MANAGING

The check is on the Internet Payment Tipping Point

By Teresa Bitler bank account or doesn’t trust making his payment by check, he will need or In 2003, elec- want payment options. tronic payments SIDE NOTE — Be aware when exceeded check pay- the time comes to sell that landlords ments in the U.S. for the who accept cash must keep scrupulous first time, according to the records. Failing to do so can negatively Federal Reserve. Three years affect a buyer’s ability to get a loan on later, electronic payments had incomplete rent roll accounting disclo- increased to more than twice sure. the number of check payments. Americans have clearly changed WIRE TRANSFERS the way they pay, and this trend is & MONEY ORDERS not limited to the checkout line at the One option is a wire transfer, like grocery store. Increasingly, tenants the service Western Union offers. It are looking for options when it comes works like this: the tenant goes to one time to pay the rent. of 55,000 agent locations in the U.S. and pays a transfer fee of approximately TRADITIONAL METHODS $9.99 (the fee varies depend- Checks are one of the most popu- ing on where the money lar ways to pay rent. The tenant writes is sent from, where his check and mails it; you find it in it is sent to, and how the mail, process it, and deposit it. The much is being sent). problem is there are so many opportu- He then is able to pay nities for so many things to go wrong cash or, at many loca- between writing the check and depos- tions, use a debit card iting it in the bank, including get- to transfer money to ting lost. you instantly at anoth- In some tenants’ minds, cash er agent location. is a good alternative. For one “It’s quick, conve- reason or another, some ten- nient and reliable,” ants deal strictly in cash, but said Kristin Kelly with the drawbacks for you, the Western Union. “Agents landlord, are obvious. are located in grocery Cash can’t safely be stores, convenience stores, mailed, which means and places where you’re it has to be deliv- already going to be.” ered in person. That’s The process for a inconvenient for you money order is similar. The and the tenant, espe- tenant would bring cash to cially if you are going an agent location, and for a to do it every month. If nominal fee, the agent would a tenant doesn’t have a issue a money order, which

70 March - April 2009 . Personal Real Estate Investor www.PersonalRealEstateInvestorMag.com MANAGING

PROPERTY MANAGEMENT COMPANIES REMOVE the tenant could then send as payment. “PayPal also works really well with PAYMENT HEADACHES If the money order were to get lost in vacation rentals,” Oldenburg added. the mail, the tenant could call Western There are many rental manage- Union with the money order number ment packages, like Renttropolis, that Receiving rent payments is and Western Union would follow up. have online rental payment and mer- time consuming. Even if the ten- Western Union does have other chant facility as features. ant mails you a check every payment options like online, telephone month before its due date, you still and mobile-to-mobile money transfers, AUTOPAYMENT BY DIRECT DEPOSIT need to process and deposit that but these are not available in the U.S. An online service like PayPal check. When you consider other at this time. Kelly expects that at some works well when you have one or two possible weirdness — insufficient point, Western Union will make them tenants who want to pay online. The funds, lost checks and money available. If it does, it could give ten- more tenants you have, though, the orders, requests for alternative ants additional options. more complicated things get because payment methods — sometimes it’s manual. it may seem like more hassle than ONLINE PAYMENTS Direct deposits put rent collection it’s worth. While wire transfers and money on autopilot. Instead of waiting for Property management com- orders may give your tenant more your tenant to pay online, you arrange panies take the headache out of options, they certainly don’t make life with your tenant to have the rent auto- rental payments. “When it comes easier for you. In most cases, you’ll still matically withdrawn from his account to rent, whatever the problem, have to go somewhere to pick up the each month and directly deposited into the property manager deals with money, and you’ll have to deposit it. your property’s account. For the do-it- it,” said Duane Hamilton of H & Online payments let you collect rent yourself landlord, with a few proper- H Properties. “The landlord just wherever you can get an Internet con- ties and limited resources, it’s easier gets a statement each month, and nection. There are several ways you said than done because the process is the money is deposited in their can have your tenant pay online, but more complicated than moving funds account.” PayPal is an online payment service from one account to another. Hamilton adds that with a that most people have at least heard Before funds are transferred from property management company, of, if they haven’t already used it. the tenant’s account to the proper- if the payment is late, the prop- “If someone wants to make an ty’s account, they need to be verified erty manager, not the landlord, online payment, PayPal is one of the and deemed “good.” In other words, follows up. The manager also easiest and safest ways to do it,” said there needs to be confirmation that deals with other payment issues, Michael Oldenburg of PayPal. He adds the tenant’s account is open and that like requests to pay rent online or that he has even used it to pay his own sufficient funds are available. This is send payments by FedEx. rent. done through the Automated Clearing “Utilizing the right property Oldenburg said that as a landlord, House payment network. manager takes all the headaches you can do one of two things. The first As a landlord, you can transfer out of property management is you can create a business account on your funds through the ACH pay- for the landlord, not just when it PayPal and send out an invoice to your ment network yourself, but you need comes to collecting the rent,” he tenant every month when rent is due. to partner with a bank that can process said. “We have leasing agents, The e-mail would include a button that ACH transactions from tenants. The repairmen and landscapers we would bring them online for payment. bank will set up an ACH account, pur- work with. We’re here to make They could pay using a credit card, chase or lease the software necessary having properties easier for land- bank account, or their own PayPal to create ACH files and learn how to lords.” account. transmit files to the network, all while Other regional or national Or, the tenant can log in to his own complying with federal regulations property management companies PayPal account, select the send money governing ACH transactions. that do this are Brewer Caldwell, option, enter your email address and “You can do it yourself, but it’s very GoRenter and Bennett (AZ), pay you from his credit card, bank complicated,” said Ryowon Kim with MemphisInvest (TN) or Retire- account or PayPal account. Either way, ClearNow, an online service specializ- on-Rentals (NC.) Nationally, Real account information remains secure. ing in direct rent deposits. “The bank Property Management is an ideal You won’t see the tenant’s financial you are working with isn’t really going alternative. information, and he won’t see yours. to help you if you have questions, and

