Jonathan Folicia
Every landlord has a unique story and reason to buy and rent property. But the main reason real estate investors rent their property, such as ultimately providing retirement and providing someone with the best place to live is to generate rental income.
There are many ways to accept rent payments, each with its own advantages and disadvantages. Here, turbo tenants break down the risks that rental businesses may face when they accept rents with Zel, Venmo, cash or cheques.
Zel’s risk
Zell sells himself as the best way to send money to friends and family, and tenants may want to use it to send monthly rent payments. Zelle works directly with banks, so its functionality depends on whether the bank (or tenant) accepts Zelle or not.
If you accept Zelle, each bank has a limit on daily and monthly payments. These limits can be as low as $1,000 per day and as low as $5,000 per month. If your tenant’s bank does not accept Zel, the restrictions will be even more stringent, with a $500 weekly limit. Zell’s payment limit will certainly complicate collection capabilities, as the median rent in the US is $1,379 per month, according to a recent apartment listing report.
Beyond the limits, Zell is also risky as tenants could accidentally pay the wrong person. Zelle payments are not easily tracked by businesses, and partial payments pass immediately. Zelle also focuses on fraud.
Benmo’s risk
Venmo is a ubiquitous payment app that everyone uses to split pizza with their friends, how does it work as a rental collection service? Venmo has many issues, and one of the biggest issues is that Venmo charges a 1.9% business fee for every transaction.
If you charge a median rent of $1,379, it reaches $26 a month from your revenue. Additionally, Venmo charges consumers an additional 3% fee to transfer money using a credit card.
Venmo makes it easy to withdraw tax forms, but instant transfers cost up to $15 and there is an additional charge. Like Zell, Benmo can complicate the eviction process as tenants risk accidentally paying the wrong person and they don’t block partial payments. Venmo does not allow recurring payment options, so tenants will have to make new payments each month, which can lead to delays in payments. Venmo is a versatile payment app and is not tailored to property management, so it does not have useful rental features such as automatic deferral fee calculations.
Another notable drawback of Venmo is that it is impossible to cancel your payments on Venmo. Their policy does not allow a refund to the tenant if the tenant pays the wrong amount. If it’s unlikely that Venmo has chosen to participate in a payment dispute, they usually side with the buyer.
Cash risk
After reading Benmo and Zel’s risks, you may have thought to yourself that this is all overly complicated. If the goal is to collect rent, why not rely on the tried and true methods of cold, hard cash? Cash does not include any additional charges and banks will not look to deposit immediately. It’s very obvious because if a tenant can’t afford rent, it won’t be able to deliver the right amount of cash.
Conversely, cash definitely carries its own risks to rent payments. The most obvious problem is that you will need to physically collect cash, especially if you manage out-of-state rentals. Cash can be easily left behind and can be difficult to properly document. For example, payments are short in some invoices, but tenants say they claim they paid in full. How do you prove that?
If you have a great platform to streamline rental management and you have digitalised all the other parts of the rental process (marketing, screening, leases, etc.), why do you need to pay cash?
Check risk
A check carries many of the same risks as cash. If it’s easy to put a stack of cash incorrectly, losing one check is even easier. Or, it’s even easier to claim that the tenant sent the check, but “lost it by email” without evidence. Another important thing to keep in mind is that checks are not used much anymore and tenants under the age of 40 may not have a checkbook or are not particularly used to writing and delivering checks each month. That there is.
Another serious risk of accepting rent with a check is that it can bounce off the check and it takes time to even know that it has bounced. This creates extra money and time. This can be a serious headache, especially if you have multiple rental units. The check can also be cancelled by the tenant. Also, there is no automated way to provide receipts to tenants for monthly payments.
This story was produced by Turbotenant and reviewed and distributed by Stacker.
Original issue: February 6, 2025, 3:29pm EST
