Archive

Category Archives for "Guides"

The Complete Guide to Accepting Rental Payments Online

Introduction

Decided to make the switch from checks to online rent payment? By the end of this guide you should be able to:

  1. Understand the basic process of getting set up to collect your rent online.
  2. Figure out which method is best for you.
  3. Open an account to start collecting rent.
  4. Collect your first rent payment digitally!
Start Accepting Rent Online

One of the biggest pains in being a Landlord is collecting the rent. Whether “The check is in the mail” or consistently late tenants, what makes owning rental property so rewarding (the money), can often be the most difficult part of ongoing property management. That’s probably why  it’s  one of the most important parts of the job.

Over the past few years, more and more companies have entered the online rental payment space, targeting different markets and users. They use different technologies and different options, but the desired end result is the same: fast, effortless rent collection.

Start Accepting Rent Online

Is Getting Paid Online Better Then Getting a Check?

In a word, yes. Having your tenants set up to pay online every month, is one of the best things to happen to Landlords and Property Managers. Keep in mind that most people (especially millennials), don’t even use checks anymore. So not only do they have to write you a check, they have to remember how to use a check in the first place!

Start Accepting Rent Online

What are the benefits of using an online rent collection service?

When you switch from receiving checks to processing direct deposits, you make life a lot easier for both yourself and your tenant:

  1. It’s automatic! No more running after tenants to get paid. A tenant can either set up an automatic recurring monthly payment, or opt to receive an automated email every month when their rent is due.
  2. It’s fast! Most landlords will receive their money within 24 hours – that’s faster then a normal check can clear.
  3. It saves time! No more messing around with excel or quickbooks – your rental payment will automatically be entered into your online ledger.
Start Accepting Rent Online

Comparing the Different Ways to Accept Rent Payments Online

There are a few different methods that you can use to get paid online. Each has their own pluses and minuses, and we’ll discuss them here:

ACH/Online Direct Deposit

ACH stands for automated clearing house, and is what the banks use to handle transferring money to each other. If you’ve ever used direct deposit as an employer or employee, it’s basically the same system.

The primary benefits of ACH include:

  1. Same day and next day payment receipt.
  2. Difficult to dispute (which is good for Landlords).
  3. Can be automated.
  4. Very low costs, compared to credit cards or paypal. (Compare $2 a transaction vs 2-3% of a rental fee!)

This is the cheapest system to use, and is also the most secure. It’s also the one that powers our online system, which you can sign up for here.

Start Accepting Rent Online

Accepting Credit Cards For Rent Payment: Good Idea or Bad for Business?

In theory, accepting credit cards seems like a good idea. Almost everyone has one, everyone knows how to use it, and you don’t have to worry if your tenant can’t afford the bill later on.

There are two main problems with credit cards for Landlords, which makes accepting them a bit of a risk, as well as expensive:

  1. Cost: Accepting credit cards can be very expensive. Transaction costs are usually 2-3% + 50 cents of a transaction, depending on which company you use. If your rental costs $700 a month, you could potentially lose up to $21.50 a month just on credit card fees. You could try and make your tenant pay for it, but most will fight with you. Compare that to a $2 fee for accepting direct deposit, which you can directly charge your tenant, and it makes direct deposit a clear winner.
  2. Chargebacks: The little spoken, but much bigger risk of credit cards, is chargebacks. This is when the credit card holder (in this case, your tenant), calls his bank and disputes the charge. The bank then takes the money back out of your account AND charges you a fee – anywhere between $25-75 every time. Now you have to fight with your bank to get that money back, and you often lose!
  3. Start Accepting Rent Online
When does it make sense to accept credit cards?

If you work with a lot of low income tenants, offering the option of credit cards can allow a third party (a well to do relative or friend) to pay the occasional payment on time. Additionally, if your tenants don’t have bank accounts, they may prefer to use prepaid bank cards that they can buy at places like CVS, Wallgreens or Krogers.

Start Accepting Rent Online

Should I Use Paypal to Get Rent from Tenant?

