Relying on mobile payment platforms is risky for landlords. Here’s why a secure online rent collection platform is the best option for all parties.
When it comes to paying rent, modern tenants value efficiency and simplicity — but relying on peer-to-peer payment platforms is risky for landlords. Here’s why a secure online rent collection platform is the best option for all parties.
In the era of immediacy, it’s no wonder that platforms like PayPal, Venmo, and Zelle have taken off — and even become a popular method for tenants to pay rent online.
Peer-to-peer payment platforms offer a simple and efficient way to quickly send and receive funds. But collecting rent payments through these apps comes with several major risks for landlords — including costly fees, tax and legal implications, and limited financial protection.
Here, we explore why landlords should opt for a platform designed for rent collection over these mobile payment apps to ensure the process is both seamless and secure.
Consumers today rely on mobile payment apps to make instant transactions for just about everything — whether that’s splitting dinner with a friend, charging roommates for utilities, or even bigger purchases like paying rent. In 2021, more than 70 million people used Venmo.
For tenants, the pros of using this method are simple: paying rent on Venmo is fast and user-friendly, plus the app is already widely adopted. But unfortunately, the pros don’t outweigh the cons for landlords. Here’s why you should avoid using peer-to-peer payment platforms like Venmo, PayPal and Zelle for rent collection:
As a landlord running a rental property business, collecting rent from your tenants qualifies as a business transaction. Unfortunately, many mobile payment services charge processing fees for business transactions that can add up quickly for both senders and recipients.
Venmo, for example, charges a 3% processing fee for business transactions. PayPal’s processing rates range from 1.9% to 3.5% for every business transaction. While Zelle doesn’t charge fees for businesses to send or receive money, your bank may have rules about fees and transaction limits when receiving payments — so be aware in advance. While you can technically avoid processing fees by not classifying rent payments as business transactions, this has risky legal and tax implications that could cost you more in the long run.
While it depends on the platform, many mobile payment services have transaction limits that restrict how much money tenants can send or landlords can receive at a time. This may impact landlords in high-rent areas, or those who manage multiple rental properties.
For example, Venmo has a series of rules surrounding how much you can send on a weekly basis. In general, your daily limit is $3,000, though if you have not completed your identity verification, you’re limited to spending $299.99 per week. That means if your rent price is higher than $3,000, this presents a challenge to both renters and landlords. Similarly, when sending payments through Zelle, the daily transaction limit tends to be about $1,000, depending on your bank.
PayPal offers more flexibility in this regard, allowing tenants to transfer between $10,000 and $60,000 per transaction. That said, the money gets held in your PayPal account rather than your bank account, and moving money from your PayPal account to your bank account can take one to three business days.
Many online apps require landlords to report the income they receive annually. Venmo in particular has drawn a clear line in the sand: “Starting the 2022 tax year, the IRS will require reporting of payment transactions for goods and services sold that meets or exceeds $600 in a calendar year. Anyone who receives at least $600 in payments for goods and services through Venmo, or any other payment app, can expect to receive a Form 1099-K.” This is also true of Cash App, Zelle, and PayPal.*
*Note: The IRS has delayed the implementation of the $600 tax reporting threshold as of 12/23/2022. Please refer to the IRS statement and stay tuned as we'll be updating here regularly.
If landlords accept rental payments as personal transactions, rather than funds for their rental entity, this makes for a complicated tax situation where personal and business transactions are commingled — and can make you more susceptible to a tax audit.
Last but certainly not least, landlords who allow their tenants to pay rent on Venmo have less protection in their transactions.
If a tenant unintentionally sends a payment to the wrong person, for example, the monthly payment could be delayed until they’re able to retrieve the funds and resend the rent. Another example is if a renter decides to send you a partial payment. Even if you didn’t agree to accept partial rent as a term in the lease, tenants are able to send whatever amount of money they choose via Venmo and other payment apps — without you being able to reject it. If you later want to evict a tenant for not paying rent on time or paying an insufficient amount, they may challenge this claim by showing proof that you accepted partial rent.
In the same vein, using a mobile payment platform means less financial protection for landlords. For example, PayPal is notorious for favoring buyers, or tenants in this case, in the event of disagreements. They can then hold the funds and make them unavailable for use until the issue is resolved. This puts landlords in a difficult position where they have to prove their rights to PayPal and wait for funds in a drawn-out process.
Unlike mobile payment apps, a rent collection platform like Azibo is specifically designed for sending and accepting rent payments — a model that benefits both tenants and landlords. The advantages of accepting payments via Azibo instead of peer-to-peer payment platforms like Venmo include:
Like peer-to-peer payment platforms, Azibo’s rent collection platform is free. Our seamless, secure, and tax-friendly method for collecting monthly rent comes at no cost to landlords. And with Azibo, you also get access to a suite of financial tools for landlords, including online rental applications, tenant screening, banking, insurance, line of credit, and more.
Rent collection platforms like Azibo are specifically designed to support landlords’ needs. Managing your portfolio has never been easier thanks to user-friendly tools that automate payments, enforce late fees, and track rent payment status for tenants across your portfolio. With everything you need under one hub, landlords save time and stay organized — rather than scrolling through Venmo transactions to check which of their tenants have paid, or mark transactions for tax purposes.
Tenants value a simple, seamless rent payment experience. A streamlined platform like Azibo ensures they enjoy built-in flexibility, efficiency, and support. For example, tenants using Azibo can choose how they pay rent, with the ability to do a bank transfer or use a credit or debit card. And tenants can use Azibo Credit Boost to improve their credit score by reporting their on-time rent payments to the major credit bureaus. Azibo also helps tenants find cost effective renters insurance to protect themselves and their belongings.
The best rent collection platforms allow landlords to prepare for tax season all year round. With Azibo, you can track income and expenses in real time and get a dashboard view of your overall rental business performance. Landlords using Azibo can also easily export rent rolls to provide the IRS with accurate information, and tag expenses by Schedule E categories to maximize real estate tax deductions.
Managing rental properties can be time-consuming, especially if you have to sort through multiple mobile payment platforms to check whether your tenants have paid. With Azibo, every piece of your rental property finances — from tenant screening and banking to insurance to loans and beyond — is streamlined in one platform, with one login.
The bottom line? 80% of tenants want to pay rent online — but paying rent on mobile apps like Venmo is not serving you or your tenants. Instead, these peer-to-peer mobile payment platforms cost you unnecessary time and money. Azibo streamlines monthly rent collection with secure, flexible payment methods, fast payouts, and a reliable way to keep track of rent payments and expenses across your portfolio.
Ready to embrace a seamless rent collection platform? Get started with Azibo today.
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This article and the Azibo Blog in general is intended for informational and educational purposes only. It is not investment, tax, financial planning, legal, or real estate advice. Please consult your own experts for advice in these areas. Azibo provides information believed to be accurate, but Azibo makes no representations or warranties about the accuracy or completeness of the information contained on this article or blog.