Is Accepting Credit Cards for Online Rent Payments Worth It?

Cash used to be king, but in today’s digital society things are changing. Online bill pay has increased in recent years with recurring payments chief among those. And why not? The customer – or in your case, the tenant – sets up recurring payments and it’s paid on time, every time. No need to remember to pay each month. You may have already set up a portal for your tenants to link their bank accounts for online rent payments, but have you considered allowing them to pay by credit card?

We’ve put together a few pros and cons to help you decide if accepting credit cards for rent payments is right for you.

Pros

Quicker Funds

One of the perks of accepting credit cards for online rent payments is the quick turnaround time.

There’s a lot of waiting around with a traditional check. It can be sent through the mail or your tenant may drop it off, but you’ll still have to find the time to deposit the check.

ACH payments are often more convenient, but may take 2-4 (business!) days to transfer to your bank account.

Payments made by credit card are faster and can be batched out as soon as the night of the payment.

Renter Benefits are a Selling Point

If you live in a competitive rental market, you need to find creative ways to stand out. Accepting credit cards is a selling point to many potential tenants. They can build their credit score and earn reward points by paying the rent with their card. 

Get Paid on Time

If your tenant is a little short on funds, accepting credit cards is a great way to ensure they can pay for their rent within the rental agreement’s time frame. 

No Bounced Checks

Traditional check payments and ACH deposits can take a few days before the bank notifies you of insufficient funds. That can throw your budget off. If a credit card is decline, it’ll be at the point of sale. Your tenant will receive an alert, and it will be up to them to make other arrangements. No more tracking them down in hopes that the second payment will go through.

Safe and Secure

One of the many reasons that credit cards are so popular today is they are safer and more secure than other payment forms. The service that you use will have a set of security checks for the card used. This could be the full number, the CVV code on the back, the billing address details, and more.

You don’t have to worry that the check will bounce or you’re being paid with stolen money, and you won’t ever misplace an envelope filled with credit card payments. 

Saves You Time

The most overlooked benefit of accepting credit cards is that it saves everyone time. Instead of having to make individual calls to collect payments or wait for the mail to deliver them, transactions happen in the blink of an eye. 

Cons

Canceled Payments

One of the biggest potential issues to weigh is that, by accepting credit cards, you open yourself up to the possibility of a disgruntled tenant canceling their rent payment on their card or disputing the charge. If this happens, you do have ways to state your case on why the chargeback is not valid.

Fees Involved

When a credit card is used there will be an interchange fee. Depending on the service you choose to use, you may be able to shift those fees to the tenant.

A Learning Curve

As with any new technology, there can be a learning curve to a new form of payment acceptance, but it is pretty small. You can reach out to the service you use to clarify any questions.

Is It Worth It?

Accepting credit cards for rent payments has a lot of value for both landlord and tenant. You’ll save time and provide additional options that your tenant may not get when they rent from other landlords. If you’re ready to start accepting rent payments, let LandlordStation help you set that up today!

How to Perform Tenant Screening and Respect Data Privacy

Investing in rental property also means investing in your tenants. Quality tenants keep your property clean, submit timely requests for any repairs, and leave less wear-and-tear on the house. They also pay on-time rent every month. But how do you know which applicants will become your best tenants? That is what the tenant screening process is for, and the laws associated.

Fair housing laws determine the questions you can ask. Local data privacy laws determine what you can do with an applicant’s personal information. Even their name and current address can be the seeds of identity theft, which is why data privacy has become such an important issue. So how does a responsible landlord handle tenant screening, wisely choosing the right tenants while protecting their data in the necessary ways?

As landlord pros, we have a few pointers.

The Fair Housing Act and Tenant Screening

The Fair Housing Act prohibits landlords from asking questions that may lead to discrimination. Unfortunately, this can include questions you might otherwise ask about family, background, and personal plans. You cannot ask questions or make decisions on housing regarding a tenant’s:

  • Race
  • Color
  • Religion
  • National origin
  • Sex
  • Disability
  • Familial status

You can ask about the number of household members, but not about spouses or children. You can ask about the number of vehicles, but not if one is a handicap van. It is even tricky to ask where your tenants are moving from, in case this reveals their national origin.

