Collecting rent online: Venmo vs. Zelle vs. Paypal vs. Cozy

Happy rent day! Today is the first of the month, which means payday for most real estate investors! To date, we've collected rent from tenants in a variety of ways: Venmo or in person checks mostly. But as we grow, I knew it was best to systematize this for the ease and convenience of everyone involved.

Matt holding the rent checks for a newly renovated property.

And so, we are happy to be your guinea pigs if you are currently considering the best way to collect rent online. After doing some research, we selected one of the following options. Here are the pros and cons of each.

Zelle

• Time to transfer: "Within minutes," per Zelle's website.

• Fees: None. (But your bank may charge a fee, check with them.)

• Access: Your bank and your tenant's bank must BOTH currently offer Zelle for you to make transfers to one another.

• Other benefits: Zelle may be a better option than Paypal and Venmo, since it goes directly to your bank account where your money is best protected.

• Pitfalls: Receiving the money directly in your checking account means a partial payment from a tenant could be automatically accepted. You do NOT want to accept partial payments because this sets you at a disadvantage if you ultimately need to evict.

Paypal

• Time to transfer: Funds will show up immediately in your Paypal account. But transferring the balance to your bank account could take 3-5 business days.

• Fees: 3% business fee

• Benefits: E-invoicing and refusing partial payments. E-invoicing allows you to send a friendly reminder to your tenants on a monthly, automatic basis. Once your tenant makes payment online. You can then check to make sure they have paid in full. If they have not, you can refuse the payment and send it back with a note explaining why. Again, accepting partial payment from a tenant will put you at a disadvantage if you must evict.

• Pitfalls: Paypal has a money back guarantee. If the tenant 'feels' you have defrauded them, then Paypal may give the tenant their money back.

Venmo

• Time to transfer: Instant transfers to your bank account are available for Venmo Business accounts.

• Fees: 3% business fee (Venmo is owned by Paypal, hence the uniform fee.)

• Benefits: In addition to the instant transfer feature, Venmo offers social media features that allow businesses to connect with their customers, or in our case tenants, on another level, ie. customers share their purchase activity on a feed showing they ate somewhere or purchased something. I don't really think this is a huge benefit for landlords, but sounds great if you are a retailer.

• Pitfalls: Venmo does not afford all the protections a landlord may want. Venmo can reverse a payment if a landlord-tenant dispute issue arises. Also, in order to be able to accept business payments, you must have a Venmo Mastercard. If you lie and say your transactions are not business related, they may shut down your account.

Cozy

• Time to transfer: 1-5 business days

• Fees: $0 for landlords. Renters pay 2.75% transaction fee to pay with their card, but if they use a checking account it is free.

• Benefits: Apartments.com bought Cozy.co in 2018. Cozy.co was built specifically to help landlords manage their rental properties. From tenant screening to rental payments, they offer a full suite of features specifically designed for rental property managers and investors. Cozy.co also allows tenants to set up payments to automatically deduct every month directly from their checking account. They also send e-mailed reminders to tenants monthly and automatically add a late fee.

• Pitfalls: Getting tenants set up and accustomed to making payment this way involves a little more of a learning curve than Venmo or Paypal. However, Cozy.co sends an e-mail out to tenants on your behalf to walk them through the process. The turnaround time for payment processing the first month takes a little longer, up to 7 days. And I don’t like how when they apply a late fee it’s not a daily fee, just a one time fee. You have to go in and manually add additional fees if a tenant is really late. They also don’t block partial payments. For that reason, the platform suggests you stop using Cozy if a tenant is in default.

We have decided to use...

One of our rental properties with a 'for rent' sign out front!

We have decided to use Cozy.co for rental collection going forward. I just love that I can see every property all in one place, who paid, who is late, etc. In addition, there are reminders for when the lease is nearing completion, so I remember to tap the tenant for a renewal or get ready to re-market for rent. And of course Cozy offers a lot of options to market your property and screen applicants when the time comes.

Today marks the first day we are receiving rental payments through Cozy.co so I will let you know how it goes for us going forward. But so far, I can see every one of our tenants payment is 'processing'. Which is a nice thing to see up on the screen on the first of the month!

Inside another one of our rental properties.

Additional options

I would love to hear about any additional online forms of payment that you use that are not detailed here! We're always interested in operating our business better. So if you use a service you love (or don't love), or if I did not include a pro or con you that you are aware of with any of the above services, please like or comment below!