All landlords want to collect rent as easily as possible. Only if you collect the rent in full and on time can you secure your cash flow and keep your rental business profitable.
To streamline rent collection, most landlords use a variety of online methods to get rental payments. One popular method that landlords use to collect rent online for free is Venmo.
For many landlords, however, it is becoming more expensive to use Venmo to collect rent. Venmo announced that it will charge transaction fees for “goods and services” from July 20, 2021. So if you are using Venmo for a business transaction, you will have to pay 1.9% + $ 0.10 for each transaction.
Of course, Venmo already allows business transactions and charges a transaction fee of 3%. But some landlords use their personal account to receive rent from tenants – although doing so is against Venmo’s terms and conditions.
If you are a small rental company, how will changes to Venmo’s transactions affect you? Are there any free alternatives to Venmo to collect rent without paying transaction fees?
More about collecting rent at BiggerPockets
The cost of using Venmo for online rental collection
Venmo was never developed as a way for landlords to collect rent. Originally, the peer-to-peer app was intended for people who knew and trusted each other to transfer money. There are no fees for in-person transactions and you can withdraw up to $ 2,999.99 per week. It has thus become common for small landlords to use their personal Venmo accounts to collect rental payments and bypass business transaction fees.
However, using a personal Venmo account to collect rent is against their terms. According to the Venmo website, “You CANNOT use Venmo to accept (or send payments to) payments from another user for a good or service unless expressly authorized by Venmo.”
To move in with Venmo Rent, you need to set up a business profile. Then there is a transaction fee of 3% for every rental entry. Venmo offers payment protection to ensure smooth, secure and problem-free transactions for landlords and tenants.
From July 20th, users can choose a payment option for “goods and services”. In this case, landlords pay 1.9% + $ 0.10 of the transaction fee. Even if the tenant does not select the “goods and services” option, it is still possible for the Venmo AI system to recognize payment descriptions and mark the payment for “goods and services”. There are already online discussions on how to work around this problem.
There is another possibility that Venmo will become more expensive to use. Anyone who wants to make an instant transfer to their bank account now has a transaction fee of 1.5% instead of the current 1%.
The pros and cons of using Venmo to accept rental payments online
Peer-to-peer apps are popular for rent collection because they are fast, efficient and – until now – cheap. Most people are familiar with PayPal, Venmo, Cell, and CashApp for money transfers, so there is usually little or no learning curve for renters to pay rent using these methods.
Compared to receiving rental checks or cash, collecting the rent online saves landlords time. You no longer have to check the mail and go to the bank to deposit money. Then there is the tedious waiting for checks to be cashed and dealing with bounced checks.
However, the use of cash apps or “digital wallets” for rent collection also has disadvantages. Unless you are using a business account, apps such as Venmo and PayPal do not offer payment protection for landlords. If your tenant has a dispute over the rental payment, there is no way to resolve the issue through the payment app. In addition, there may be fees for transferring money to your bank account.
When using Venmo or PayPal to collect rent, there is another concern for landlords: partial payments cannot be prevented. A tenant can pay any rental amount. This can create significant problems if you have a problem tenant in one of your units.
For example, suppose you are trying to terminate a tenant for violating the rental agreement. A defaulting tenant could pay just $ 1 through Venmo to heal or stop the eviction. This means that it could become almost impossible to cancel a tenant if you accept rental payments through Venmo or PayPal.
Being a landlord can be fun – if you do it right
No matter how good you are at finding great rental property deals, you can lose it all if you don’t manage your property properly. Being a landlord doesn’t mean calling in the middle of the night, doing costly evictions, or bothering with ungrateful tenants on a daily basis.
Alternatives to Venmo for collecting rents online
Since payment apps like Venmo are becoming more and more expensive for landlords, it makes sense to look for alternatives. Several apps are specially designed for landlords and property managers. Some are paid property management apps with a variety of features. In contrast, other free apps are designed for rent collection and deposit.
Here are some of the benefits of using a move-in or property management app.
- Rent online for free. Look for trustworthy property management apps that offer free rental collection. Typically, there are no fees for ACH payments or payments with a debit card. However, it is common practice to include a transaction fee for credit card transactions.
- Set up recurring payments. All landlords want to collect the rent on time and in full. Tenants can set up regular payments with rent collection apps so they don’t miss a rental payment. Not only does this improve your cash flow, but it also saves you from charging tenants late fees.
- Instant messaging. Another benefit of apps for landlords is the ability to send instant messages to tenants. This can be to a single tenant or bulk messages to all of your tenants. You can also set up automatic rental payment reminders for your tenants to improve cash flow.
- Maintenance requests. Property management apps also allow you to process maintenance requests. For example, a tenant can send the request along with pictures of the problem. You can then assign the job to a contractor and monitor the progress through the app.
- Process documents electronically. You can also use the best property management apps to manage rental agreements, leases, deposits, and other important documents. With the eSign services, you and your tenant can, for example, electronically sign documents. This saves time as you don’t have to meet the tenants in person to sign documents.
There are many excellent rental apps for property managers and landlords to choose from. These apps allow you to collect rent without paying transaction fees. And because they’re designed for landlords, they include many more valuable features that are specific to the rental property industry.
It could be that rent collection apps like Venmo, Cell, and PayPal follow the same path as paper checks: they were helpful for a while, but tedious and expensive for landlords to use.