Is your multifamily property accepting flexible payments?
The following article was written by Jeff Jaussi, Vice President of Payments at MRI Software.
With many of your residents staying in their apartments as a result of stay-at-home mandates or shelter-in-place orders, how will your multifamily property collect next month’s rent?
Many communities have had to close leasing offices or not permit residents or prospects to enter the premises in order to protect leasing office staff and follow the directives given by local officials. This abrupt change has altered the traditional interactions that leasing office staff have with residents and has created potential hurdles for accepting payments from residents and prospects.
Changes in resident payment behavior
While this recent and unforeseen challenge has changed how your leasing staff will collect payments, this isn’t an entirely new trend. Residents and consumers in general have slowly changed their buying patterns in favor of ecommerce transactions for many years now. Historically speaking, the only way to pay rent was to stop by the leasing office and write a check, or leave it in the drop box if it was after hours. However, this method of payment has been on the decline for years as more consumers embrace electronic payment channels. According to the 2019 Federal Reserve Payments Study, ACH transactions exceeded the number of check payments for the first time ever in 2018! Surely, this is a milestone that checks will never reclaim as more and more consumers embrace online payments. This is impressive, given that ACH payments only represented 5% of the check volume in 2000. There are many contributing factors that have influenced this change, including but not limited to the advancement and adoption of online payment options, demographic changes in our society and consumer demand.
Three payment options for multifamily properties
What options are available for residents to make payments beyond the traditional check and how can you encourage alternatives?
1. Online payments
Offering payments through your property’s website using a resident portal is the most convenient method to accept electronic payments. With an online presence, you’re able to accept ACH, debit and credit cards. Most residents prefer to pay their rent using their bank account, and this holds true even when residents move from a leasing office check payment to an online payment method. The next preferred option for residents is their debit card. It’s important to consider that while an ACH and debit card use the same account for funds, it’s the payment channels by which these payments are processed that differ, and thus the cost structure for each payment type is different. Lastly, don’t forget you will have some residents that opt to use a credit card to make their monthly rent payment. Why do some residents prefer to use a credit card? Some want to earn rewards points or airline miles; others are late payers that need to use the credit.
If you offer online payments to your residents, you do have the option to charge a convenience fee for this payment method. At first glance, this might sound enticing. However, it’s important to consider the trade-offs that come with convenience fees and how they impact online usage. Anytime a convenience fee is added to a transaction, cost-conscious residents will find a free option and more often than not, that means reverting back to the old checkbook. Most of you see the benefits of free online ACH and its more economical cost structure and offer this payment type at no cost to the resident. This is the preferred approach for most multifamily properties. Debit and credit are in another category given these payment types do carry a higher cost structure. Depending on your average rent, you might want to add a convenience fee for debit and credit cards to ensure you’re able to offset the cost of these more expensive payment types. The strategy you choose to implement will greatly impact the success you see with online payments.
2. Cash payments at retail locations
There is a segment of the resident population that are considered unbanked or underbanked. These two terms refer to people that don’t use traditional banks or credit unions to meet their banking needs. According to a Federal Reserve study from 2019, 6% of US adults fall into the unbanked category. If these adults are not using traditional banking services, how do they engage in financial transactions? They use money orders, check cashing services, payday loans and other options as an alternative to traditional financial services. The underbanked make up 16% of US adults and these individuals have a traditional bank account, but still use alternative financial services to meet their needs.
If you have a segment of residents that are unbanked or underbanked, how do you accept an electronic form of payment? These residents traditionally go to a retail location that can sell them a money order. The residents then need to return to the site office and have your leasing agents either scan this paper item or take it to the bank. However, there are electronic payment types available to these residents. Many of these same retail locations have partnerships with payments companies that can convert these cash payments to an electronic payment type. The good news is that many software vendors have relationships with these processors. This completely eliminates the need for residents to buy a money order and then take it to the leasing office for your leasing agents to process or take to the bank. While this payment method does require residents to visit a retail location, it does keep these payments out of the site office.
3. Lockbox solutions
For those of you with residents that can’t conform to online payments and prefer to use a traditional check, a lockbox solution can allow you to still accept paper checks and process them from a central location. Some software providers have an integration with a lockbox processor and can even post the amounts collected directly to your ledger. Generally, the reason some of you may opt to use a lockbox processor is due to the fact you don’t have a traditional leasing office, or you don’t allow leasing agents to process and post rent into your property management system. While this payment channel still requires someone to process a traditional paper check, it does eliminate the need for leasing agents to process the checks.
There are multiple avenues to collect rent from your residents outside of the traditional leasing office. How you implement one or all of the solutions outlined above will depend on the software vendor you’ve selected for your property management system. When choosing any potential vendor, it’s critical to focus on your desired goal. Your outcome should be a comprehensive solution that builds synergy with your systems and simplifies the experience for your leasing agents as well as your residents.
At MRI Software, we have a payments solution that was built specifically with our clients in mind. In fact, it was at the request of our clients that we offer a comprehensive payments solution that addresses their unique needs. Learn more about MRI Payments and how it can assist you in your property operations.
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