Why Property Management Owners Should Never Use Venmo or PayPal To Collect Rent

The rising popularity of e-commerce has given rise to the popularity of mobile wallets like Venmo and PayPal. These mobile wallets have made money transfers easy to use and very convenient. That’s why most people opt for mobile wallets to pay money to friends and family, or for paying bills online.

Considering how convenient Venmo and PayPal are, is it a good idea to use them to collect rent? Not really. In fact, landlords and property managers should never use Venmo and PayPal for collecting rent. Let’s understand why.

Why Venmo and PayPal should not be used for collecting rent

Both Venmo and PayPal are free to download. You can connect them to your desired bank account to make payments. Despite their simplicity and speed, they are not a good option for landlords to collect rent.

Legal reasons

If you want to use Venmo or PayPal to collect rent, you must ensure that you use a business account to do so. If you use a business account, you will also need to pay additional fees. Can you avoid the fees by using a personal account instead? That’s illegal and in direct violation of Venmo’s User Agreement. It says that you cannot use Venmo to receive business, commercial or merchant transactions, which means that you cannot use Venmo to accept payments for a good or service.

Being a property owner, you are providing both goods and services to your tenants. If you use a personal account to accept rent payments, Venmo or PayPal could flag your activity. Rent payments are usually a much larger amount than most personal exchanges. Also, if you receive the same amount of money around the same time month after month, you are bound to trigger suspicion. By using these mobile wallets, you run the risk of these platforms barring your access, and other legal problems.

Fees

Say, you own a business account that you want to use for rent collection. You will most likely need to use PayPal because Venmo does not allow the same. PayPal may be more business-friendly, especially if you use a proper business account. However, you would need to pay additional fees to PayPal.

For every transaction, you would need to pay 2.9% of the total rent amount with an additional charge of $0.30. If you accept a rent amount of $500 through PayPal, you as the landlord would need to pay $14.80. If you own multiple rental properties, you will need to pay quite a hefty amount in these fees. Over time, you will realize that these transaction fees are eating into your profit margins.

Lesser control

Using Venmo or PayPal may give your tenants a lot more control, but the same cannot be said for the landlord. As a landlord, you have no way of compelling your tenants to make rent payments. You cannot enforce late fees or set up automated payments. There is also no way for you to send reminders regarding payments.

Also, when a tenant makes a payment through Venmo or PayPal, it is accepted by default into your bank account. But, what if you want to evict a tenant? You would like the option to reject the payment, wouldn’t you?

Say, you want to evict a tenant because of overdue payments. If you accept even a partial payment from such a tenant, it could delay or even nullify the eviction process. You should be getting your payments in full. As a landlord, you want to be able to reject partial payments.

No option for recurring payments

Venmo and PayPal do not give your tenants the option to set up automatic payments. Also, these wallets do not send any reminders to your tenants. If you use Venmo or PayPal to collect rent payments, there is a high chance that a tenant may forget, making late rent payments more likely. Not receiving rent payments on time will eventually disrupt your cash flow.

Misdirected payments

Another major issue with using Venmo or PayPal for rent collection is that payments could easily be misdirected. A simple typo by your tenant could send the payment to someone else’s bank account. Mistakes may happen even with your most careful tenant. If your tenant pays the money to some other bank account, you have no way of getting the money back.

Limited protection

Mobile wallets like Venmo and PayPal offer limited protection to landlords. PayPal has been known to favor buyers in case of disputes. So, if a dispute occurs PayPal may side with your tenant rather than with you. PayPal may also bar access to your funds, making them inaccessible for use. The fee you pay for your business account may offer Purchase Protection, but PayPal does not cover any purchases related to real estate.

Venmo also does not offer any better protection than PayPal. In fact, it does not offer any protection at all. Venmo explicitly states that it does not offer buyers or sellers any protection program.

If you decide to use these platforms to collect rent payments and a dispute arises, your tenants are more likely to win.

Delayed bank transfers

If you want to transfer money from your Venmo account to your bank account, you should know that it does not happen instantly. It may take between 1 to 3 days before your money arrives in your bank account. Of course, you do have an option to transfer the money instantly. However, you would need to pay 1.5% as the processing fee.

Even PayPal takes 3 to 5 days to transfer money to your bank account. If there are holidays or weekends, it may take even longer. If you opt for instant transfers, you will need to pay 1% of the amount transferred. So, if you are transferring $1,000, you will need to pay $10 as instant transfer fees.

Can’t report payments to credit bureaus

Venmo and PayPal do not have any feature that allows you to report rent payments to credit bureaus. Rent is perhaps one of the biggest payments that your tenant makes in a month. However, there is no way of letting the credit bureaus know that your tenants pay the rent on time. Using Venmo or PayPal may make it easier for your tenants to make payments, but it does not help their credit score in any way, even with timely payments.

Better options are available

If you think Venmo and PayPal are the most convenient options available, you are wrong. Property management software is a much better option for collecting rent and managing your rental properties. They offer a host of useful features, such as tenant screening, automatic payments, security deposit collection, late fee calculation, and so much more.

Conclusion

If you have been collecting rent through Venmo or PayPal, you should stop immediately. The benefits offered by property management software are much more than either Venmo or PayPal. These mobile wallets are not designed to serve landlords.

Instead, use property management software such as the one by ExactEstate. Features like online leasing, online payments, accounting, tenant screening, and so on will help you manage your rental business a lot better.

Schedule a demo today to know how ExactEstate can help your business.