Joseph is CEO of TenantCloud, a cloud-based property management solution that helps landlords maximize revenue from rental properties.
If you haven’t been to the office in months and have added “WFH” to your lexicon, then you’ve probably added some new technology to your daily routine. While there are tons of options for working remotely, sometimes the real estate industry struggles to keep up.
I was around to witness when real estate missed the big technology wave after 2008 due to a general lack of enthusiasm. Unsurprisingly, when real estate values were rapidly depreciating, the last thing people wanted was technology to make it happen faster.
But times have changed, and we have since introduced tools that streamline business, helping property owners make money doing less. For everyday landlords and large property management companies alike, there are few things to be aware of when moving forward with technology.
The days of calling the local newspaper and creating an ad for your vacancy have passed. Now, potential leads are at your fingertips. The typical players in this space — Zillow, Craigslist, Facebook Marketplace and Apartments.com — are typically paid for per listing, though some, like Rentler and Facebook Marketplace, offer free options as well.
Companies like Apartment List and Zumper can give your listing a boost and invoice you based on the number of leases being placed. This usually works better for property managers of multifamily apartments than small, DIY landlords, since the average price per lease is around $350.
Other options create the ability to syndicate listings from a single management platform. Such companies have a manifold of additional functions, so applicant leads and listings are not their main focus. Companies that offer this include Yardi, RealPage, AppFolio and my company, TenantCloud. Pricing varies, but is often based on the number of rentals units under management (around $1 per unit).
After listing a property, the next issue is the rental application. Many landlords are learning that going digital is great, but disruptive to the normal process of looking at applicants. Since most listing sites will now include the option for accepting digital applications, the key is finding one that meets your needs.
For example, if you have several properties, you should select a tool that allows you to create application templates that you can customize while still ensuring that applicants all get the same application (shout out to fair housing laws, which should be taken more seriously than ever).
Think about fees. The type of fees often charged in connection with rental applications include the application fee, a processing fee and a screening fee. Small landlords often combine everything into one fee. You can continue to charge fees however you did so in a paper form; you just need to ensure your rental application software enables you to create and customize fees, who pays them and when the applicant is charged.
Collecting Rent Online
Collecting rent online can be such an advantage but it does come at a cost, so understanding how it works is important. Typical online rental collection platforms will usually also handle listings, applications, accounting, maintenance management and lease management. But pricing will vary when it comes to rent collection and how the tool processes it. If you or your company charges tenants a convenience fee for paying rent online, you can easily add that fee, but remember that’s in addition to fees described below.
Types Of Fees And Who Pays Them
Three standard types of transactions are credit card fees, debit card fees and automatic clearing house (ACH) fees. Most transaction fees are charged to the vendor, which in this case is the landlord or property manager. Most platforms allow you to create a service charge to the tenant to cover the cost, but you will need to make sure to set this up. Credit card fees are typically 2.9-3%, debit cards are typically 1% and ACH vary, but are usually a fixed fee ($0.50–$2).
All these fees vary, and if you choose to use a payment platform rather than a rental platform, the fees will likely be the same. ACH will almost always be the cheapest option, but it is a government-regulated option for sending money from one bank account to another and it tends to be slower. Typical ACH transfers take between two and five business days to move from your tenant’s bank account to yours.
What Does All This Mean For Your Tenant?
Your tenant will be charged, at the least, a small transaction fee for paying rent online, and if they want to use a card then their fees will be higher. If only those were the only things to understand about collecting rent online, but that often isn’t the case. As a landlord, you need to be prepared for the issues that can arise with online rent collection. Although it’s worth it, you will need to be aware of what nonsufficient funds (NSF) reverses, and even fraud, can entail.
NSF happens when a tenant pays rent via ACH but doesn’t have the money in the bank when the payment is triggered. The bank goes through the whole process to only rake it all back. There are often fees all around for this type of reversal. If your tenants are financially sound, then this is a rare occurrence.
Fraud is more common with larger property management companies but is now becoming more common for small-time landlords. As DIY or property managers processing the payment, you won’t know the fraud is occurring yet and will move funds to your bank account. In a couple of months when the fraud victim realizes their money has been used to pay the fraudster’s rent, the property management company can be required to return funds. It’s a rare occurrence, but it does occur, so it’s important to know it.
Still, the convenience of managing your rentals online far outweigh the risks associated. Technology has been created especially for the purpose of making a landlord’s life easier, and it’s time to take advantage of it.
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