Best way to collect rent?

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TRC
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Best way to collect rent?

Post by TRC » Thu Sep 26, 2013 9:41 pm

I have a rental with a tenant that wants to pay his rent direct deposit. This is ideal, but I'm somewhat uncomfortable giving him my bank account # and routing # to set up direct deposit. Is this a valid concern? What's the safest way to collect rent automtaically without dealing with checks? If it matters, he has BofA and I have TD Bank.

Thanks,
TRC

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steadyeddy
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Re: Best way to collect rent?

Post by steadyeddy » Thu Sep 26, 2013 9:46 pm

Just set up a new checking account used only to take those deposits. Automate a transfer into your regular account on a monthly basis. Problem solved.

TRC
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Re: Best way to collect rent?

Post by TRC » Thu Sep 26, 2013 9:48 pm

steadyeddy wrote:Just set up a new checking account used only to take those deposits. Automate a transfer into your regular account on a monthly basis. Problem solved.
Excellent idea! Thank you.

jeff1949
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Re: Best way to collect rent?

Post by jeff1949 » Thu Sep 26, 2013 10:05 pm

I have had five direct deposits each month from my renters for the past 7 years and have never had a problem. I much prefer it over the check in the mail or the knock on my door plus you have a nice record of when they paid.

And yes, the dedicated checking account works if you have any misgivings. I have not bothered but maybe I have just been lucky.

Texas hold em71
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Re: Best way to collect rent?

Post by Texas hold em71 » Thu Sep 26, 2013 10:11 pm

You give your account number and routing number to someone every time you write a check. The numbers on the bottom are those numbers plus the check number.

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bogleblitz
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Re: Best way to collect rent?

Post by bogleblitz » Thu Sep 26, 2013 10:49 pm

If he has Bank of America. You can open a new Bank of america account.

Then he can email, text the payments to your bank of america account without giving out bank account number and routing. Bank of america has this feature

FoolStreet
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Re: Best way to collect rent?

Post by FoolStreet » Thu Sep 26, 2013 11:08 pm

bogleblitz wrote:If he has Bank of America. You can open a new Bank of america account.

Then he can email, text the payments to your bank of america account without giving out bank account number and routing. Bank of america has this feature

Right. Just don't do anything that requires a 5 or 7 cent test deposit. That is a security gate to prevent a separate account from not just pushing $ to your account but also pulling from it.

lump532
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Re: Best way to collect rent?

Post by lump532 » Thu Sep 26, 2013 11:57 pm

Texas hold em71 wrote:You give your account number and routing number to someone every time you write a check. The numbers on the bottom are those numbers plus the check number.
This

magneto
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Re: Best way to collect rent?

Post by magneto » Fri Sep 27, 2013 4:37 am

steadyeddy wrote:Just set up a new checking account used only to take those deposits. Automate a transfer into your regular account on a monthly basis. Problem solved.
We use a 'savings account' from which money cannot be withdrawn, only transferred to one of our other accounts such as our checking account.
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WendyW
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Re: Best way to collect rent?

Post by WendyW » Fri Sep 27, 2013 5:39 am

steadyeddy wrote:Just set up a new checking account used only to take those deposits. Automate a transfer into your regular account on a monthly basis. Problem solved.
More complicated, plus I don't see how "New" checking account would be more impervious to fraud than "old" checking account.

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interplanetjanet
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Re: Best way to collect rent?

Post by interplanetjanet » Fri Sep 27, 2013 7:23 am

WendyW wrote:
steadyeddy wrote:Just set up a new checking account used only to take those deposits. Automate a transfer into your regular account on a monthly basis. Problem solved.
More complicated, plus I don't see how "New" checking account would be more impervious to fraud than "old" checking account.
The point is that by having a separate account, you compartmentalize any damage that can be done with a withdrawal. If money goes into this new account and then moves into your "main" account in a regular fashion, you only expose the money that has just been deposited, and only for a brief window of time.

That said, I think it may well be overkill - as has been mentioned, you already give out your routing and account number on every check you write. If you couldn't trust your tenant with a check from you, can you trust them with your house?

On the other hand, I have dedicated "checking" and "debit" accounts that are only used for paper checks and debit transactions, respectively, and hold only a small buffer plus whatever funds are necessary to cover outstanding transactions. So, I suppose I'm a bit paranoid myself. For what it's worth, I pay several recurring expenses (alimony, etc) by ACH push ("direct deposit") and it's a marvelous way to do it - it almost makes you think that banking in the USA has caught up with the 21st century in the third world. Direct bank transfers are largely the norm outside of North America.

WendyW
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Re: Best way to collect rent?

Post by WendyW » Fri Sep 27, 2013 12:52 pm

interplanetjanet wrote: The point is that by having a separate account, you compartmentalize any damage that can be done with a withdrawal. If money goes into this new account and then moves into your "main" account in a regular fashion, you only expose the money that has just been deposited, and only for a brief window of time..
This assumes that your potential fraud loss is equal to the balance of the account, and I'm not certain that that's true.

If my balance is $0 and some fraudster writes a phony $200 cheque against my account, I suspect that the bank will still be looking for $200 (plus overdraft) from me, the account holder.

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neurosphere
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Re: Best way to collect rent?

Post by neurosphere » Fri Sep 27, 2013 12:56 pm

WendyW wrote:
interplanetjanet wrote: The point is that by having a separate account, you compartmentalize any damage that can be done with a withdrawal. If money goes into this new account and then moves into your "main" account in a regular fashion, you only expose the money that has just been deposited, and only for a brief window of time..
This assumes that your potential fraud loss is equal to the balance of the account, and I'm not certain that that's true.

