Some day soon, shopping lists across the country will read: Buy 1 dozen eggs, pick up prescriptions, and pay rent.

Or at least, that may be the case at Wal-Mart, says Ryan Gilbert, co-founder of PropertyBridge, a multifamily payment systems provider based in Oakland, Calif. His firm's acquisition by MoneyGram in 2007 will allow residents to pay their rent at MoneyGram locations at retail stores, including more than 3,100 Wal-Mart locations nationally. While the service hadn't been rolled out as of press time, Gilbert indicated that King of Prussia, Penn.-based Morgan Properties, which owns and manages more than 1,000 units on the Eastern Seaboard and in the Midwest, is starting to implement the service for its residents. Morgan Properties did not return calls for this story.

This change would be a departure from the way apartment owners and managers collect their rents today. “The whole concept of paying rent has its roots in feudal times. Tenants would physically bring a portion of their crops to the landlord so that they could stay on the land,” Gilbert says. “Basically, that's the same hierarchical structure that still exists today.”

If Gilbert has his way, though, that won't be the case much longer. After all, Americans now pay more than half of their bills electronically, according to a report from Emeryville, Calif.-based Joshua Tree Consulting, an industry research firm. Yet, for an area that represents the single largest chunk of “wallet share” for a third of the U.S. population, getting the multifamily industry and its residents onboard with electronic rent payment has proved vexing.

Now, PropertyBridge and other firms are bringing the fundamental transaction of the multifamily industry—paying rent—into the 21st century. Namely, they're trying to make it easier for residents to pay their rent online with credit or debit cards, or through automatic withdrawals from their checking accounts.

THE LAST E-HOLDOUT

Part of the challenge to updating the rent collection process is that the industry is often glacial in adopting technology. Rent collection, billing, and payment systems remain a frozen backwater.

Gilbert estimates that only 10 percent of all rent transactions are paid electronically today, though he notes that this is major progress from five years ago, when the number was an anemic 0.5 percent. He wants to see that number at 25 percent within two years. “We've gotten an excellent response,” Gilbert says, adding that his firm's new service is particularly attractive for the “unbanked”—those residents who don't have bank accounts.

Still, with door charges that typically start at $5, but can range as high as 3 percent of collected rent each month, the systems and related charges for accepting electronic payment can take a noticeable chunk out of a portfolio's net operating income. flat scenario causes many to ask why they should pay good money to make it easier for residents to pay what they already owe. The answer, of course, is that implementing these systems can often lead to more efficient operations and actually save you money in the long run.

For example, Alliance Residential Management, a Houston-based operator of approximately 45,000 units nationwide has been implementing rent and utility billing and payment systems from Irvine, Calif.-based NWP Services Corp. across its portfolio since 2006. A key components of that system is NWP's Resident OneBill, a single statement that goes to Alliance residents, detailing all charges, including rent, utilities, and other fees. Residents can then pay online through their checking accounts, or in traditional ways, such as bringing a paper check to the leasing office. One unexpected outcome? Residents began paying early.

“If they get the bill on the 26th or 27th of the month, many people will pay it the same day,” says Brian Head, Alliance's assistant vice president of business services. A more tangible benefit, in fact, was a boost in the firm's interest income from those earlier payments, says COO Mark Copeland.

There were other benefits, too. By having NWP monitor and bill all of its residents for its utilities, Alliance was able to recoup more than $1 million in vacant utility charges, where residents would move into a unit, but not switch the utilities into their names immediately. By having the charges electronically monitored, Alliance was able to compare move-in dates to actual utility service periods, and collect those charges from its residents. “It made for an easy implementation,” Copeland says.

Yet, Alliance is still only collecting 7 percent of its rents electronically. The firm attributes that to the fact that it hasn't marketed electronic payments to its residents aggressively enough. Plus, some residents, such as those who pay by money order, will never pay rent online. Still, the company is pushing to transfer 20 percent to 30 percent of its rent collection to electronic means within 18 months.

CONVENIENCE CONUNDRUM

Alliance's experience belies another challenge when it comes to collecting rent electronically in the multifamily industry. Namely, while paying for other necessities, such as a cell phone bill or cable package is easier online than putting a check in the mail, dropping a check off in the same building where you live is still very convenient. Some tenants write checks as a way to “float” their rent by a couple of days as payment clears their bank. And still others may relish the social aspects of catching up with the manager or exchanging the latest gossip on their neighbors.

“A huge amount still want to come in, hand you the money, get a receipt, or just chit-chat with you,” says Diana Pittro, executive vice president at RMK Management Corp. in Chicago, which manages approximately 7,000 units in the Midwest. The firm started using San Francisco-based RentPayment.com for electronic rent payments about five years ago; 23 percent of its residents now pay rent electronically. The other three quarters still choose traditional means.

PLASTIC PUSH

One catalyst for wider adoption of electronic rent payments may actually come from outside the industry. Observers say that credit card companies, which have aggressively pushed Americans to pay for everything from groceries to fast food to student loans and mortgages with plastic, are now targeting the billions of dollars Americans pay in rent each month.

“Credit card companies are increasingly offering deals so that they can get into the rent game,” says Allison Atsiknoudas, CEO of Belmont, Mass.-based Investment Instruments Corp., whose Rentomatic Web site offers billing, payment, and collection services to small portfolio owners. The firm is launching its own credit card payment service in the first half of this year. Atsiknoudas says whereas credit card companies may charge as much as a 4 percent fee to retail merchants to accept cards, she's seen marketing as low as 1.5 percent for rent payments as incentive for multifamily owners to get on board.

Rewards points programs may be the catalyst that gets renters on board. Jeff Takle, co-founder of RentingYourHome.com, a Stafford, Va.-based property management software company that targets small landlords, says touting rewards points has increased resident adoption among his clients. “Companies usually tell tenants they can save a stamp or make their lives easier by paying online,” Takle says. “flat's great, but it doesn't light a fire under their butts. Telling them they can get two free airline tickets does.”

Tristan Jordan, a spokesman for Purchase, N.Y.-based MasterCard Worldwide, says multifamily is now high on the firm's list for new markets. “In the same way that we want to make sure that it's easy for people to use their cards in taxicabs, we want to make sure it's easy for people to use their cards to pay for rent,” Jordan says. “It's an area where we think there is a compelling value proposition and one where we're really focused right now.”

Joe Bousquin is a freelance writer based in Sacramento, Calif.

ACTION ITEMS: E-PAYMENT ESSENTIALS

These tips will help you implement a smart rent payment system.

  • Be pennywise, pound foolish. While rent payment systems do cost money, they also help save it. Processing paper checks also takes time and money, and accepting payment electronically cuts down on errors and multiple entries.

 

  • Enjoy the ancillary benefits. By setting up an electronic rent payment system, residents are more likely to pay rent on time, or early. Pocketing that time savings can translate into real money in terms of interest income.

 

  • Negotiate fees. Credit card companies want to get into the rent game. Press them for volume and rate discounts, and then use the fact that you accept credit card payments as an added amenity for new prospects.