Data Privacy Laws for Landlords

Data privacy laws vary by state and can vary by city. California has the strictest personal data laws, but many other states include laws regarding how customer data (tenants, in your case) is handled and must be deleted on request. You will want to look up your state’s data privacy laws.

Best practices, however, suggest avoiding possessing any private data. If you can’t avoid, the second best option is to delete any private data you acquire as soon as its use is completed.

Do You Need Sensitive Information to Screen Tenants?

Yes. Part of tenant screening includes a credit, criminal, and eviction check. You will also want to verify each applicant’s employment and income. All of this requires very personal information, like an applicant’s social security number, current address, date of birth, and more. Knowing some of this information can even lead to a conflict of interest between fair housing and landlord decision-making.

Fortunately, you don’t need to personally have this kind of private information on your future tenants. Only your background check and credit check team do. LandlordStation allows landlords to run tenant screenings with just the tenant’s name and email address. The tenant can then – privately – enter sensitive information that goes straight to the credit bureau for the report – but is never seen or stored by the landlord. This is the best way to fulfill all your goals; getting a  detailed tenant screening report, respecting fair housing laws, and protecting tenant data privacy.

How Should Sensitive Tenant Data be Kept?

If you find yourself in possession of private tenant data, perhaps in the form of applications, keep this data under lock and key or delete it to protect the tenant’s data security.

If you store tenant data, keep papers in a locked filing cabinet. Keep digital files in encrypted storage or a data vault with a brand that you trust. In most states with data security laws, you are required to make a reasonable business-class effort to protect your customer/tenant’s data.

What to Do If You Have a Data Breach

What happens if a server or service where you are storing tenant data is breached by a hacking incident or exposed by accident? You will need to follow the data protection laws of your region but, most likely, your requirements include alerting tenants that their risk of identity theft has risen and possibly providing an identity protection monitoring subscription-like Norton LifeLock or Experian IdentityWorks.

LandlordStation Protects Tenants and Landlords from Data Privacy Concerns

Being a landlord is standing halfway between a host and a business owner. On one hand, you need to carefully screen tenants to find reliable and responsible people. On the other hand, you need to handle and hold as little sensitive information about your tenants as possible, especially during the critical decision-making process. LandlordStation offers the perfect solution that creates the shortest, most secure path between the tenant’s information and the credit check reports you need to make a strong decision.

To begin tenant screening with LandlordStation or to explore more of our handy landlord resources, contact us today.

Your Guide to Investing in Student Housing

Expanding your rental home portfolio requires consideration and strategy beyond just finding a home that is rentable and affordable. Each property is an investment and some locations offer a unique business model that you can benefit from. Affordable housing near any college or university, for example, will immediately become a candidate for student housing, a potentially profitable but more volatile form of property rental.

Student housing is livelier, faster-paced, and more accident-prone than typical investments, but also potentially very rewarding. Let’s dig deeper to find out if student housing is a smart investment for your landlording style.

What It Means to Rent Housing to Students

Students in college and university – and their friends already in the job market – are young. They are often renting a home without parents for the very first time, maybe with a little practice from the dorms. They don’t know how to fix things, many students have not yet learned how to clean, and late rent payments with a fantastic (often real) excuse about exams and all-nighters are par for the course. But if you have a thick skin and a sense of humor, student renters also provide never-ending demand. If the university continues to operate, you will have new students every year and may even develop a waiting list for properties near campus.

Pros and Cons of Student Housing Investment

Pros of Renting to Students

  • Endless demand and wait-listing
  • Chain referrals from good student tenants
  • Reliable rent when paid by parents
  • Low cost-cost amenities chosen for durability
  • Small and unusual properties included
  • Never-ending entertainment value

Let’s take a look at the pros of managing student housing. The biggest benefit is that demand is endless. It’s so endless there are wait-lists for near-campus housing and when students change plans mid-year, another roommate is ready to hot-swap and take over the lease. Students tell their friends about great places and you may even get a chain of good, studious tenants who refer each other to your property each year.

Expect students to be inexperienced at rent payment, but often with parental backup. Some parents will even sign the lease. You can choose between durable, low-cost housing for most students or luxury student housing for parents who insist on sponsoring the best for their collegiates. You can also choose properties that would be less appealing as family homes, like small and strangely designed houses, as students are not picky and often like strange spaces.