Paypal has been around since the beginning, and is a well trusted name in the payment space. That being said, it’s important to understand the risks involved with taking any kind of money from paypal:

  1. Chargebacks again! PayPal can and will remove money (even if sent as a “check”) from your bank account, if it decides you are defrauding the person who sent you money. The burden of proof with PayPal lies solely on the Landlord, never on the tenant!
  2. Account Freezes: Do some Googling. Find out how many people have had a paypal account frozen! When you accept money with PayPal,it’s not your account!
  3. High Fees: PayPal charges very high fees to accept payments.
Start Accepting Rent Online

Demand Draft – Printing Out a Check for Your Tenant

Demand drafts are these little known method for accepting checks. Mostly used by telemarketers, the idea works like this: You receive permission from your tenant each month to print a check in their name, with their account information. It doesn’t need to be signed. There is special software that does this for you. Then, you take this to the bank and deposit it like a regular check.

Start Accepting Rent Online

Paying at a Kiosk

Services like PayNearMe let’s the so-called “underbanked” (people who don’t have bank accounts, typically lower income), pay rent in cash at places like 7-11.

FAQ About Our Payment Service

Is it safe to pay and collect rent online?

Yes, our service is 100% safe and uses the same level of encryption and security that banks use, as well as companies like Amazon.com.

How much does it cost?

It currently costs $1.99 for each rental payment you accept.

How do I start collecting rent online?

Simple, click here to get started.

Start Accepting Rent Online
2

How To Calculate Prorated Rent

Landlords: Do You Want To Make Life Easier?

RentApplication.com is the only service that allows you to easily find tenants,  screen them and collect rent, automatically. Collect Rent and never have to worry about prorating again.  We're offering a free trial, which includes free tenant lookups, a free rental website, and more. Try it todsy!

One of the questions that we see asked a ton is “How Do I Calculate the Prorated Rent on My Unit”?

Before we answer that question, let’s answer an important question:

New: Use This Calculator:

What exactly is Prorated Rent?

Prorated rent is how much you, the landlord, charge a tenant when the tenant is occupies the rental for a unit less that specific on the lease.

The most common example is a tenant who starts a monthly or yearly lease in the middle of the month. Normally, you charge them for a whole month, but they won’t be living in the unit for a whole month at some point of the term. Since your daily rental rate is often significantly higher then your monthly rate, you need to prorate the apartment rental.

Why do You Need to Prorate the Rent?

Simple – it’s the honest, fair thing to do. It’s the best method for when tenants want to move in for odd lease durations, or need to get a 4.5 month lease or something similar.

How Do You Prorate the Rent?

There are two popular methods to prorate rent:

1. Number of Days in the Year

While popular in certain segments of the rental industry, it can be confusing to tenants. It’s technically the most accurate for a yearly lease, but can sometimes cause confusion and short change tenants during months with shorter days.

Here’s the formula to prorate yearly:

((Months Rent * 12) / Days in The Year)) * The Number of Days The Tenant Needs to Pay

If we took an example of August 18th Moving in Day, and a monthly rent of $1000, the equation ends up being:

((1000 * 12/ 365)) * 14 =  $460.27

2. Prorate by the Number of Days in the Month

This method is simpler, easier to calculate, and ultimately ends up being fairer to tenants.

((Month's Rent) / Days in the Month)) * The Number of Days The Tenant Needs to Pay

Using our example again from above of August 18th with a $1000/m rental:

((1000 / 31)) * 14 =  $451.61

Notice how the monthly prorated came out to slightly less then the yearly prorated? The yearly prorated will be more on months with 31 days.

The nice thing about the monthly pro-ration is it works extremely well for those who often rent month to month. And since your rents can be all over the place depending on demand, it makes sense to prorate based on the actual month the tenant is renting.

Additionally, it’s dead simple. Your tenants will get it and you shouldn’t have that many problems or pushback from them.

Local Laws and Prorating

As always, check with your local government about specifics related to prorating the rent. In Los Angeles, for example, the courts have decided that a rental month is always 30 days for evictions, so use that for your prorating.

