Why Landlords Should Not Accept Rent Payments Through Cash Apps

Accepting physical checks for payment is becoming a thing of the past.  Many landlords looking to replace this method without increasing expenses have considered using cash apps such as Venmo or Paypal.  However, where these apps make receiving rent very convenient, they are risky.  Continue reading to understand why landlords shouldn’t accept rent payments from cash apps and what their options are.

Not Great Rent Payment Methods

Physical Checks

OK, let’s start with rent payments through physical checks.  Where this method is familiar, and many landlords look forward to the beginning of the month when rent checks arrive in the mail.  They like the physical nature of holding the rent payment in their hands and taking a ride to deposit it into their bank.  Issues we have found with physical checks are that often there are delays through the mail, and should late payments be due, the tenant will wait until the next month to add it on.  We will get to our preferred rent payment options later in the post.

Cash

Accepting rent payments in cash is not advised for either the landlord or the tenant.  Often, tenants will try to make a partial payment, and the landlord, happy to get anything funds from them, will take it.  This acceptance constitutes an effort from the tenant.  Should the landlord try to evict, they will have to wait until the next month.  Unfortunately, by this time, there is another entire month of rent that is late.  For the tenant, you need proof that the landlord will apply the cash properly.  Cash payments are a perfect storm of “he said, she said” complications because it is not traceable.   We won’t even discuss how unprofessional it is to accept large cash payments for rent in advance.  Just don’t.

Venmo

A very popular cash app that makes it easy to send funds between two people, this app is not ideal for receiving rent payments.  Tenants like it because they can use any form of payment to process their rent, bank accounts and credit cards being the top options.   Venmo is free to use for basic transactions, but rent payments are considered a business transaction, so Venmo deducts a 1.9% fee plus 10¢ for each deposited amount.  There is no option to add this fee to the rent rate.  You’d have to have it written in the lease as an additional fee to use the service so that the tenant can cover that fee.  Want your funds deposited instantly?  Add 1.75% PLUS an additional charge up to $25 per transaction.

Venmo has no protection for its users.  This is why the app asks the sender to confirm they have the correct recipient and amount before sending.  Once the tenant transfers an amount, there is no getting it back.  If the tenant sends the wrong amount, you have no recourse to cancel the payment.

Additionally, like cash, a landlord may find themselves in a predicament when filing eviction papers if the tenant only pays what they can afford.  If a tenant has access to a landlord’s Venmo account, they can simply send $100 (or any amount), and that effort would cancel the eviction in any court.

Lastly, you cannot issue invoices that can automatically add late payments on Venmo.  So if a tenant pays late, the landlord will have to calculate and then track the funds down from the tenant.

Venmo is a great app for splitting costs for food or ride shares.  Unfortunately, landlords shouldn’t accept rent payments from cash apps.

PayPal

We love PayPal.  We use it to buy items online, send money to our kids, etc.  It’s a great cash app that takes security seriously and has features to avoid fraudulent transactions.  Like Venmo, PayPal allows you to make payments directly from your bank account or through credit cards you have registered with their service.

For business users, it can track invoices and payments against those invoices.  Additionally, PayPal allows large transfer limits, up to $60K per transaction, depending on your usage level.  Unfortunately, rental payments are real estate transactions that, in the eyes of PayPal, are NOT considered business dealings.  This means rent payments are not protected under their business transactions umbrella.

If used for business, PayPal charges hefty fees between 1.9% – 3.5% PLUS a flat fee of 49¢ per transaction.  They charge this fee to the recipient, not the sender, so even if rent payments were protected, accepting payments through this cash app would really cut into your bottom line.  Want your money fast?  Add another 1% for instant deposit to your PayPal account (not your bank account).

PayPal deposits all payments to a cash account under their app, not your bank account.  This means you must manually transfer the funds to your business bank account to use it for your general business purposes.

Just like Venmo, PayPal does not have a way to allow you to add late fees to invoices paid after the due date, and there is no way to stop or block payment from being made once it is sent.  Same issue with regards to creating problems when filing evictions as well.  Any amount sent is considered effort and, in the eyes of a judge, grounds to toss the eviction case out, causing a landlord a lot of frustration and lost time and money.

Lastly, if there is an issue with the funds, PayPal tends to lean on the side of the sender, not the recipient.  As you can see, Venmo and Paypal have similar discrepancies when used for rental payments, and landlords shouldn’t accept rent payments from cash apps.

