Over the years of being a landlord I’ve had tenants pay me rent in various ways. In most cases, the method of payment was based on their personal financial circumstances.
Various ways I have received payment
- Standing Order/Direct Debit
- Housing Benefit
I’m not entirely sure if there are other ways of receiving rent, but I think I listed the most common methods. Then again, I’m sure there is a network of seedy landlords accepting payment in forms other than money. Maybe when I get a little older, a bit wrinklier, and a lot less attractive, I’ll be jumping on the bandwagon.
I’m sure each landlord has thier own personal favourite for different reasons. While I can guess which is the most desired method, I’m sure some landlords have their own unique circumstances which will sway from the obvious choice.
My analysis of each payment method
I really don’t like the housing benefit system is setup.
I used to receive a cheque every 30 days on behalf of my DSS tenant. However, it wasn’t the entire amount, it was only the amount the tenant was illegible to receive. The shortfall was then covered by the tenant. So I was receiving 2 payments every month. It made everything incredibly difficult to track, especially because the council paid every 30 days, and not PCM (Per Calender Month), which is how most landlords calculate their rates.
Cheques are kinda’ irritating and extremely old school, that’s why they’re becoming extinct. But you still get those die hard fans that just won’t let go.
The problem with cheques is that they need to be posted in the mail. Once we receive it, we need to deposit it into a bank, not to mention the 3-5 working day clearance time. The entire process is just long, and that’s why this is my least preferred method.
Needless to say, this method opens up a huge window of opportunities for tenants to lie through their teeth. It’s just inviting them to say, “The cheque must have got lost in the post. I sent it, I swear” Yeah, right, asshole!
My favourite method because they’re easy to setup and reliable. Also, electric transactions leave behind a foot-print, so it’s incredibly easy to track/prove what has been paid and when.
Standing orders payments in general are typically used to make rent payments or payments to charities (quite the contrast!). This is when a tenant tells their bank or building society to make regular payments to a particular bank (i.e. the landlords bank). They’re incredibly easy to setup these days- most banks allow you to it online.
Standing Orders are often confused with Direct Debits, but there are distinct differences, but in most cases, tenants should be setting up a Standing Order to pay the landlord. The main difference between the two is that with a direct debit you tell your bank or building society to let an organisation take money from your account, so for example a monthly gas bill (which is likely to change every month, depending on usage). A Standing Order is fixed, you set them up to pay exactly the amount you choose, not the amount you owe to an organisation.
I’ve personally never received rent by Direct Debit, they’re usually used by organisations, not individuals. In fact, it’s very unlikely that a private landlord will setup a DD.
Lettings agents my require tenants to pay them by direct debit (assuming an agent is managing the rent) or a landlord that has multiple properties and operates under a limited company.
Companies prefer DD’s because it’s cheaper for them.
For landlords to setup a DD (if they’re able to) they need to contact their bank and find out the appropriate steps.
I’ve had some tenants pay directly by cash before. I have no idea why, but I didn’t ask any questions (it’s always best not to).
It’s not the most ideal method, but I didn’t mind too much. The catch here is that I had to collect it every month (they didn’t want to deposit the money into my account), but he didn’t live too far, so it was cool. The added bonus here was that it gave me an opportunity to see what condition the property is in. So I was effectively doing a monthly inspection. However, one of the major drawbacks with cash payments is that unlike electric transactions, it doesn’t create a foot-print (maybe that’s what you want though… but that’s your business!), so you should create a receipt, which can be relied upon if there are any disputes,
For me, there’s only one clear winner, to accept rent by Standing Order. It’s easy, reliable and secure!
Landlords, how do you currently collect rent, and which method do you most prefer?
Tenants, how do you pay rent?