By Monica Kusley
February 23 2009
What's All the Rage About?
Just as in other competitive industries, property management firms employ new technologies with the goal of saving money, increasing cash flow, and improving customer service. Forward-thinking property management firms have embraced electronic payment systems for security deposits and resident payments with great success. Initially considered only as a "resident convenience" property managers are now seeing the financial benefits associated with e-payments.
E-payments offer a way to reduce the cost of handling "paper check" resident payments. With the current "check by mail" or certain "lock box" systems of collecting and funneling resident payments to a central location, multi housing communities are experiencing a multitude of inefficiencies all of which result in volatile cash flow and high expenses. Sorting through thousands of paper checks, time spent physically depositing checks, data entry, reconciliation, and large numbers of delinquent payments are the major contributors to cash flow problems. By accepting resident payments electronically, properties and managers can benefit from real time authorization and settlement, 1-2 day funding, reduction in delinquencies, and automatic posting of transactions and deposits to financial management systems. As a result, property managers experience accelerated cash flow due to a significant reduction in float times and administration expenses. It is easy to see why providing community members with multiple forms of payment is a tremendous benefit not only to residents, but to the property, and to managers as well.
The huge savings and benefits that are available are reflected in the speed with which e-payments are growing in real estate. Currently almost 30% of multi-family housing owners and property managers offer electronic payments to their tenants. Recently Visa USA reported that the number of properties offering tenants the option of paying their monthly residence fees with a Visa debit or credit card increased 43 percent. It's truly rare to find a business model that benefits everyone involved, but e-commerce as applied to the property management industry comes pretty close.
The echo boomers (ages 20-29 years), the largest group of renters, have been early adopters of Internet technologies and online resident payments are no exception. Visa reported a 158% increase in its card use for rent payments over the previous year, according to Jim Eitler, Visa's Vice President for Client Services. Jupiter Research's Online Bill Viewing and Payment Forecast (2004 to 2009) (January 2005) projects that by 2009, more than 90 percent of U.S. households will manage daily payment transactions online. Driving the demand for online resident payments are added convenience, increased broadband penetration, environmental concerns, and the ability to choose how to pay monthly fees. Many property management companies have seized the opportunity to use accepting electronic payments as a competitive advantage over those not offering an e-payment service. With an expected 63 million echo boomers set to enter the rental market, real-estate experts are expecting the rental market to swell over the next 10 years. It is vital to your community to consider this new technology as it will soon become a necessity to offer this new technology to the changing demographic.
What to Look For
As properties and managers look to implement this new technology, one thing they find is an over abundance of providers. However, there are a number of things you can do to ensure you choose the right partner for your property. First, look to companies that have proven track records specifically in the real-estate and electronic payments industry. It is unlikely that a standard "credit card company" will understand your needs. Instead you want someone with experience and knowledge about the real estate business. Second, be sure the provider can deliver your tenants flexible payment types to choose from. One of the key benefits to e-payments is that they provide multiple payment options to your tenants, thereby increasing the speed and likelihood of you getting paid. Your payments provider should deliver an integrated solution that includes a suite of payment choices for your tenants, including e-checks, credit cards, and ACH. Third, online security is the key to avoiding liability for your company and protecting your residents. PCI and DSS compliance is a crucial part of implementing an e-payments platform. Knowing how and when to administer convenience fees and making sure the platform is set up correctly will assure safe and secure transactions for your tenants. It is important that your provider is following all of the rules and regulations when providing solutions with convenience fee. Failure to follow industry specifications brings unnecessary risk to both the property management company, and its tenants. Finally, ask you payments provider to design a customized solution that fits the needs of your specific property. One of the best things about working with a company that is focused on real estate payments is that they will understand the needs and challenges of running a property and give you valuable advice in designing a solution that matches your needs.
Real Benefits That Improve Your Property
Traditionally, rent week or "dues week" is generally regarded as down-time due to old fashioned paper payments. An online payment system can save properties and management companies between two and three dollars per transaction, while freeing up your staff to focus on other important matters.
By implementing a customized e-payments solution, properties and managers control every aspect of the collection process. In its simplest form, properties can now accept electronic checks by phone or online, as well as accept credit card payments from residents. Other features allow you to schedule recurring ACH payments that will automatically be deducted from resident accounts and deposited into your property management or property account. Advanced features even let your property and managers control which tenants are allowed to make e-payments thus supporting the collections and eviction process when necessary. With the reduction of deposit slips that need to be completed and the reduction of time consuming data entry and posting, property managers are now free to devote their time and resources towards maintaining profitability for communities.
â€¢Lower costs to collect and handle resident payments
â€¢Faster collection and reconciliation of all resident payments for all types of communities
â€¢Better control over what money has been received and which residents are late
â€¢Streamlined integration with key business processes and leading accounting systems
â€¢ Complete array of payment types and channels tailored to your needs
â€¢Dedicated customer service to launch, maintain, market, and monitor program
â€¢Residents love the freedom and flexibility to pay with credit cards and e-checks by phone or online.
Over the past decade the real-estate market has remained one of the last industries to implement electronic payments. This is mostly due to the lack of battle tested platforms and lack of providers with expertise in the real-estate industry. Today these platforms offer efficient, flexible, and cost effective solutions that return your investment many times over. As mentioned previously, it's truly rare to find a business model that benefits everyone involved, but e-commerce as applied to the property management industry comes extremely close.
William Corbera is Vice President of Revo Payments and RevoPay Onsite. Revo offers customized solutions uniquely designed for the real estate and property management industry. For more information, you may contact him at : firstname.lastname@example.org or visit http://www.revopayments.com/onsite.
The author has permitted the reprinting and redistribution of this article.