What’s The Best Way To Collect Rent?

Over the years of being a Landlord I’ve had different 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

• Cash
• Direct debit
• Two cheques per month- one from social benefits and the second from the tenant to cover the shortfall
• One complete cheque in the post
• Direct debit from letting agent

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

Two cheques per month
Ok, it goes without saying that waiting for 2 cheques per month was by far the worst and most irritating method of collecting rent. It made everything so complicated. But it did have a HUGE advantage, and that was, housing benefit was paying 90% of my tenant’s rent direct to me. So, worst case scenario was that if my tenant failed to cover rent, I would still get 90% of it.

Of course, the law has changed since, and tenants on housing benefit now receive payments directly.

One cheque
Cheques in the mail are somewhat annoying for a few reasons. Firstly, cheques need to be deposited into my bank account, which means I have to make time to go to the bank. Also, cheques take 3-5 working days to clear. That’s no fun.

Any payment which is posted through mail 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”

Direct debit
I think most Landlords would vote this as the best method. While I think this is one of the best methods of receiving rent, I don’t think it necessarily is. Why? Well, banks don’t operate on weekends or public holidays, consequently rent can potentially be delayed as cash transfers get halted. For example, it can take 3-5 days for cash to transfer from one account to another. So if rent is due on the 5th, and the direct debit is arranged to leave on the 1st of each month, it should arrive in my account by the 5th. But that’s if the 1st-5th are all weekdays, which won’t always be the case. On bank holiday weekends, their can be further delays. From my experience, money can be delayed by up to 5-7 days because of banks being idle during weekends and public holidays. If you’re an impatient fucker like me, it’s not always the best method of receiving rent.

Having just dribbled all that negative jive, I must confess, it is the most convenient method.

Cash
Of course, cash wins it for me. I have one tenant at the moment that pays all in cash each month. The only catch here is that I have to collect it, but it seriously doesn’t bother me. The place isn’t far from my house, and it only takes 5mins of my time. There’s no messing around, and I get payment on time, every time. It also gives me an opportunity to see what condition the property is in, which is a HUGE bonus.

Landlords, how do you currently collect rent, and which method do you most prefer?
Tenants, how do you pay rent?

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Talk / 10 Comments left so far

Dan Harrison wrote this on 2009-05-22 10:24:47 My tenant set up a standing order into my account for rent. However, that's not much different to sending a cheque really (unless the sending bank is part of the fast BACS transfer scheme).

Dan 1

Jools wrote this on 2009-05-24 20:48:58 What about the big F*** off dog and the mac 10? Surely a more reliable way of achieving yield?

Jools 2

Michelle Green wrote this on 2009-06-04 07:06:40 I am thinking about accepting Paypal as a means of collecting rent. Yeah there will be fees, but no more than a property management company would charge I suspect. 3

Steve wrote this on 2009-07-01 15:30:56 Sounds like you've got some tenants on government assistance like I do. For me this has been a blessing and pain all at the same time. I've intentionally priced my rents higher than the maximum living allowance ($620/month where I live) so I can attract better quality tenants. However, I'm often left with a shortfall even though the tenant only needs to come up with less than $100.

Worse yet most of these tenants don't seem to have bank accounts (I didn't even think this was possible!). So this means I can collect cheques direct from the tenants (If they bank), get a direct payment from social assistance, then make up the shortfall from the tenant, or collect cash.

While I've often had to deal with bounced cheques, I find cash to be incredibly inconvenient. While grabbing rent once a month shouldn't take more than 30 minutes on paper, it's next to impossible to coordinate schedules for all of my tenants and me. I end up making multiple trips and it can sometimes take days to coordinate times. Which leaves me with the issues of getting my money in the bank before mortgages are due.

I like cheques. If I have post-dated cheques from everyone I make one trip to the bank on the first and all is done. Easy. 4

Tariq wrote this on 2009-07-28 19:54:02 Hi,
I am pretty new to all this and have previosley received rent in cash however, i am now considering standing order with a new dss tenant.

Are there any tax implications with receivng rent by standing order?

Many Thanks 5

The Landlord wrote this on 2009-07-29 07:29:20 Hi Tariq,
You should pay the same amount of tax regardless of which method you choose to collect rental.

Kind regards 6

John wrote this on 2009-07-30 11:19:43 Do you need to set up as a company to arrange rent collection via direct debit? 7

The Landlord wrote this on 2009-07-30 11:29:31 Nope, you don't, John.
Just give your tenant your account number and sortcode, and that should be fine.

Cheers. 8

NewLandlord wrote this on 2009-09-20 20:32:18 I have student tenants so I either take three cheques a year (just after student loans are paid) or standing order.

Are you sure you are talking about direct debit? I asked my bank about them and they cost £2000- £3000 to start up because the vank guarentees your payment and puts the onus on the tenant (hence the large setup fees). I think what you are describing is the standing order. 9

Sherrie wrote this on 2009-10-28 01:19:51 I have a potential tenant who has a history of late rent payment, I want to set up a method to collect directly from the tenant's credit card. Does anyone know how this can be done?

Thanks. 10

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