As an added bonus, students make entertaining and interesting tenants, so if you don’t mind the antics, you will rarely find student housing to be boring.

Cons of Renting to Students

  • Inexperienced renters
  • Untimely rent payments
  • Increased rate of damage and repairs
  • Increased cleaning requirement during turnover
  • Demand for short-term (semester) rentals
  • Roommate hot-swapping

All the pros aside, student housing is challenging to run. You will need energy – or an energetic team – to keep up with minor repairs like dents in the drywall and loose faucet handles. Expect excessive calls for repairs (and drain clearing) or eerie silence with inexperienced young renters who don’t know when to call for maintenance. You may get lucky with a run of reliable young students or unlucky with a pack of partiers. 

Student housing is most adaptive with 6-month leases and even if you enforce a 1-year lease policy, expect hot-swapping of roommates because students are tied to the semester-based schedule.

Special Legal Considerations for Student Housing

Your city or state may have specific regulations when it comes to renting to students or to residents below 18 or 21 years old. Because students do not yet have their full rights  (ex: to drink, book hotel rooms, or rent cars), and some freshmen are still 17 and legally minors, you will want to write your lease carefully and proceed with caution. In most locations, there are no special rules for renting to students and young adults, but the penalties for renting a hazardous unit may be increased if perceived as taking advantage of inexperienced tenants.

With this in mind, use safety and transparency as your rules of thumb. Write a clear lease and make a habit of going over it with new student tenants regarding both their responsibilities and what they can ask of you – like timely repairs. You will also want to pay special attention to safety and repairs during turnover. If the unit is never empty, be sure to schedule annual or biannual inspection-repair visits.

Choosing the Right Property for Student Housing

What kind of houses can you choose for rental student housing? This is an important consideration. The good news is selection is one of the perks for student housing investment. There are exactly three requirements for student housing:

  1. Near to campus (or the bus route)
  2. Safe and livable
  3. Durability

Location and Livability

Students will live just about anywhere, but it must be close to campus, on the bus route, and decently livable. Performing your legal duties as a landlord will more than fulfill most students’ demand for property quality, but location is key. The closer your properties are to a college campus, the more students will want to live there.

Any House, Any Size, Any Style

Students will stay in small houses, homes with strangely shaped rooms, lofts, attics, basements, and homes with no yard. The usual family-friendly considerations need not apply and most students are especially spry if there is a knee-wracking staircase or even a ladder to the loft. Students expect to live closely packed together, to share multi-bedroom homes as roommates, and to take over buildings by moving in with friends.

Interesting apartments are, in fact, one of the rights-of-passage for young adults renting their first homes. Many want to come away with a few strange tales about the attic apartments and strange campus houses they lived in during their wild college years. Older boarding-house-style homes, which are hard to rent room-by-room to any other demographic, are considered excellent student housing. Apartment buildings and townhouse rows can quickly become overrun with student tenants as roommates and neighbors.

Student Housing Durability

The final deciding factor for student housing investment property is durability. Can the house take an endless stream of energetic, inexperienced tenants who may party, exercise, and do unpredictable school projects on premise? The good news is that if you’re ready for light renovation, most homes have the “bones” to be durable student housing, and just need a fresh coat of gloss (read: washable) paint and new laminate board flooring. Throw in a few heavy couches and bed frames, and you’re student-ready.

Create a Custom Student Lease Agreement

Students are not your typical renters, and leases can be written with any terms that are most convenient to the two parties. Write your lease in a way that helps students become better renters by outlining the rules, using plain language, and providing a few training wheels and safety bumpers in the policies to help them learn without creating conflict or debt.

  • Make it a visual syllabus – easy to read
  • Outline house rules
    • Quiet hours
    • Drain care
    • Trash day
  • Flexible rent payment dates and penalties – training wheels
  • Included utilities or links to utility providers
  • Room for roommates
    • Wait-lists and referrals
    • Hot-swapping leaseholders
    • Guests and long-term guest policies
  • Copies available on request and online

How to Screen Student Tenants

Screening student applicants can be challenging because they do not already have a rental or credit history. Most have just taken their first big financial step in life – by taking out student loans. How do you screen a student tenant with no financial history to show their suitability? It is possible to ask more holistic questions while respecting the fair housing laws about certain personal details.

