The average price of a 2022 rental property in Canada is $1,885 per month — and that’s just for a one-bedroom! Managing sums of money this large can be stressful. Even the smallest error can lead to big mistakes.
Finding the best tenants is the first step to running a thriving rental business. Ensuring they pay their rent on time is the next. And while collecting rent may seem like an easy and mundane duty on the surface, it can prove to be challenging once you begin collecting rent from your tenants.
Depending on how many rental properties you own and how much you charge, you could be responsible for handling large sums of cash or numerous cheques. The task can be tedious and stressful: money can go missing, cheques can get lost in the mail, etc. Even the slightest mishap can lead to big mistakes that hurt your bottom line.
One way to eliminate some of the headaches associated with this monthly task is to collect rent from your tenants online.
In this article, we’ll highlight the advantages online rent collection offers and why it’s ideal for landlords. And we’ll also cover the different ways you can go about setting up your digital rent collection system.
Online money transfers play an increasingly vital role in facilitating financial transactions. Landlords across the country have embraced the opportunities to employ fast, reliable, and safe methods to collect rent from tenants online.
Here are some reasons why online rent collection trumps traditional offline methods.
Cash is a risky payment method to collect rent from tenants. The reason is that you receive no document that functions as proof of payment. Similar problems can arise with cheques. You’ll have no way of knowing whether or not your tenant sent payment in the first place.
An online payment platform reduces the risk of lost rent payments in transit and disputes with tenants over unpaid rent. And you’ll have every receipt at your fingertips to keep track of rental income for accounting and tax purposes.
The amount of time and effort you can save by collecting rent online from tenants is perhaps its most appealing benefit.
Online platforms automate every step (or most) of the rent collection process. As a result, there’s no need to travel to your rental properties to gather payment directly from tenants. And no need to wait for days or weeks for cheques to arrive in your mailbox nor make multiple trips to the bank to deposit them.
By streamlining your rent collection, you also gain more time to focus on other aspects of your rental business.
Have you ever called up a tenant to ask for their rent payment? How often do you hear them say, “I forgot to write a cheque,” or discover that they mailed it out one day before the due date?
Ensuring timely rent payments can be challenging and cause undue stress for landlords. Thankfully many rent collection services offer preauthorized automatic deposit (PAD). This payment technology enables you to collect rent in your bank account without initiating phone calls, emails, or texts. Once the system is in place, it runs on auto-pilot.
You can also set up additional PADs to collect other types of payments:
Online rent collection platforms offer numerous tools to help you better gather, track, and manage your rent. Depending on the software’s features, you may be able to:
Implementing online rent collection can help develop a stronger landlord-tenant relationship.
By disassociating yourself from the rent collection process, you can have much more friendly and relaxed conversations with your tenants, which helps to cultivate trust and openness. This means they’ll be more likely to contact you if something in the rental units needs to be fixed or looked after.
Financial security is crucial regardless of how you gather rent from your tenants. The last thing you want as a landlord is to have your rent money stolen or go missing.
Conducting rent collection online removes many of the risks associated with the offline world. By avoiding cash and cheques, you significantly reduce the chance of funds getting lost in transit or being the victim of fraud.
It’s also better security for the tenant. If they send a cheque, it could get lost in the mail, and since their banking details are on the cheque, they risk having it exploited by thieves.
Online rent payment services and other electronic payment systems are designed to keep your transactions safe and secure. Payments are encrypted to ensure the funds aren’t lost or compromised by thieves. However, each platform differs in the level of privacy and protection it offers. Thus, you’ll need to do some research to understand the risks and benefits.
Direct deposit is a form of bank-to-bank electronic payment transfer. Most people are familiar with it since it’s how they receive payment from their employer. Essentially, the payee provides the payer with their banking information to receive the funds directly into their bank account.
However, setting up direct deposit can be a struggle – and it’s not entirely safe. It requires your tenants to sign up for online banking, and you must provide them with your banking information to receive payment. The latter requirement can impose privacy and financial security risks.
Direct deposit isn’t worth setting up to collect rent from only one or two properties. However, it can be suitable for landlords with ten or more tenants.
E-transfer enables your tenants to set up automatic payments. And unlike direct deposit, you don’t need to divulge your banking details to them. They only need your email address to send payment. The process is similar to paying bills; it’ll only take your tenants a few minutes.
Once payment has arrived, you’ll receive an email notification. You can then click on the link in the email, which will transfer you to your bank’s login screen. Upon logging in, you can accept the deposit.
Most of Canada’s large banks offer E-transfer as a free service. Check out these links for more bank-specific information.
While E-transfer is fast and reliable, it’s also susceptible to fraud and payment errors, which can be difficult to reverse.
While many peer-to-peer (P2P) money transfer apps exist, not all are available in Canada. For example, you cannot connect Venmo, Zelle, and Apple Pay to a Canadian bank account. So, if you want to use a third-party P2P, PayPal is one of your only options.
PayPal was the original peer-to-peer (P2P) payment platform, so most tenants will be familiar with it or even have an account. The app is easy to navigate, and most payment types are free of charge.
A notable drawback is that receiving the funds in your bank account takes more time than direct deposit and E-transfer. First, you’ll have to wait for the rent payment to arrive in your PayPal account. Then you’ll need to transfer the amount directly to your bank account. The whole process can take a week.
In addition, PayPal doesn’t offer many features or much in the way of flexibility. You cannot set auto-reminders for tenants, customize payment options, etc.
Rent collection software caters precisely to landlords’ needs. It streamlines most aspects of the rental business: tenant screening, accessing credit reports, advertising rental properties, and rent collection.
To set up online rent collection, your tenants typically provide you with their banking details, which you can then use to set up PAD payments.
Property management software provides a broader array of features compared to other apps and platforms. These can help you better track payments, customize tenant payment options, set up reminders for upcoming rent, issue late payment notifications, etc.
The only downside is that it may be too expensive to justify if you run a small rental operation.
As part of our Rent Guarantee for landlords, we offer landlords and property owners pre-authorized debit (PAD) services at no extra charge. This add-on service complements the Rent Guarantee program, which ensures landlords receive their monthly rent when tenants encounter financial problems. You’ll need the following information to apply:
Once you and your tenant are approved, we’ll send you a link to connect your bank accounts to our system. From there, you can set up a recurring payment that is taken directly out of your account. Say goodbye to the hassle of dealing with cash, cheques, and money transfer apps!
Offering tenants fast, easy, and reliable methods of online rent payment can go a long way to ensure they pay you on time. Ensure you specify how tenants should send rent payments in your lease agreement. It’s also wise to include more than one option to give your tenants some flexibility in case they experience issues sending payments.
Try SingleKey’s Tenant Credit and Background Check report to add an extra layer of security to your payments. Our detailed metrics will help you find a high-quality and reliable tenant for your rental property.