If you asked ten property managers their least favorite part of their responsibilities, nine of them just might say rent collection. That’s why online rent collection is a common PropTech solution and one of the first things PMCs look to digitize or automate.
Automated rent collection is a system that enables property managers to collect rent payments from residents via electronic means such as online portals, direct debit, ACH, direct deposit bank transfers, or credit card payments. Automating monthly rent payments simplifies the rent collection process, saves time, and minimizes errors associated with manual processes. It also provides residents with a convenient and secure way to make payments, leading to increased satisfaction and retention rates.
But maybe the best part? You don’t have to constantly remind residents to pay rent. We all want the resident experience to be better than that – and your experience, too!
In this article, we’ll talk about some of the best online rent payment systems, the best strategies to automate rent collection, and how to implement these strategies. We’ve got insights from two leaders in the industry: Wolfgang Crosky and Ray Hespen.
Key Learning Objectives:
- What are the best cloud-based online rent collection software products?
- How do you set up automated rent payments for residents?
- How do you transition residents to using mobile payment apps?
- Can you outsource rent collection?
Today's Expert: Wolfgang Croskey, Founder & President of How’s My Rental
Benefits of Automated Online Rent Collection for Single-Family Rental PMCs
While automating rental management tools is valuable for any type of property, the benefits are enormous when we’re talking about SFR property management.
PMCs managing single-family homes have to deal with geographically dispersed properties with often a wide range of property types and needs. In addition, SFR property managers are often entrepreneurs running independent small businesses. They’re quick to adopt new technology, especially since using automation tools helps simplify workflows and effort.
Wolfgang Croskey calls automation the “great equalizer.”
“Why I have a passion for automation and AI in tech is we're a small independent company,” Croskey says, “and technology is the great equalizer. It allows us to compete with these nationwide companies and to provide not only the same level of service but to be able to pivot and adapt much quicker than those larger companies can. So for me, you're a smaller company, AI and Automation Tech is that equalizer that's going to allow you to shine just as well as these larger companies.”
Choose a Cloud-based Online Rent Collection Software
Cloud-based property management solutions have proliferated in the last decade, with proptech solutions and third-party tech platforms solving age-old property headaches.
Cloud-based online rent collection software is a platform that enables property managers to collect rent payments from residents securely and conveniently over the Internet. It eliminates the need for manual rent collection processes by automating payment reminders, processing online payments, and reconciling accounts.
These products are hosted on remote servers, allowing property managers access from anywhere with an internet connection.
Let’s look at some popular examples to help you collect rent online.
- Buildium - A property management platform that provides a range of features, including online rent payments, payment processing, tenant communication, maintenance tracking, and financial reporting.
- AppFolio - A cloud-based property management software that offers online rent collection, security deposit, tenant screening, property inspections, and accounting tools.
- Avail - A cloud-based rent collection tool that allows PMs to automate rent, send rent reminders, track payments, and manage rental properties.
- Rentec Direct - A software platform for property managers that offers features such as online rent payments, tenant screening, lease tracking, and maintenance management.
- RentRedi - A mobile-first property management software that allows landlords to collect rent payments online, screen tenants, and manage maintenance requests through a user-friendly app.
- Cozy - A free online rent collection platform that enables landlords to collect rent payments, screen tenants, and manage lease agreements.
These are just a few examples, but there are many other cloud-based online rent collection software options available on the market. They can typically connect to your property accounting software and expense tracking and create a seamless experience from end to end.
Allow Residents to Choose Recurring Automated Rent Payments
Recurring rent payments are a popular method of rent collection among property managers and property investors. This method involves automatically deducting the rent amount from a resident’s credit card or bank account at regular intervals, most often monthly or on certain business days.
For property managers, autopay eliminates the need for manual rent collection processes and reduces the risk of late or missed payments. It also streamlines accounting processes by providing accurate and up-to-date records of rent payments. And, of course, recurring payments can be set up to occur automatically, saving property managers time and reducing the need for follow-up with tenants. No more existential dread around rent time!
