Flexible Rent Payments
Paying for housing is usually the biggest expense in the average person’s monthly budget. Renters understand the importance of making their payments on time, but unexpected expenses and other cash flow issues can quickly put them into a bind that can lead to deterioration of the landlord-tenant relationship.
Third party providers are stepping in with a solution: flexible rent payments that allow tenants to pay their rent in installments while ensuring that the landlord or property manager receives the full amount on time. What are flexible rent payments, and what risks and rewards do they come with?
- What are Flexible Rent Payments?
- What are the Benefits of Flexible Rent Payments?
- What are the Drawbacks of Flexible Rent Payments?
- Who Provides Flexible Rent Payment Solutions?
- Conclusion
Year to year, around 15% of all American households fall behind on their rent payments. Between economic uncertainty and an ever-rising cost of living, many renters are feeling squeezed, and it’s not always easy come up with the full payment on the first of the month.
Late fees just compound the problem for them, making it harder to catch up and leading to a vicious cycle that can be hard to get out of.
At the same time, property owners are subject to economic pressures of their own, and granting extensions and waiving fees can have a detrimental effect of their ability (and incentives) to offer housing up for rent in the first place.
With a third party solution bridging the divide, renters can make flexible installment payments on a manageable schedule while landlords enjoy the security of knowing that payments will be made in full and on time. But there are always trade-offs to working with a third party in the middle, and users of flexible rent payments may experience some of the issues associated with Buy Now, Pay Later installment plans in the retail sector.
What are Flexible Rent Payments?
Flexible rent payments are a way of allowing tenants various options for making their rent payments, instead of having to pay the full amount on a fixed due date every month.
While nothing prevents property owners from offering their own flexible rent payment plans, they are usually handled by third party providers that remit funds to the property owner on a fixed schedule.
Flexible rent payment providers can offer various features and services to make the rent payment process more convenient for tenants and landlords alike. These include things like online payment portals, digital record-keeping, and acceptance of alternative payment methods.
What are the Benefits of Flexible Rent Payments?
Flexible rent payments make it possible for tenants to pay their rent on a schedule that works with their cash flow situation, without delaying remittance to the property owner.
Here are a few of the specific advantages of using a flexible rent payment solution:
- Landlords and property managers receive payment in full, on time, on a predicable basis.
- Tenants can set up automatic payment schedules based on their projected weekly cash flow, without having to pay late fees or ask for special accommodations.
- Tenants can make rent payments online, using their payment methods of choice.
- Landlords and property managers no longer have to spend time on collection efforts for late payments.
- Paperless transactions provide proof of payment and accurate digital records for both parties.
- Digital payments can be settled faster and more cheaply than checks, money orders, or cash.
- Flexible digital payment options can make a property more appealing to a wider range of renters who are financially secure but have non-traditional banking or employment situations.
- By giving tenants more flexibility in terms of how and when they can make rent payments without penalty, landlords and property managers can increase tenant retention and avoid the expense and inconvenience of the eviction process.
Of course, no beneficial service comes without some sort of cost, but in this case it is often borne by the renters, who might have to pay a fee of around $15 to $20 per month to use these payment platforms, instead of the property owner.
What are the Drawbacks of Flexible Rent Payments?
Complications can always occur when a third party is placed in the middle of a business arrangement. Flexible rent payments cannot guarantee that renters won’t still have trouble coming up with sufficient funds, and there’s always a risk of miscommunications, technical errors, and disputes.
As many retailers who have jumped on the Buy Now, Pay Later bandwagon have discovered, giving buyers more flexible payment options sometimes encourages poor financial planning and overspending.
No matter how flexible an installment plan is, payments eventually have to be made, and if the tenant still can’t cover them, things can get messy as both parties triangulate with the third party service provider in attempts to resolve the situation.
A tenant could potentially misuse payment disputes to prolong the eviction process on a rental they can no longer afford, making payments and then disputing them to reset the clock on proceedings and delay the inevitable. If a tenant succeeds in obtaining a permanent chargeback from a third party provider, the landlord might be held liable, depending on the details of the provider’s contract.
Who Provides Flexible Rent Payment Solutions?
There are a number of companies that have launched flexible rent payment solutions in recent years, giving property owners a fair amount of choice when it comes to providers.
Working with a trusted, reliable service provider is of paramount importance. A provider that makes errors or mishandles payments can cause serious damage to the tenant-landlord relationship and can lead to disputes that may be found in favor of the rent payer.
It’s important to evaluate the provider’s reputation and customer reviews, and read their contract carefully before signing on.
Some of the better-known providers include Best Egg, Circa, Flex, Jetty Rent, Rent Advance, Splitit, and Xspaced.
Conclusion
As important as it is to have a place to live, many renters feel like the processes for securing and paying for housing is dated, inconvenient, and punitive. Flexible rent payment solutions can help bring the rental business into the 21st century with digital payment tools and customer-centric payment options, but these platforms can’t solve all of the underlying problems that lead to late and missing payments.
There are clear benefits to extending flexibility to renters, but it’s important to choose a trusted provider that you can count on to work with you as a collaborative partner when you have to deal with tenant disputes, non-payment, and other unfortunate issues.
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