“Hey, Mr. Landlord. Can I pay my rent in cash?”
Do you ever get this question from your tenants?
(Many landlords do. And many landlords cringe when they hear it…)
It’s only natural to cringe. Nobody likes to carry large wads of cash around. Why not?
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Because you don’t feel safe walking around with a lot of cash on you.
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Because if you lose it, it’s gone forever.
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Because it’s very easy to start spending it before you deposit it.
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Because it’s harder to keep track of for taxes than normal checks.
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Because you might have to write out receipts for your tenants, instead of tenants just using checks.
So to fix these problems, many property managers will simply outlaw cash payments. They will tell the tenant verbally, or in writing through the lease (or the rules for the building etc.) that rent payments will not be accepted in cash.
But do you really ever want to tell your tenants, “I Don’t Want Your Money”? Heck no.
I imagine every property manager on the planet (all the successful ones anyway) would want to make it as easy as possible for tenants to pay their rent. And the same goes for any other money they owe you as their landlord.
And, yes, there are many legitimate reasons for tenants to desire cash payments:
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Perhaps they are college students who are picking up part-time jobs
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Perhaps they are self-employed, with customers who want to pay in cash (maybe as handymen for other landlords?)
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Perhaps they don’t trust the banking system (like my grandma?)
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Perhaps they have simply “made up my mind” about the whole thing
Of course, there may be some illegitimate reasons as well, but you’ll hopefully be able to catch-on to any shady money-laundering schemes during your screening process with potential new tenants.
Make Cash Payments Easy for Them, Great for You
So, in this installment of our weekly “Web & Tech” series, I’ve got some advice about how to make cash payments easy for your tenants (and great for you).
I don’t have a bold new app or website that will help your business…
…but, instead, here is a way to use some older technology to rid yourself of all concerns for processing cash payments.
(It can also be used as a free way to accept all forms of payment directly into your bank account.)
It’s called a good old-fashioned ATM card.
No – I’m not suggesting that you should give your personal ATM card to your tenants.
Rather, I am suggesting that you give them a separate ATM card, for your personal bank account’s benefit.
I can hear you saying:
“What?! That’s crazy!”
Well just waitaminute. Hear me out…
Most banks will give you the ability to set a daily limit on your ATM withdrawals. So what amount do you think would be a good limit to set on any ATM card given to your tenants?
That’s right – ZERO dollars!
Zip. Zilch. Nada. Nothing.
Your bank should be able to do that for you. Specifically, they can create an ATM card that cannot be used to withdraw any money from your bank account. But the card can be used to deposit money into your bank account.
Who wouldn’t want to give a card like that to tenants who already want to deposit money into your account?
Your bank certainly wouldn’t want to obstruct this reasonable process. Indeed, banks want to put as much money as possible under their control. This arrangement allows them to make more loans, charge more interest, and make more money.
And because your bank wants these inflows of cash, it will generally give you an ATM card with $0 withdrawal limit (and an unlimited deposit limit) for free.
You can ask for as many of these cards as you desire – even one for each tenant in your portfolio. Then you simply give the card(s) to your tenant(s).
Continue working with the bank, in order to give the tenants an easy-to-remember 4-digit PIN number, and print out a list of local ATM’s they can use for depositing money into your account.
Note: Not all ATM’s allow you to deposit money; some are simply for withdrawals.
The Benefits of Giving Tenants Their Own ATM Card
Once your tenants are up-and-running with their cash deposits, you will surely find the service to be quite convenient.
Some of the advantages of tenant-related ATM arrangements include:
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You never have to carry cash on you
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You never have to take the payment to the bank and deposit it – because your tenant does it for you
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The payment shows up instantly in your bank account, so you don’t have to wait several days (as with other rent collection services)
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Tenants can also use the ATM for other forms of payment (checks, money orders, etc.)
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The tenant can use his ATM receipt in case of any disputes for rent payment
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There are no transaction fees (unlike other electronic forms of rent collection)
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The deposit goes directly onto your bank statement, for tax tracking purposes
Sometimes a bit of bureaucratic paperwork is required for setting-up the ATM card with your bank. And it may also require a tenant to make several attempts for his first deposit, since some people have never made a deposit in that fashion. But generally, once the system begins to work, it continues to work marvelously.
Just be sure to remember this important nuance…
When tenants use the ATM card to deposit money into your personal account, they may be able to see the account’s balance. Although they cannot withdraw any funds, they may find themselves saying:
“Boy, this landlord makes a lot of money!”
If you want to avoid tenants saying something like this, then you may want to set up the checking account so it automatically “sweeps” all funds into a separate account each day. Or you can simply use the account to collect rent – without placing any other funds into it.
One Last Thing!
Oh, and I have one final tip about putting multiple tenants onto a single ATM card…
Make sure you can tell which payment goes to which tenant. If all the tenants in your building have the same rent, it may be difficult to identify which ones have paid and which have not.
Two simple solutions to this scenario would be:
Vary your rents by a couple of dollars for each tenant, thereby making it easier for you to identify which unique payment comes from each unique tenant.
Ask the tenants to contact you with a text/email/phone call saying they paid.
In a worst case scenario, the faithful tenant will have an ATM receipt showing he paid his rent – but you don’t want to track them down to verify it.
Talk to Your Tenants Up Front – Early in the relationship, inquire about how they would like to pay their rent.
Investigate with Your Bank – Investigate what payment services your bank offers. Some banks may not realize they could offer this. (Or, occasionally, they may have an even better service!) A good relationship with your bank really helps.
Find the Easiest Way – Identify the easiest way for your tenants to pay you. Making the process difficult for tenants will only increase the chances that they won’t pay you.
Consider the Value of Your Time – Is it worth your time to go to the mailbox each month, knock on doors and/or chase tenants for the rent? Wouldn’t it be worth paying (even a little?) if you can put a system in place that frees up all this time for you?