Top 3 Ways to Collect Monthly Rent Payments

As a newbie residential real estate investor, you’ve found that super lucrative deal, you’ve even negotiated the best price based on your budget, and you’re so damn good at this that you even have investors and tenants lined up to help fund the entire transaction and then the ongoing monthly mortgage payments.

You finally decide on the best tenant and agree to move forward with the lease and negotiate terms that are both mutually agreeable and legally enforceable. Damn for a newbie you have your act together and are on the right track.

Top 6 questions about collecting rent from your tenant

Your realtor will ask you the following questions to complete the lease agreement:

  1. When is the rent considered to be late?
  2. Do you want to charge a flat for the month or do you want to charge an incremental amount to be fair to the tenant?
  3. If you choose a percentage, what percentage would you like to charge?
  4. If you choose a flat fee per day of late rent, what would you like to charge:
    • for the 1st day of late rent payment?
    • for each additional day of late payments?
  5. What would you like to charge for a trio fee if that ever becomes an issue?
  6. And the list of questions continues depending on the terms and location of the property.

Then comes the big and probably the most critical questions:

  1. How would you like to get paid?
  2. Where would you like to get paid?

So, this blog post is really about addressing the last two questions.

How would you like to get paid the monthly rent payments?

To answer this question, you need to consider a few things such as:

  1. Do you have a bank account, and are you OK with providing your tenant your bank details
  2. Does your state allow you to collect postdated checks for collecting 12 rent checks dated for the beginning of each moth
  3. What mechanism will you use to track and record the payments or late fees

Where would you like to get paid the monthly rent payments?

To answer this question, you need to consider a few things such as:

  1. Will you have the time to pick up a rent check by knocking on the door every month
  2. What if you’re not able to pick up your rent check in person
  3. What if the tenant is not present at the pre-scheduled time
  4. Are you open to using a 3rd-party service such as a property management company or online rental management software

So, my landlords ask me what and how do you collect rent?

There are a number of ways to do this, but what I’m going to cover here are my top three ways to collect rent that have worked very well for me.

Top 3 Ways to Collect Monthly Rent Payments

  1. Property management companies
    • Totally hand free except for approving repairs etc.
    • Rents are collected, late charges are assessed, and notices are typically handled by the property management company
    • Sourcing and evictions are also managed by the property management company
    • Obviously, none of the above is free and do expect to pay anywhere from 5{fb1e1880c459e557ac3ce17ffa2de9d6b992aa91487d45f235782beb8d8c21f0} to 10{fb1e1880c459e557ac3ce17ffa2de9d6b992aa91487d45f235782beb8d8c21f0} of the monthly rent depending on the size of your portfolio
  2. Use an online rental or property management portal.
    1. I use turbotenant.com for a number of reasons.
      • Inexpensive
      • Tenant application and screening built in
      • Allows tenant portal access to request services
      • Track payments
      • Charge late fees etc.
      • Upload and track 
  3. Checks
    1. Check draft
      • This method is a little more involved but there are lots of pros to this method
      • You’re not dependent on the tenant making a payment
      • You’re pre-authorized to issue and deposit checks perpetually so long as they continue to occupy the property 
      • You can even charge late fees and factor in automatic rent increases so you’re not chasing the tenant for a new authorization
    2. Postdated check if your state allows the use of postdated checks
      • This method is less involved and has lots of upside too from a legal standpoint
      • You’re not dependent on the tenant making a payment. You simply deposit on the date in question

In conclusion when you rely on a tenant to make a payment, you’re setting yourself up for failure as every tenant has a story and their story should not be the reason why you can’t get paid. 

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