Rent collection is the most crucial aspect of business in rental housing. However, traditional payment methods like paper checks, cash payments, and bank deposits are time-consuming, inefficient, and prone to errors. While the industry has made strides to modernize collections, numerous opportunities remain to innovate the rent payment experience for residents while maximizing collections for operators.
With the advent of new technologies and forward-thinking approaches, the rent collection process is slowly but surely transforming. New, innovative payment methodologies, like comprehensive platforms that enable flexible payment options and automate rent and arrears collections, offer operators and residents more convenient and secure methods of payment. Tech-powered approaches have substantially increased collections, reduced delinquency rates, mitigated fraud risks, improved net operating income (NOI), and enhanced the resident experience.
Modernizing rent payments is fundamental to the industry as a whole, from operators and residents to investors and overall society.
Playing Catch-Up
Automation and customization have been used to streamline multiple facets of operations. From touring to leasing, technology has helped improve countless processes. And when it comes to the most essential function—rent collections—it’s time the industry catches up with the modern world.
“Our rent collection process is the most important process we have, and we have to go through it every month,” says Marlee Murdock, director of operations for Western Wealth Communities. “But for many companies, it’s also the most complicated. We as an industry need to be innovative and keep up with not only the multigenerational renters that we are serving but also the technology they prefer.”
When residents have to write a check or get a money order, not only are operators creating unnecessary steps and leaving room for error, they’re wasting resources and time. By utilizing innovative technology that automates and simplifies collections, operators will see optimal success with the rent collection process.
Rent collection should be the same as collecting money for any other major purchase. Operators must meet modern residents where they are and deliver autonomous transactions that are customized to their individual needs. Online transactions are crucial in today's society, and a shift toward 100% online transactions facilitated by rent payment platforms is essential.
“The electronic exchange of money is crucial in today’s society, and I’m an advocate for a total online collection process at all of our properties,” Murdock says. “It’s even what renters want. But we didn’t acquire a lot of properties that offer an exclusive online rent collection process, so we are transitioning toward 100% online transactions and utilizing a rent payment platform is key to that change.”
A Seamless End-to-End Cycle
Properties can experience numerous benefits by incorporating a comprehensive rent collections process, including more on-time, in-full collections, increased efficiencies, greater NOI, and better time management for on-site associates. However, an often overlooked benefit is the ability for operators to pay investors and banks on time.
“People tend to forget that we also have bank notes and lenders to pay every month; we've got to pay our mortgage,” Murdock says. “The quicker and more efficiently we can get that money in the bank, the less resources, time, and people power we have to spend, and our associates can focus on our residents and positively impact their living experience with us. If we can use technology and remove the burden of collections from on-site teams, that's our sweet spot.”
Implementing a comprehensive rent payment platform doesn't just ensure cash flow and revenue, it also helps combat fraud—the first line of defense against delinquency.
“We had properties where collections were declining, and when we took a deep look into what was going on, we found fraud,” says Moshe Crane, vice president of branding and strategic initiatives for Sage Ventures. “Fraudulent residents don’t pay rent. This led to putting things in place to prevent fraud. Eliminating fraud helped reduce bad debt and improve collections.”
Murdock has had similar experiences that she says were greatly minimized when Western Wealth Communities enhanced its collections process.
“We're doing a much better job of validating people's true income at the time of move-in,” Murdock says. “In the last three to five years, the volume of fraudulent income documents has skyrocketed. We were finding in some cases that eight out of 12 documents were fake. Thankfully, throughout this process of improving collections, we also found new ways to combat income documentation fraud.”
Operators can also leverage mobile apps to send payment due date reminders, late payment notifications, and payment plan updates to residents. By providing real-time access to payment history, mobile-first rent payment apps allow both operators and renters to track and monitor transactions easily.
The Future of Rent
There are so many intricate nuances to operations, and it's easy for something to be neglected or missed, especially when rent payments are involved. A comprehensive rent payment platform can act as a virtual assistant manager that accounts for every facet of collections. It’s not about replacing associates, it’s about making their jobs easier and more effective.
“If you can eliminate human error or the possibility of an associate missing something, that can make things a lot more efficient,” Crane says.
No matter what technology an operator implements, the human element will always be vital. A rental payment platform is meant to take the burden of collections off of associates and free them up to be where they’re needed most—on-site. By easing the job of team members and increasing their satisfaction, operators subsequently are able to drastically improve the resident experience.
“Whenever we're looking at adding technology to anything, we are always looking at how we can improve our employees' experience as well as the residents,” Murdock says. “If they're not happy, our residents aren't happy, and, if our residents aren't happy, they're not going to renew and will choose to live someplace else.”
Implementing an all-inclusive rental payment platform allows operators to remedy collection woes through a holistic approach that considers the bigger picture.
“We recognized an evolution in how today’s residents earn and manage their income and how that impacts not only resident/associate dynamics, but ultimately the entire community," says Leslie Hyman, CEO and co-founder of Circa. “By embracing a comprehensive mobile rent payment platform, operators can streamline operations, reduce administrative tasks, and enhance the overall resident experience while ensuring cash flow, combating fraud and meeting the expectations of modern residents.”
Modernizing the rent payment process through innovative technology and comprehensive rent payment platforms is crucial to creating a sustainable future for the multifamily industry. By offering convenient and secure payment options, operators can maximize collections, reduce delinquency rates, mitigate fraud risks, improve NOI, and enhance the overall resident experience.
