There seems to be a boom these days of online payment apps that have the goal of making our financial lives easier, but a simplified peer-to-peer payment platform isn’t always the best choice for your property rental business. When you consider the attributes of rent collection that are important to you as a landlord or property owner – features such as transaction security, documentation, and reporting, the benefits of choosing to collect rent with an online rent collection platform that specializes in rental property management is clearly the safest way to protect your rental business.
While accepting rent payments with Paypal, Venmo, ZellePay or any of the other generic mobile payment apps may seem easy and secure, there are risks associated with these types of payment transactions and it makes financial sense to choose security over convenience. Additionally, a payment app that’s not specifically designed for rent collection won’t have the added features that make a busy landlord’s job easier, for instance, automated record-keeping and late rent payment reminders. Let’s review a few of the popular peer-to-peer mobile payment platforms.
PayPal for Rent Payments
PayPal has been around since 1999 and basically revolutionized the digital wallet. Since PayPal appears to be everywhere, it would seem a no-brainer to use PayPal for rent collection if only because most people already have a PayPal account. But in order to accept rent on PayPal, you need to establish a PayPal Business account in which case PayPal will charge a fee per rent transaction that’s a percentage of the funds being transferred.
Since personal PayPal accounts are free, some landlords may think it would be cheaper to simply accept rent payments into their personal accounts, but doing so is actually a violation of PayPal’s user agreement. When you consider the sizeable dollar amounts involved in rent collection transactions, your personal account could be flagged by the compliance or fraud division in which case your funds can be frozen. An important note in PayPal’s terms asserts that if any payment to your account is flagged as suspicious, they can hold those funds for up to 21 days from the date they were received.
Another drawback to PayPal is that the funds you receive are not deposited directly into your bank account, instead, they go to your PayPal account and you need to initiate a transfer to send the money to your bank. Bank transfers typically take a day which delays your access to the funds.
PayPal is fairly limited in terms of monitoring payments and managing your rental business, and it’s important to note that if you are struggling with an unreliable tenant – it’s impossible to block partial payments and impose late fees.
Venmo to Pay Rent
Venmo payments launched in 2009 and was designed as a way to transfer small amounts of money to family and friends to facilitate splitting bills for things like movies or dinner, tickets to events, or even a birthday present for grandma. The Venmo payment app wasn’t designed to handle large financial transactions like monthly rent payments and Venmo doesn’t have a business account option.
When you initially sign up with Venmo, a user’s total transactions are limited to no more than $299 until their identity is verified. After their identity has been approved, users can transfer a maximum of $2,999 but that has to be over a 7-day period. Clearly this financial restriction alone would make Venmo a poor choice as a rent collection tool. And while Venmo may seem like a quick and easy way to accept a rent payment, the Venmo user agreement is clear.
‘You may only use Venmo to pay for goods and services through mobile websites or apps that are approved to offer Venmo as a payment option.’
As such, the legality of rent payments would be questionable on Venmo. As a landlord running a business, it makes sense to manage and accept every payment transaction lawfully. Similar to PayPal, you could also find your funds frozen if your regular monthly payment transfers catch the attention of the compliance or fraud group.
Another prospective problem with Venmo payments is that funds can be easily, accidentally misdirected. The payer (the tenant) simply puts in an email address or phone number and if they happen to transpose a letter or mistype a character, the money could be transferred to the wrong person. In this case the tenant will believe they’ve paid their rent – and on time, but from the landlord’s perspective the rent is considered late.
Finally, it’s important to note that with Venmo, rent payments land directly into your Venmo account and the company charge a 1% fee with a maximum of $10 per transaction for an immediate bank transfer, but you can also go the 3-day transfer route for free.
With Both PayPal and Venmo, a landlord has no legal remedy if there is a payment problem or in the case of misdirected funds, if a payment isn’t received at all. PayPal’s business account protections tend to favor the ‘buyer’ which would be the tenant if a dispute arose regarding the transaction. Neither PayPal nor Venmo have terms that definitively protect a landlord or property owner, and Venmo makes that very clear.
‘Venmo does not offer a buyer or seller a protection program for any transactions conducted using the Venmo app or Venmo.com, regardless of the nature of the payment (or charge)’.
Zelle Rent Payments
ZellePay is another online payment tool that allows a user with a bank account to transfer funds to another user within a matter of minutes. All a tenant needs to initiate a transaction is the other party’s cell phone number which links to the corresponding ZellePay account at the bank where the funds will be delivered. The thing that really differentiates ZellePay from a standard bank or wire transfer is that the transaction is free to both parties.
A major drawback to accepting ZellePay for rent is that it’s currently only accepted at major banking institutions. If the financial account for your rental business is with a small independent bank or a credit union then ZellePay wouldn’t be an option for rent collection.
ZellePay also imposes transfer transaction limits on individual accounts that vary anywhere from $500 to $2500 per day based upon a user’s average monthly bank balance. As such, your tenant may have to pay their rent over a period of a few days which is a hassle for you, and most likely doesn’t match the terms of their lease.
It’s important to note that Landlords are not able to block an incoming payment from ZellePay. If the tenant has been late with rent payments or is behind several months and you’ve started eviction proceedings, the issue of partial rent payments unexpectedly landing in your bank account can complicate that process. Additionally, ZellePay simply transfers money, the payment platform doesn’t offer an option for implementing late payment policies or tracking individual tenant records to determine if a specific rental property’s late payment deadline has passed.
Benefits of PayRent for Rent Collection
As an online payment platform specifically designed for rent collection, PayRent offers several benefits to Landlords for safely managing their rental properties and securely collecting rent. PayRent starts by allowing the property owner or landlord easy access to quickly build a profile and add their rental properties, including individual rent collection policies per property that PayRent can track and enforce so you have one less thing on your plate to manage.
Additionally, PayRent can accommodate and track a multitude of other financial payments relating to your rental unit, such as security deposits, assessing late fees, and even parking payments. PayRent offers an Excel reporting feature that allows a landlord to download a file of all transactions in order to build invoices and keep records for each individual tenant.
With PayRent there’s no contract. Landlords can choose from three different service plans including one that requires no monthly fee, just a reasonable charge per bank transfer. Transaction fees can be easily passed on to renters, split, or paid for by the landlord. The benefits of using PayRent are not limited to just supporting the Landlord, there are lots of perks for tenants too.
Tenants that use PayRent for rental payments have the added flexibility of paying their rent with a credit card and the ease of making payments through a mobile device like their smartphone. For payment platforms like Venmo and ZellePay, the funds have to be available in their bank account at the time the payment is initiated. Tenants can also set up automatic recurring payments to ensure that the rent is paid on time, every month, without ever having to think about it. They can also request an emailed receipt after every completed transaction to confirm the rent’s been paid.
The Take Away
The digital wallet age is here and there are a variety of payment platforms available to simplify and expedite our daily and monthly financial transactions. Some of the most popular frontrunners, PayPal, Venmo, and ZellePay would seem to offer both landlords and tenants speed and convenience for rent payment transactions, but these generic payment apps can’t provide the security and control that an online property management payment solution like PayRent delivers when you’re a property owner.