Collecting Rent Payments
Cash, Check, or Charge?
“Show me the money!” is a mantra many landlords employ. But do they really mean “show me the check?” What is the best tender for landlords to require from their tenants?
Accepting cash for security deposits or rent is not a good habit for landlords. Cash can make you a target for crime—especially if you are known for collecting rent yourself. Carrying around large sums of money is just not the way you want to conduct your business. Besides, do you want the type of tenant who must pay their bills in cash?
Still, you may have good tenants who prefer to pay bills out of a cash account, or who are rebuilding their credit. It is reasonable to ask for rent payment in the form of a money order—which takes the risk off of you and puts it on the tenant. Keep in mind, though, that stop payment orders are available for money orders, too—in case they are lost or stolen. Don’t allow a new tenant to move in until the payment for their security deposit and first month’s rent has cleared your account.
Desirable tenants are stable, have regular income, and bank accounts. They are accustomed to paying their bills by check. While accepting personal checks can be risky, smart landlords always conduct tenant credit checks, so they are aware of any bounced check situations. Again, it’s best to wait until a personal check has cleared your account before handing over the keys to your rental property. Or, you can take the check to the bank it’s written on and have it certified. That way, you know the funds are available and are actually held until the check clears.
Online rent payment is becoming more popular. Some of your tech-savvy tenants probably cannot remember the last check they wrote. They pay their bills and do their banking exclusively online. Rent payment service providers allow landlords to set up accounts and receive tenants’ payments online through credit cards or e-checks. While convenient to both parties, landlords should evaluate the return on the investment—since these services are not free. But if you're trying to fill vacancies in this competitive rental market, then offering online rent payment is one way to differentiate yourself, while attracting the best tenants.