Ask Student-Housing Questions

  • Do you have roommates ready to move in with you?
  • Do you require roommate match-making?
    • see – your waitlist and other applicants
  • When does your school term begin?
  • Will you be staying through the summer?
  • Do you see yourself in this home for your duration at this school?
  • Do you have pets, or do you plan to get a pet?
  • What are your personal quiet hours for sleep or studying?
  • What is your field of study or chosen degree?

Have Parents Co-Sign the Lease

One of the cleanest solutions is to have a parent co-sign the lease and take responsibility for timely rental payments. From there, you can do the usual tenant screening checks on the parent to confirm sufficient income, a reliable credit score, and a good rental history.

Managing The Revolving Door of Student Housing

Student housing is a profitable and extremely active way to invest in rental homes. students change their housing situations every semester and every summer break. You may have students who stay put for all four years of school and students who only stay for a few months before hot-swapping their lease with another resident.

Fortunately, you don’t have to manage your lively student housing investments solo. With online tools like LandlordStation to streamline your property management and help students keep up with online bill-pay, helpful documents, and maintenance requests, you can simplify the effort of managing student housing.

To discover online property management through LandlordStation, contact us today!

How to Make Sure Your Favorite Tenants Stay

Having to replace a good tenant can be very expensive. The final costs of replacing a tenant can easily exceed $4,000.

Accordingly, it’s very important that you try to hold onto your favorite tenants for as long as possible. Offering competitive rental rates and keeping your property in good condition are obvious requirements in this effort, but consider these five suggestions for extra steps you can take to keep good tenants signed on.

Offer a Longer Lease Renewal

If you normally offer one year leases, try offering a two year lease (or even longer) the next time your favorite tenant is up for renewal.

While this is technically a market gamble for both of you, from your tenant’s perspective it will seem as if you’re offering them the opportunity to avoid rent increases for the next couple of years. This will encourage their loyalty to you and the property.

The income stability of a tenant with a good payment history can often outweigh the potential downsides of missing the opportunity to increase the rent for a few years.

Give a Lease Renewal Gift

The small things matter, and that can be especially true when you’re trying to keep a good tenant.

The next time a tenant renews their lease, offer them a renewal gift. It doesn’t need to be much, and even a $50 gift card to a fantastic local restaurant can be enough to make a tenant appreciate you. Pair this with a small gift for the holidays and you’ll generate even more goodwill.

Give Them Opportunities for Feedback

It’s important to make sure your favorite tenants feel that their concerns are being noted, and this requires more than simply waiting for them to call with a problem.

Be proactive about communicating, and actively reach out to them from time to time. If you’re renting a multi-unit property, make sure to have a comment box in a common area, along with a placard that reminds tenants of your contact information. It’s also a good idea to send them a letter two or three times a year letting them know that you’re available to discuss any concerns that they may have.

Offer an Apartment Update

Part of the appeal in finding a new apartment can be that vacant apartments have often been newly renovated, or at the very least given a new paint job and touch up.

To recapture this feeling for your favorite tenants, particularly if they’ve been renting for several years, offer them an apartment update for their next lease renewal. This can be a simple repainting, but it’s also a good opportunity to accomplish two objectives from things you were planning to do anyway. For example, instead of simply stating that you’re going to replace their stove (if you were already planning on doing so), tell them you’re doing it because they’re a good tenant and you appreciate them.

Offer a Cleaning Service

In the same vein, offer them a visit from a cleaning service when they renew their lease. A good, deep cleaning can make a difference that is just as dramatic as an actual renovation. Tenants will feel like they’ve genuinely stepped into a brand new apartment, but one with all the comforts of their familiar home.

Eviction Moratorium: What This Means for Individual Landlords

This is the second post in our series exploring the impact of the eviction moratorium. You can check out the first post here

On September 4, 2020, a temporary national eviction moratorium on evictions for nonpayment of rent was announced by the Centers for Disease Control and Prevention (CDC) and the Department of Health and Human Services (HHS). The order was introduced to help renters who were unable to pay their rent due to the impact of the pandemic. It was originally set to expire on December 31, 2020 but had been extended several times before being allowed to lapse on July 31st, 2021. On August 4, 2021, the CDC Director signed an order extending the moratorium once again. This federal order extended the protection of tenants in certain counties through to October 3, but has since been blocked by the Supreme Court.  

