Collecting Rent Online: A Trend that is Here to Stay
The move toward collecting rent online will continue to gain momentum as digital banking services become increasingly convenient and secure. Tenants enjoy the time-freedom of the arrangement, while landlords enjoy the accuracy of these systems and the ease with which collecting rent online allows them to manage their accounts.
Most real estate experts agree that the trend toward collecting rent online is about to spike off the charts. With more than 35 million Americans paying rent each month, the market for such systems is certain to remain strong. Just four years ago, more than 90 percent of Americans still paid their rent by writing a check, while just 6 percent handled this monthly task online. As mobile banking expands, these figures are almost certain to reverse themselves. In a matter of a few years, the option of collecting rent online will be considered an essential part of rental agreements.
From the point of view of residents, the move toward collecting rent online offers a welcome convenience. This is especially true for college renters, many of whom have their rent paid for by their parents. It is much easier for parents to pay rent electronically, at any time of day or night, than having to send a check through the mail.
In addition, the option of collecting rent online helps tenants avoid late fees. Our over-scheduled, distracted society means makes it much easier to miss a rent deadline, even for the most conscientious tenants. It also allows tenants to pay on time via credit card if cash is tight and pay the balance later. Paying online via credit card also gives tenants the option of acquiring various reward incentives they would not receive if they paid by check.
Landlords favor collecting rent online, because it lowers operating costs and improves cash flow. For a large complex, traditional methods of collecting rent require a significant investment of time and effort. These include processing paper checks, making sure the payments are posted in a journal, filling out deposit slips, and taking time to go to the bank to deposit the money. Collecting rent online automates the entire system, freeing up countless hours of work. An online system also tracks payments quicker and with more accuracy. Bad checks are identified very quickly, which reduces the risk of fraud.
Collecting rent online also helps close the deal. In some instances, landlords lose good renters because they are waiting for a security deposit from their previous landlord. Offering an online option helps close the vacancy much sooner than traditional payment methods.
At the same time, the landlords and property owners should be recognize that transition to an online system may entail some challenges. The administrative changes involved in the change can be frustrating at first for staff members. For example, integrating the new system with the current software used to manage accounting and property management must be coordinated. In some cases, the office still employs somewhat dated software that possesses far less flexibility than web-based platforms. If the two systems remain poorly integrated, landlords may find that the time they save in collecting rent online is spent in other tasks, such as reconciling account ledgers or having to enter payments manually into the existing property management software.
Still, as online providers create new techniques that provide seamless integration, these glitches will fade.
Transaction fees also present a challenge for landlords as they implement their decision to begin collecting rent online. If tenants pay by credit card, the typical transaction fee of approximately 2% to 3% may affect profit margins. For larger complexes, the fees can add up to significant amounts. Since research indicates that renter dislike paying convenience fees if those fees are added to the cost of rent.
Given the fact that neither side enjoys paying convenience fees, the market is likely to correct itself via shared fees. Alternatively, landlords may find ways of building in the cost of transaction fees to other parts of the rental process, so that the cost appears more palatable to new renters.
Even in the face of fees, one thing remains certain with regard to collecting rent online: the process is here to stay. College students have already embraced the idea fully, for example, which portends a growing trend for the future. As the transition to a completely digital society intensifies, collecting rent online will simply be a part of the mobile, digital economy.
