PropertyManagementMaven: Tenant Bank Drafts Save Landlords' Profits and Simplifies Collections

I know I'm not the only one out there that has a nagging feeling in their head when the beginning of the month rolls around.  I pro-rate my tenants so they are all due on the first, and typically give a 3 day grace.  There's the select few tenants that pay on the 1st.  That breed of tenants has mostly vanished.  The remainder tend to push that grace limit to it's maximum and come in on the 3rd or 4th of the month.  The whole time I'm worried if they will be in at all.  If the 5th rolls around and nobody is around, just the thought of notices and eviction sets me on fire because I know it's going to be a painful process no matter what and at the very least will strain the landlord-tenant relationship.

The scenarios may be:

1. The tenant just forgot to bring it by, or was out of town.
2. The check got lost in the mail (I've heard this more times than I think is really possible).
   
3. This just happened to me this month, once the mail reached my office it ended up in a different co-workers box, so while the rent arrived on the 4th, I didn't get it until the 7th.
4. Maybe the tenant really is looking to move.

In most cases it's just an accident that the rent didn't make it on time.  Most tenants want to stay and they just aren't prioritizing their bills well.  Even so if you've begun the eviction or notification process for non-payment it's creating a strain on your landlord/tenant relationship and it's costing you time and money.

There's a lot of companies out there that have similar practices to landlords in collecting a recurring fee for services.  The power company, the gas company, cable and satellite companies, and most municipal utilities such as garbage, water, and sewer.  What have all these companies discovered?  Yes, automated bank drafts (ACH) save them money, collection efforts, and often get them their funds faster!  Why haven't landlords jumped on this ship yet?  The answer:  some landlords have, most haven't however, but why is that?  My research tells me that the municipalities and big utility companies all have the means to go through the extensive process of getting it setup and automated with their banks whereas landlords do not.

I'm here to tell you that Landlords now do now have the means!  It's MUCH EASIER than setting up a bank account or merchant account, and the only prerequisites are a) You must own or manage property for rental purposes, and b) You must have a bank account.  If your a landlord reading this I'm absolutely certain you qualify.  The setup process is so simple now that any landlord could be accepting ACH tomorrow.

What does it cost?  I've seen processors charge from $0.50 (plus add'l monthly fee's and percents) up to $5.00 per transaction.  Rentec Direct charges a flat $2.00, and no percentage or monthly charges.

HUGE BENEFITS!  Aside from being able to sleep better knowing that the rent payments are going to happen automatically, one enormous benefit of doing automated ACH is longer term tenants.  Studies have shown that services that are paid automatically are less likely to be cancelled.  This is one of the very reasons the utility companies push ACH.  For a landlord this means less turnover.  How would you feel if your vacancy rate went from 30 days/year down to 10 days/year?  It's possible.  Another big benefit is your payment always gets priority.  Set the deduction day the day following the tenant's paycheck and generally banks process electronic payments (ACH) before paper checks.  You get your money before anyone else.

Sounds great, where do I signup?  I would suggest you do your research and pick a reputable company you can feel comfortable with handling your funds.  Go to Google and just type in tenant ach and see what you get.  There's a number of companies, including ours, that provide tenant ach services.

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The author is a founding member of Rentec Direct.  Rentec Direct provides property management software which includes ach for landlords and tenant screening.  While the above article may speak of products we offer or use screenshots from a product we offer, we encourage landlords to do their research and make up their own minds when selecting a new product.  That said, we of course welcome ActiveRain members with open arms.