72 March - April 2009 . Personal Real Estate Investor www.PersonalRealEstateInvestorMag.com MANAGING

they won’t do a lot of handholding.” It paperwork be submitted at least two drawn, there is no guarantee that land- is possible to have funds automatically weeks before the date of the first with- lords will receive their rent payment. withdrawn and directly deposited into drawal). “Tenants need to have sufficient funds your property’s account, Kim said, but Once set up, rent payments are in their bank account to make the pay- you will most likely need the help of made automatically every month. Cost ment.” a company like ClearNow. The process is $14.95 to establish one ClearNow is very simple. The landlord enrolls account. You need one account for OTHER OPTIONS first by completing a one-page autho- each landlord bank account. If you When it comes to rent payments, rization and providing a voided check are going to receive multiple depos- there are so many options and varia- for the property’s account. The tenant its in one account, it’s an extra $2 per tions that it’s impossible to touch on then also completes a one-page autho- transaction fee. Additional ClearNow every service and resource available. rization and provides a voided check. accounts cost $7.95. There are no start- That’s good news, though, because Usually, if all necessary information up fees and no contractual time obliga- whatever the needs of you and your is provided, the transaction should be tions. tenant are, you’ll be able to find the set up within one to two business days Kim points out that even though right solution. It’s just going to take the (although it’s recommended that all funds are being automatically with- time to do some research.

RESOURCES

Bank of America NACHA – The Electronic Payments www.bankofamerica.com Association www.nacha.org Bennett Property Management www.electronicpayments.org www.bennett2r480-969-1818 703-561-1100

Brewer Caldwell Property Management NewWard Development LLC www.brewercaldwell.com Renttropolis.com 480-834-9200 518-899-5855

ClearNow, Inc. PayPal www.clearnow.com www.paypal.com 866-882-5327

Federal Reserve Real Property Management www.federalreserve.gov www.realpropertymgt.com 801-546-4200 GoRenter www.gorenter.com Retire on Rentals 602-512-8300 www.retireonrentals.com 866-747-7667 Duane or Craig Hamilton H & H Properties, LLC Service First Solutions www.ideahoincomeproperties.com www.svcfirst.com 208-388-3900 866-982-4400

MemphisInvest Western Union www.memphisinvest.com www.westernunion.com 901-871-9029 800-325-6000

74 March - April 2009 . Personal Real Estate Investor www.PersonalRealEstateInvestorMag.com