Summing Up About Prorating and Rental/Lease Agreements

Whatever method you decide to use to prorate, be consistent. Specify how you’re prorating in your lease, when you take the prorated rent (some Landlords will prorate a longer term lease on the second month to smooth out income and make sure you can pay the rent), and what method you’ve decided to use to prorate the rent. Once you’ve done that, stick to it!

At the end of the day, prorating is not a difficult concept.

Post in the comments if you have questions or opinions on how to prorate!

 

 

1

The Nine Tips You need to Know to go from Amateur to Professional Landlord in No Time Flat

Ask any former Landlord what their biggest issue was, and you’ll always get the same answer: “The Tenants”.

Your tenants are both your greatest benefit (they pay the rent, after all), as well as your biggest annoyance. No one else is going to call you at 3AM because of a leaky Air Conditioning unit, or try and sneak their 200 lbs rottweiler into the building.

Some of us became landlords accidentally, while others entered this business to quit their 9 to 5. Regardless of how, or why, you’re a landlord, the rules for success are the same. And love ’em or hate ’em, a lot of your success is going to focus  on how you deal with tenants.

1. Never be The Final Decision Maker

This is the most important thing any Landlord can do. It’s a well known negotiating technique. Whenever a Tenant has a complaint, simply tell them it’s from the owner. You’re always just the property manager or owner’s representative.  This may require operating the rental under an LLC and a few other notes, but it’s well worth it.

2. Never Stop Learning

Being a real estate investor and landlord constantly requires education and knowledge. There is so much information out there that can help double or triple your real estate business over time. We’re big fans of anything John T. Reed publishes, and of course everything on BiggerPockets.com

3. Know Your Marketplace

Surprisingly, A lot of landlords don’t have a clue about their marketplace. What are the normal rents? What kind of tenants does the area attract? What is included standard with rentals? Who generally pays the utility bills? These are important questions, and the answers differ significantly by region and market. Knowing them is important.

4.Learn Marketing

You’re competing against hundred of other business that offer a similar product, and advertise in the same place. How do you make your ads and your product stand out? In other words, how do you get your listings noticed on sites like Craigslist, Zillow and Trulia? Head to the local library and pick up a book or two on marketing, and get to work.

5. Network Network Network

It’s important to know what’s going in your market, so make sure to network. Networking also helps you find better deals for more properties and services that might not be available elsewhere. Join local apartment associations, find a local real estate investing group on Meetup.com, and of course, check out BiggerPockets!

6. Know the Law

You don’t need to be a lawyer, but you should have a good understanding of local and federal laws. Read up on the Fair Housing Act, your state’s equivalent law, as well as the Fair Credit Reporting Act. Find out what, if any, local ordinances there are, and how they affect you. For example, some jurisdictions require licensing for every unit that you own and rent out. Others prohibit AirBNB. It’s important to research and find out exactly what’s going on in your area. This is another reason why networking and joining a local apartment association can be so helpful.

7. Be Organized

Keep everything relating to your rentals separate and organized. Maintain a calendar and a log book so you can know what happens, when. Consider getting a google voice number so you can track calls but also maintain privacy. 

8. Be Professional

Being a professional Landlord is not that hard. Maintain specific hours of when you are always reachable by tenants, and defer anything outside that time except emergencies until the next time. Create actual policies and stick to them. Not only does this make life easier, it gives you another higher authority to defer to. “I’m Sorry John, we only accept checks and credit cards, no cash. It’s our policy.”

9. Care About Your Properties

Your properties, along with your tenants, are the life blood of your business. You don’t need to coat everything in gold plating, but you need to make sure you offer a quality rental that meets and exceeds renter expectations. It can be simple things like a fresh coat of paint and functioning air conditioning, or even extra add ons like a digital keyhole. The specifics will depend on your budget, your market, and you. The important thing is to go the extra mile and make sure your tenants know you’re doing it for them, too.

 

What are your best ways to improve your rental business? Share in the comments below and on facebook!