accounting properly.
Property management software also offers something that no other solution does.
With it, you typically get access to a tenant portal which can be easily accessed by your tenants online– even from their smartphone– to view their balance, payment history, and more. And, of course, you can easily collect rent straight from your device.
3 Best property management software options for improving rent collection
After reading through the last section, it should be clear now that with property management software, you get the best of all worlds.
- Digital rent collection, so you don’t have to physically visit the property
- Automated payments, so no need to do any manual work collecting each month
- And a streamlined system that organizes payments into a single platform, making it easy to track and manage your accounting
With that said, let’s talk about some of the best property management platforms available if you’re looking to level up your rent collection efforts.
Here are three options:
If you’re looking to improve how you collect rent, DoorLoop gives you everything you need and more.
That sounds like big talk, I know, but we mean that literally.
Not only do you get feature such as:
- Multiple payment methods including debit card, credit card, or eCheck (ACH) payments
- Automatic rent payment scheduling
- Track paid and overdue rent easily from a single dashboard
- Automated payment reminders to help tenants stay on top of payments and never be late again
You also get PCI-compliant, 256-bit military-grade encryption using RapidRent powered by Stripe
That means rent payments go straight to the credit card processor and never touch DoorLoop’s own servers.
Fully automated, fully secure, incredibly convenient. Collecting rent couldn’t be easier.
And not to mention, the full suite of other property management features you get with DoorLoop as well.
Schedule a free demo of DoorLoop today to see if it’s a fit for you.
2. Property Matrix
Our second option, Property Matrix, is a solid option if custom reports are a priority for you and budget isn't much of a concern.
The software's Pro plan, which is its recommended option, includes:
- Custom reports and fields
- ACH, credit card, and check payments
- Mobile app
With that said, Property Matrix is one of the pricier options on this list (especially considering that many of the alternatives offer comparable features). Its subscription plans start at $400/month.
3. Landlord Studio
Landlord Studio is another option that stands out for its clean UI and ease of access.
While a number of property management tools can feel somewhat dated and clunky, Landlord Studio is relatively simple and straightforward.
The drawback is that you only get access to a few basic features, mostly centered around accounting.
- Online rent payments
- Tenant portal
- Expense tracking
An all-in-one property management solution will be able to offer systems for streamlining every aspect of your property management.
You won’t get as much functionality with Landlord Studio, though it’s worth considering if you’re just looking for something that organizes your accounting and gives you some basic rent collection tools.
What is the best and safest way to collect rent?
As a landlord or property manager, how effectively you collect rent from tenants is a benchmark for how effectively you’re managing your properties period.
If you can’t collect rent effectively, your rentals aren’t going to be successful no matter what else you do.
With that said, there are new and more effective methods for collecting rent now than ever before.
And the best part about it is these methods mean less work and less hassle.
That leaves you with more time to invest in improving other areas and less time needed chasing down tenants for rent.