In this post we are exploring what the moratorium has meant for individual Landlords.

Unpaid Rent = No Income

The biggest impact the moratorium has had on landlords is also the most obvious – landlords have been left with no income from rent payments yet, in many cases, they were still responsible for their own mortgage, taxes, and other bills. 

According to a study by the Aspen Institute, around 15 million people are currently behind on their rental payments and, according to the National Equity Atlas, those households owe over $21 million to landlords. 

While some landlords may have emergency funds in place to cover one, maybe two months of missed payments, very few individual landlords will have funds in place to cover multiple months of unpaid rent.

Unlike corporations, businesses, and agencies, individual landlords are likely to only own 1 or 2 rental properties. So, while tenants are required to pay accrued rent when the moratorium is lifted, it may be too late for individual landlords. Especially those who don’t have other properties generating rent and other means of income, if they are unable to make their own mortgage payments, they may lose their property through foreclosure.

Little To No Relief Reaching Landlords

There has been little to no relief reaching landlords so far. Despite Congress allocating $46 billion to assist, only a fraction of those funds have reached tenants, and even less has reached landlords, according to Treasury Department data.

There appears to be two main reasons for this: 

  1. Confusion surrounding availability of relief.
  2. The process requires the cooperation of the tenant.

Confusion Surrounding Availability of Relief

According to the Urban Institute, more than half of renters and 40% of landlords are unaware that aid is available to them, so are unlikely to be applying for relief. In addition, uncovering what is available isn’t straightforward. The same report from the Urban Institute states that, “Less than 6% of landlords and 11% of tenants indicated that they applied for federal emergency rental assistance.” This indicates that even when landlords and tenants are aware of these funds, there is still another stumbling block in the process. 

Each state has its own system and process for distributing funds. Some states require the landlord to start the application process and the tenant to complete it. Others require the tenant to start it. The need for states to put new systems in place and the fact that they are also dealing with staff shortages due to the pandemic have caused significant distribution delays.

Uncooperative Tenants

The process of claiming available funds does require tenant cooperation. Some landlords have reported that their tenants are refusing to complete the application forms.

For some tenants, online-only applications can pose a barrier, especially for those who are not tech-savvy, who are aging or who do not have easy access to the internet. Others are simply overwhelmed to the point of inaction.

Penalties For Landlords

Another way in which the moratorium has impacted landlords is in the penalties for failing to comply. A landlord who evicts their tenant despite having received the written notice of their status, can face up to a $100,000 fine and 1 year in jail. Combined with undergoing months without receiving rental income, the financial implications of the moratorium add up quickly for landlords.

What Happens Next?

The extended moratorium was to remain in effect until October 3rd, but on August 26th the US Supreme Court stated that the CDC did not have the power to impose the moratorium and as such, the extended moratorium was blocked.

What will happen now is uncertain and is likely to vary state by state. It is thought that there may be delays in many states as they work through the backlog of eviction cases.

Buying Rental Property Tips

One of the most consistent investments that can be made today is a rental property. Real estate can be somewhat volatile, but rentals are in need during the good times and the bad times. When managed appropriately, you can have a consistent level of income. To get started, you’ll need to get a great property that will be attractive to potential tenants. Find that and you’ll be able to secure that investment using these 6 buying tips.

1. Purchase directly from the owner whenever possible.

Buying a rental property for profit means finding the best deal possible. Go through your community and find the distressed homes that are in your area. Make contact with the owners and see if they’d be willing to do a short sale with you so that you can maximize your investing power.

2. Raising capital is sometimes better than a mortgage.

Rental properties are a business investment, even if you’re the only employee of your business. Sometimes you can get better terms by raising capital for your business investment instead of taking on debt. You’ll have to sacrifice a portion of your income in return, but you’ll be debt-free.

3. Watch out for dead neighborhoods.

Just because a rental property is an amazing deal doesn’t mean that it’s actually a good investment. If there are several distressed homes in the same area, then there’s a good chance that there won’t be much rental activity there. Everyone has moved away. If no one is there, you won’t get many tenant applications.

4. Look for areas where there is strong job growth.

Lots of jobs mean lots of potential tenants. You may need to look outside of your local community in order to find a great property, but it’s worth the effort. Many investors can charge higher amounts of rent in strong job growth markets and profit more in the long run.