If my balance is $0 and some fraudster writes a phony $200 cheque against my account, I suspect that the bank will still be looking for $200 (plus overdraft) from me, the account holder.
You can get ask for an account with no overdraft protection, I believe. If someone tries to write a bad check, the most you might be charged is a fee for having a bounced check, but they will not honor the check itself.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

brajalle
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Re: Best way to collect rent?

Post by brajalle » Fri Sep 27, 2013 10:58 pm

You might also consider Dwolla.

paddlepoudre
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Re: Best way to collect rent?

Post by paddlepoudre » Fri Sep 27, 2013 11:47 pm

We use eRentalPayment. It's $3 per transaction, which seems high, but it separates accounts, sends reminders, establishes a payment record, enforces late fees, and provides other useful features. I just figure the costs are trivial compared to repairs and other potential rental hassles. It's worth it for the convenience.

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LazyNihilist
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Re: Best way to collect rent?

Post by LazyNihilist » Sat Sep 28, 2013 12:33 am

This was baffling to me when I first came to US. How someone can use an account number + routing number and 'withdraw' money from it. And both these numbers are easily available.
In New Zealand, you can give your account number to anyone and everyone and all they can do is 'deposit/send' money to this account. You cannot withdraw cash by knowing an account number.

I wonder why US banks do not or cannot implement the same feature.
The strong do what they can and the weak suffer what they must -Thucydides

Gardner
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Re: Best way to collect rent?

Post by Gardner » Sat Sep 28, 2013 2:06 am

When I moved from the US to Germany a couple years ago I was shocked at how freely account numbers are given out. For example, someone is organizing a catered picnic for 4th of July. Everyone chips in 10EUR. The organizer sends an email to everyone "Here's my account info, please transfer 10 EUR to me." When people come to the door collecting for the Red Cross or something they will not accept cash, they want you to fill out a form with your bank info. That's a little trickier because you are authorizing them to pull the money OUT of your account, and there is often some fine print at the bottom that says something like "to save you the trouble of remembering, we will pull the money out of your account every year at this time until you ask us to stop." But that's off the topic.

Anyway, passing out account numbers here is no big deal, I think the system is pretty safe or people wouldn't do it. There's no real alternative because paper checks do not exist. As has been pointed out, the numbers are on every check, so I think this is an irrational fear in the US. (Of course in a few minutes someone will post about how their life savings were wiped out by giving a tenant their account info and then I will retract my "irrational" comment.)

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tadamsmar
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Re: Best way to collect rent?

Post by tadamsmar » Sat Sep 28, 2013 5:52 am

steadyeddy wrote:Just set up a new checking account used only to take those deposits. Automate a transfer into your regular account on a monthly basis. Problem solved.
Note that small business checking accounts are less secure than personal accounts because you have at least 30 days after you get your statement to reverse a withdrawal from a personal account. With a business account, you have to stop payment quickly before it is posted. At least, this is the protection afforded by federal law.

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frugaltype
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Re: Best way to collect rent?

Post by frugaltype » Sat Sep 28, 2013 6:45 am

neurosphere wrote: You can get ask for an account with no overdraft protection, I believe. If someone tries to write a bad check, the most you might be charged is a fee for having a bounced check, but they will not honor the check itself.
I would never have an account with "overdraft protection."

tim1999
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Re: Best way to collect rent?

Post by tim1999 » Sat Sep 28, 2013 8:45 am

When I was a landlord, I went around to all of the apartments on the evening of the 1st of the month and collected the rent in cash, certified check, or money order from each tenant, unless the tenant had previously contacted me to make an appointment to pay at an earlier time. Probably not the best method for many, but worked for me. If they weren't going to pay/wanted to lay excuses on me, I figured it out pretty quickly.

brajalle
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Re: Best way to collect rent?

Post by brajalle » Sat Sep 28, 2013 7:46 pm

Also wanted to recommend checking out biggerpockets - wealth of info there from landlords. They might have some other recommendations.

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dandan14
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Re: Best way to collect rent?

Post by dandan14 » Sat Sep 28, 2013 8:48 pm

I use erentpayment.com.
He won't know your checking account number. You setup your account on erentpayment and he sets up auto payments. I've been using it for about 8 months now and no complaints. They charge $3 per deposit.

sdrone
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Re: Best way to collect rent?

Post by sdrone » Sun Sep 29, 2013 11:06 am

Fyi I think a lot of people use those Amex Bluebird accounts available at Walmart for stuff like this.

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interplanetjanet
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Re: Best way to collect rent?

Post by interplanetjanet » Sun Sep 29, 2013 11:17 am

Cherokee8215 wrote:When I was a landlord, I went around to all of the apartments on the evening of the 1st of the month and collected the rent in cash, certified check, or money order from each tenant, unless the tenant had previously contacted me to make an appointment to pay at an earlier time. Probably not the best method for many, but worked for me. If they weren't going to pay/wanted to lay excuses on me, I figured it out pretty quickly.
No offense, but was this a pretty sketchy area? I've been renting for about 15 of the last 20 years in multiple cities, and have never had anyone demand any payment other than a personal check.

I would feel nervous dealing with other forms of payment - a receipt would be necessary of course! I've heard horror stories of money orders and certified checks getting lost, and extensive time needed to get the money back.

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