For tenants, recurring rent payments provide a convenient and hassle-free way to pay rent on time every month. It eliminates the need to remember to make a payment, reducing the risk of late fees and improving their credit score by building a consistent payment history.
Property managers who are reporting rent payments to credit bureaus (such as TransUnion) as part of a Resident Benefits Package can use this as a massive incentive for residents to automate payments. Additionally, tenants can set up recurring payments using their preferred payment method, making it easy and flexible for them to manage their finances.
How to Set Up Recurring Payments with Residents
Setting up recurring rent payments is straightforward and can be done using cloud-based rent collection software, like the examples described above.
First, the property manager needs to have the resident’s consent to set up recurring payments. Once the resident has agreed, the property manager can initiate the process by entering their payment information into the software. This information typically includes a variety of payment options such as their debit card, credit card, or bank account details; the rent amount; and the frequency of the payments.
Once the information is entered, the software will automatically deduct the rent amount from the resident’s payment method on the designated date, and the payment will be recorded in the property management software. If there are any issues with the payment, such as insufficient funds or an expired credit card, the software will notify the property manager and the resident to rectify the issue.
Allow Residents to Pay with Mobile Payment Apps
Allowing residents to pay rent with Apple Pay or Google Pay is gaining popularity across the property management industry. Zelle is another payment service that can help with ACH payments without transaction fees. PayPal and Venmo are other mobile payment platforms. With these mobile payment apps, renters can pay their rent using their mobile devices.
It’s a win for residents because they can easily make automatic payments on the go using their smartphones without the need for a physical wallet or a visit to a bank or property management office. Additionally, these mobile payment methods are highly secure, as they use biometric authentication to ensure the transaction is authorized by the account owner, minimizing the risk of fraud and identity theft.
(Learn more about how property managers are protecting residents from identity theft in our State of Resident Experience report.)
For real estate investors and property managers, accepting mobile app payments can streamline the rent collection process, reducing the need for manual processes and improving the efficiency of rental income. Additionally, mobile app payments are highly trackable and can provide detailed records of rental payments or partial payments and send you notifications of issues, making accounting processes easier and more accurate.
How to Set Up Mobile Payment Apps with Residents
Setting up mobile app payments for properties is easy and – again – can be done through cloud-based rent collection software.
First, property managers need to enable mobile app payments in the software and then provide tenants with instructions on how to set up and use the payment method. The software will then provide a unique payment link that can be sent to the tenant via email or SMS, enabling them to make payments by the due date using their preferred mobile payment app.
Once the payment is made, the funds are automatically deposited into the landlord or property manager's designated bank account, and the payment is recorded in the rent collection software. In case of any issues, the software will notify both parties.
Outsource Rent Collection to Third Party Service Providers
Of course, you can also outsource rent collection entirely.
Outsourcing rent collection to third-party specialized service providers can be a great solution for property managers who want to save time and reduce the stress that comes with managing rental properties.
Rent collection is one of the most important tasks for property managers, but it can also be one of the most time-consuming and frustrating tasks. By outsourcing it to a third party, property managers can focus on other important tasks, such as marketing the property, screening tenants, and maintaining the property.
Third-party rent collection service providers are reliable and have a proven track record of success. They can offer you the expertise and resources needed to effectively collect rent and manage resident relationships – plus, they already have advanced technology and software to track payments and manage records.
Another benefit of outsourcing rent collection is that it can help property managers avoid potential legal issues that may arise from handling rent collection themselves. Third-party service providers are experienced in dealing with rent collection laws and regulations, ensuring that landlords and tenants are protected.
How Second Nature Helps Ease the Stress of Rent Collection
At Second Nature, we’ve built digital products around creating ease for residents and property managers – adding value and reducing headaches for everyone involved.
Our Resident Benefits Package provides services that incentivize on-time rent payments and supports residents in building credit, protecting their identity, and remaining financially sound.
Rent doesn’t have to be stressful for everyone involved. In fact, using the right tools, rent collection can become as easy as – you guessed it – Second Nature. (We had to.)