5. Give yourself a rental profit.

If you do decide to take out a mortgage, make sure to calculate a certain percentage of profit from the rent that you charge. You’ll need enough to cover your mortgage and any property taxes or HOA fees that are due, of course, but a 5% upcharge for profits will help you make a little – even if you’re planning on using the rental one day to retire.

6. Don’t settle for the first property you see.

There are numerous investment opportunities that can be found today. There are numerous properties that are on the market still today, so if one investment doesn’t feel quite right, then it isn’t. Keep looking and you’ll be able to find the perfect property.

What Makes a Good Landlord Insurance Policy?

Before renting out your property, you should purchase a landlord insurance policy.

Unlike a homeowner’s insurance policy, a landlord insurance policy will protect you from common problems that occur when you rent property.

Types of Landlord Insurance Policies

While the terms used to describe insurance policies vary by company, most agencies offer three types of landlord policies.

The DP-1 policy is the least expensive policy and offers coverage for only named risks.

These risks can include:

  • Fire and smoke.
  • Hail, windstorms, and lightning.
  • Riots.
  • Damage caused by aircraft or other vehicles.
  • Explosions.

However, there is no guarantee that a DP-1 policy will cover damage from any of these problems.

Landlords must check their policy before signing to see what risks their policy lists.

A DP-2 policy offers coverage for more types of risks. Like DP-1 policies, covered risks will be explicitly named in the policy.

In addition to the risks covered in the typical DP-1 policy, a DP-2 policy may cover risks like:

  • Electrical damage and frozen pipes.
  • Building collapse.
  • Damage caused by the weight of snow and ice.
  • Falling objects.
  • Flooding caused by a stream or river overflow.

DP-3 policies are often called “open peril policies.”

This type of policy covers most risks and is the most expensive.

A DP-3 policy will list any specific perils that are excluded from coverage.

If you are concerned that a DP-3 policy does not offer coverage for a specific peril, you can ask that a rider be added to your policy to provide additional coverage.

Actual Cash Value Versus Replacement Cost

When purchasing insurance, landlords should look for policies that offer replacement cost coverage versus actual cash value coverage.

For most DP-1 and some DP-2 policies, the insurance agency will only pay you what they believe your property was worth when the damage occurred.

For example, if hail damages your rental’s seven-year-old roof, the insurance company will pay for the worth of the existing roof.

Then you would be responsible for paying the additional cost to replace the roof with a brand new one, which will certainly be more expensive than the “value” of the 7-year-old roof.

Most DP-3 policies and some DP-2 policies offer replacement cost coverage.

If you have replacement cost coverage on your seven-year-old roof, the insurance company would issue a check that would cover all of the costs associated with replacing your roof with a new one.

Replacement cost coverage is somewhat more expensive, but the coverage it offers is extensive by comparison with most DP-1 or DP-2 policies.

All-Risk Provisions

Some policies have an all-risk provision that will protect the property from theft, vandalism, or malicious mischief.

Common examples of these risks include graffiti and intentionally broken windows.

Some DP-3 policies already have this coverage, while other insurance agencies will add an all-risk provision as a rider to your existing policy by request.

Vacancy Restrictions

If your property is vacant for longer than 30 days, your landlord’s insurance policy may be invalid.

An unoccupied property creates a larger risk for the insurance company, so some agencies will cancel coverage if you make a claim and your property has been vacant.

Talk to your insurance agent the moment your property becomes vacant to discuss any changing landlord insurance requirements.

Also, look for policies that offer a 60-day window before the property is considered vacant.

Landlord Umbrella Policies

A personal umbrella liability policy will extend the liability coverage on all of your property.

These policies are usually a few hundred dollars per year for $500,000 to $1,000,000 of coverage.

However, if you own more than a couple of rentals, the personal umbrella policy may become invalid.

If you own four or more properties, you can purchase a commercial umbrella liability policy.

When you purchase this type of coverage, you provide a list of properties that you would like covered under the policy.

As you purchase or sell properties, contact your insurance agent so your coverage can be adjusted accordingly.

Purchasing landlord insurance is the best way to protect your real estate investment.

To make sure you get the coverage you need, stay in communication with your insurance company to notify them of any changes.