Today we can pay for gas with a credit card, receive direct deposit
of payroll, and pay tolls with an E-ZPass tag. The increasing ability
to use electronic funds transfers (EFTs) for payment is a reflection
of the convenience, safety, and efficiency of EFTs over traditional
forms of payment, namely cash and checks.
Following the popularity of EFTs in other industries, a growing number
of real estate investors are moving towards collecting rent electronically.
Although checks are still the most widely used rent collection method,
smart real estate investors are realizing checks are not as efficient
or reliable as electronic methods. Specifically, EFTs via the US banking
system's Automated Clearing House (ACH) payment network are an increasingly
popular and well-suited alternative to checks.
Electronic Rent Collection Methods
The three most common types of EFT are wire transfers, credit cards,
and ACH payments, each having its own benefits and costs:
In contrast to wires, credit cards and ACH payments require a one-time
set-up on the part of the tenant whereby authorization and credit card
or bank account information are provided. Once set up, rent is automatically
charged to or debited from the tenant on a recurring basis.
The Benefits of ACH Payments vs. Checks
ACH payments for rent collection offer significant benefits over checks
in the areas of cost, convenience, safety, and operational efficiency.
ACH payments are:
Getting Started with ACH Payments
Processing ACH transactions can be administratively challenging. To
get started, a real estate investor needs to partner with a bank that
can originate ACH transactions or a third-party ACH processor so debit
and credit instructions can be sent to the ACH payment network. Once
a partner is found, the investor needs to establish an ACH account.
Next, the investor must purchase or lease software to create files that
can be read by the ACH payment network. This self-directed learning
process is quite costly in terms of purchased/leased tools and time.
In addition to populating and transmitting files to the ACH payment
network, the investor needs to learn how to retrieve "return"
files from the network that reflect failed attempts at debiting or crediting
a bank account. Finally, the investor needs to comply with NACHA's rules
and Federal Regulation E when handling ACH transactions.
Fortunately, there are now inexpensive rent payment services that eliminate
the administrative complexity of ACH transactions. The main task of
the real estate investor is simply to enroll tenants in the service.
Typically, tenants complete an authorization form and submit it with
a voided check. Thereafter, rent payments occur automatically leaving
the real estate investor with a safe, efficient, and reliable electronic
rent collection method.
Article Provided By:
ClearNow, Inc. of Durham, North Carolina is a pioneer in easy-to-administer
Web-based ACH solutions for the multifamily housing market. For more
information, contact ClearNow, Inc. at 919-680-4500 or visit their Website
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