Other Reasons Why To Avoid Rent Payments Via Cash Apps

These days, tenants can apply their rent payments toward their credit score.  Unfortunately, cash apps do not have a way for landlords to report on-time rent payments to credit bureaus and help improve a tenant’s credit rating.  If tenants know their late rent payment won’t affect their credit score, they might not be motivated to pay on time.

Where landlords can report it themselves through a different app, most property management apps now offer this service for free.  To learn more about this subject, check out our blog How Landlords Can Help Tenants Improve Their Credit Score.

Using cash apps removes the ability for automatic rent payment reminders.  However, most accounting software and property management apps can send automated reminder notices to the tenant if their rent has yet to be paid 2-3 days before the due date and again on the date it is due.  This reminder has helped us countless times when a tenant is struggling with being organized from time to time.

The downfalls of allowing tenants to pay rent using cash apps run the gambit.  Therefore, landlords shouldn’t accept rent payments from cash apps.  From a lack of security or protection and no way to automate rental payments to increased costs, there are much better options to choose from.

How Landlords Should Receive Rental Payments

Depending on your savvy, landlords can most definitely use accounting software to automate and receive rent payments directly to their bank account.  We have used QuickBooks accounting software, allowing us to create reoccurring invoices emailed directly to the tenant on a specific date.  Additionally, we can set up this invoice to automatically add late fees if the invoice still needs to be paid after the due date.  We love that the system allows us to send a reminder as often as we like.  Use this link for 50% off your subscription to Quickbooks PLUS earn a $50 gift card if you subscribe!

If you are uncomfortable setting up the accounting software, check with your CPA.  They may have a bookkeeper who can set it up correctly for you.

If Quickbooks invoicing is not your thing, opt for landlord management software.  Here are a few that we refer our clients to:

Hemlane

This hybrid software company has multiple tiers of property management to choose from.  The “Basic” (lowest level) is to use their software only.  The cost is $28 per month plus $2 per unit.  This option gets you:

Marketing Syndication: Advertising in over 30 rental listing websites

Application and Tenant Screening:  Lead and applicant tracking, nationwide credit, criminal, and eviction report.

Lease Tracking & Management: Document storage, lease renewal reminders, tenant communication.  The option for E-signatures is coming soon.

Financials and Online Rent: Online payments, automatic late fees, and income and expense tracking.

Maintenance & Repair: Repair request submission, tracking, and assignment.

For an additional $10 per unit per month, you can upgrade to Hemlane’s Essential package.  This package includes all of the Basic, plus you get:

24/7 maintenance (Diagnose and troubleshoot requests, Work order management with your service professionals, Scheduling with tenants, 24/7 emergency support, No markups, Full visibility and control at all times).

State Specific Leases (Online leases, Amendments, Notices, Other legal documents, E-signature, Discounted legal advice).

Say you become ill, or a family member needs your full-time attention, OR you decide to take several weeks off for vacation… you can upgrade from your Hemlane Basic account to the Essential package for one month and have your maintenance calls covered for your units.  Then, let Hemlane worry about leaky sinks and backed-up toilets while you take the time you need.

Hemlane’s Complete package has full-service property management for a $28 base fee and $32 per unit.  So think about it, for a duplex your cost for full-time property management is only $92 a month!

We love how you can start self-managing your rental properties and using Hemlane’s service to receive rent payments.  Bonus they offer credit reporting to the credit bureau too.  Then, as your rental property business scales, you can budget for and implement any level of management you desire WITHOUT having to change software companies!  Simply upgrade your account and move on.

Click here to learn more about Hemlane and receive your first month free.

Avail

Much like Hemlane’s Basic package, Avail offers Marketing, Tenant Background Checks, Leases, Direct Deposit Rent Payments, A link for tenants to report and track maintenance requests, and Rental Property Accounting Software to track all your income and expenses.

For landlords interested in signing up with Avail, receive a $50 account credit by clicking here.

TurboTenant

This property management software is an excellent option for rental property owners, and it’s absolutely FREE.  It’s the easiest way to market rental listings, screen tenants, create lease agreements, and collect rent online.

To learn more about turbo tenant, click here.

Alrighty, we have shown you why landlords shouldn’t accept rent payments from cash apps and given you several alternatives to use instead.  Here’s to creating a professional and safe rental property business!

Check out our other blogs to guide you on your self-management journey as a landlord:

The Pro’s and Con’s of Holding Your Rental Property In An LLC

10 Things Landlords Need To Know From Landlords When They Move In

How to Handle Unapproved Roommates in Your Rental Property

Buying Rental Property?  Make Sure You Evaluate These Structural Items!

Cash Reserves for Rental Properties, How Much is Enough?

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