It’s a digital age – and more and more transactions are going completely cashless. But while businesses, services and online retailers happily accept e-transfers, cards and automatic payments, small-scale real estate investors may still be stuck with collecting paper rent checks – or cash – from tenants.
That amounts to very nearly a clash of cultures, as tech savvy renters used to swiping cards and clicking a mouse are faced with landlords who don’t have the equipment – or the desire – to process rent payments electronically.
But in this situation as in many others, there’s an app for that.
As a recent article from Business Insider reports, the real estate app RadPad, which is designed primarily for browsing housing listings, now comes with new features, including one that lets a renter use a card to pay a landlord with a paper check. It’s a handy service – but it comes with a hefty price tag for the user.
While the Business Insider piece paints landlords who demand paper checks or (the horror!) cash for a tenant’s monthly rent as tech-challenged throwbacks who refuse to get with today’s digital program, there are numerous reasons why small investor/landlords opt not to take credit or debit payments for rent.
Card readers are readily available to just about any small business. And investors are entrepreneurs whoa re eligible for home office and other business tax deductions. But readers and the sites that service them come with fees that a small investor with just one or two rentals might not want to pay every month.
Electronic accounts can be hacked, identities stolen. And although paper checks can bounce, for some, they’re still the most convenient way to collect the rent. That’s where RadPad comes in, with a feature that’s geared specifically to paying rent – not other kinds of transactions. And it seems to be aimed at those who value convenience over savings.
The idea behind the app is simple. A tenant pays the app with a debit or credit card, the app collects the relevant information, and a paper check in generated and sent to the person or company designated by the user.
The landlord receives the check, deposits it and all’s well. There’s no fee to the recipient. They don’t have to own the app or share information other than an address with it. But for the user, costs can be pretty steep.
For debit card transactions, RadPad charges a flat fee, under $5. But if you’re paying rent by credit card, the app charges you 3.25% of the total rent amount. That may not sound like much. But according to Business Insider’s sample calculation, paying a $700 rent under these terms would mean a transaction fee of $22.75. For a rent of $1500, the fee shoots up to $48.75.
Those fees point up the fact that apps like this are severely limited in scope. You can’t pay for other kinds of purchases using the app – or pay other bills. But this kind of technology aims to solve the age-old problem dogging owners of rental real estate: how to get tenants to pay rent regularly and on time.
The existence of these kinds of apps also points up the importance of having a clearly stated rent collection policy in place before a lease is signed. If you collect a lot of rents, it might be worth the effort and expense to set up a form of electronic payment system and make sure you and your tenants can use it correctly. But if you prefer the paper option, make it clear that that’s the rental policy – and you may want to implement penalties for late payments.
To accommodate that kind of policy, tenants may have to spend money. But King Solomon advocates wisdom and discernment in all things. “ If wisdom shall enter into thy heart, and knowledge please thy soul, “ he says in Proverbs 2:10-11, “Counsel shall keep thee, and prudence shall preserve thee.”
While writing a check may seem inconvenient to tech-loving renters, prudent ones may realize that the cost of that hopelessly retro envelop and stamp is far softer blow to the wallet than the RadPad’s costs of doing business – conveniently. (Featured image:Flickr/PaperCat)
Source:
Kane, Libby. “This App Lets Renters Pay Even the Most Old School Landlords By Credit Card.” Business Insider. businessinsider.com. 29 Sept 2014.
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The Solomon Success Team
