A Revolution in Rent Collection.

Property owners demand speedy and accurate rent collection. Perhaps no property management employee feels this demand more intensely than the assistant manager, whose job it traditionally has been to sort through the hundreds of rent checks that arrive at the beginning of each month and post them to the appropriate resident ledgers utilizing one of a variety of accounting software programs. Anyone who has worked on site knows that this is a tedious job that requires full-time attention from the first through the fifth of every month. The rent collection process does not end there. All communities have late rent payers or the occasional returned check for non-sufficient funds (NSF). At many communities, the majority of the administrative work related to rent collection occurs during the first week of the month, with the remainder of the month spent on collecting from late residents.

Jim Soderberg, president of Soderberg Apartment Specialists, which manages seven apartment communities in the Minneapolis, Minnesota area, says, "In this industry, we are basically overstaffed mid-month, and understaffed the first and last of the month."

While many of us have been buried in a mountain of personal checks and bank deposit slips, a revolution in rent collection has been evolving. New technology has helped provide new products and services to make the rent collection process a more efficient operation. From electronic check scanners to Internet Application Service Providers (ASPs) to rent payment kiosks in the management office, there are now numerous ways to collect rent.

Improving efficiency in rent collection also helps improve the financial performance of a community that will now be able to deposit all it's rent money earlier, reduce late payments, and virtually eliminate NSF checks. Consider the benefit of the manpower freed up when you are able to reduce the administrative duties that accompany rent collection. What would you do with an extra week of time for your on-site staff?. Plenty of options are available.

Check scanning

Many of the major accounting software packages used in property management today offer a supplemental piece of equipment known as a "check scanner." You may have seen similar equipment at the check out of a retail store. Here's how the check scanner works: once the property management office receives a rent check, it is fed into the scanner rather than manually posted into the computer and deposited in the bank. The check scanner reads the resident's personal check, turns the data into an electronic payment, and electronically sends it to the bank. The property manager or assistant manager downloads a report from the bank daily, which automatically dumps the data into the onsite software. The resident's paper check is no longer needed and can simply be filed or returned to the resident.

By eliminating the need for hand-keying rent checks, the use of a check scanner system such as GEAC's "PowerReader," RealPage's "AutoCheck," or Property Boss' "MicroReader," cuts down the time required for processing rent payments by 50 percent or more on a property of 250 units or more, according to Michael Mullin, general manager of GEAC Property Management Solutions Division. In addition to added efficiency, this procedure also offers several other benefits such as:

* The property receives its money two to three days sooner than if processing paper checks.

* The property is notified of a resident's insufficient funds the same day that payment is made. The payment then can be presented to the bank three times, rather than two as with a paper check, in hopes of retrieving funds.

"Our more fiscally-responsible customers love this service," says Thornton Michaux, director of sales and marketing of Old Forest Software, Inc., distributors of the Property Boss software. "But some of our customers don't like it because they've got a good fee schedule in place from their late fees." The check scanner is a relatively inexpensive piece of equipment (about $250 for the MicroReader used with the Property Boss software). Also required is a phone line where transactions will be conducted.

Lockbox payments

LandMarc Management utilizes "Yardi e*Banking" for their residential portfolio of approximately 7,500 multifamily units. At the beginning of every lease, each resident receives a book of payment coupons. The resident mails their monthly rent payment, along with a coupon, to a lockbox at the bank. The bank then processes the payments. The property manager then goes on-line and initiates a "Bank Reconciliation Process," which downloads the payment information directly into the on-site Yardi Professional[TM] software. For LandMarc, whose properties include condominiums, apartments, and even some private homes, posting of rent is done at the corporate office. Implementing Yardi e*Banking enabled them to cut their corporate accounting team by two staff members. "We literally took two people and replaced them with a 30-second download," says Christopher Limbrick, LandMarc's managing director. "We saved a ton of money by going to Yardi e*Banking." You must use Yardi Professional[TM] onsite accounting software and have Internet access in order to take advantage of the Yardi e*Banking product.

Rent payment kiosks

Yardi Systems has another innovative product available to aid in the rent collection process. Kiosks, which resemble automatic bank teller machines, are available for use in a property management office. When a resident pays rent, they go to the kiosk, insert a credit or debit charge to make a payment, and receive a printed rent receipt. Because the payment is done online and is validated, it is virtually impossible for a payment to be processed if funds are not available.

"This keeps resident relationships more on the positive side," says Karen Edgar, vice president of marketing for Yardi Systems. "If the property has an NSFer, instead of making them get certified funds every month, they simply put them on the kiosk system," for future rental payments, says Edgar. Information on the accounts paid through the kiosk is available for online download into the Yardi Professional[TM] operating software. Like the check scanners and lockbox systems, the kiosk eliminates all manual posting of rent payments and greatly reduces administrative duties. The kiosk unit is leased through Yardi Systems, and the property must establish a relationship with a payment-processing provider. Fees and transaction charges vary according to provider.

Another option in the kiosk family is the Freedom Systems'[R] "Rent Payment Station[TM]." Installed in the property management office or any common area, the Rent Payment Station[TM] uses the Internet to process electronic payments and integrate data directly with the onsite accounting software. Like the Yardi Systems' kiosk, the Rent Payment Station[TM] gives the resident the option to pay with a credit or debit card, while also allowing residents to set up an e-checking account to move money directly from their checking account without a debit card. Here's an added income bonus: the Rent Payment Station[TM] also allows residents to pay up to 25 different bills at one kiosk; the property receives a 25 [cts.] payment for each non-rent bill paid.

The costs to the property include the lease of the Rent Payment Station[TM] kiosk, an additional phone line, and a per-transaction fee of as little as 35 [cts.] on ATM and e-check payments. According to Brian Spagat, president of Freedom Systems[R], the property may choose to charge a handling fee to the resident to offset the transaction fees. Many merchant agreements prevent charging extra for accepting a credit card, however, so be sure you examine your agreement closely before doing so. The Rent Payment Station[TM] is currently able to integrate with Yardi Professional, GEAC's AMSI, and RealPage's Rent Roll accounting software to eliminate the need for manual rent posting.

Soderberg Apartment Specialists was one of Freedom Systems'[R] first customers. Their communities use the Rent Payment Station[TM] and integrate the data with their Yardi Professional[TM] software. "What makes our business profitable is automation," says Jim Soderberg. "If we get 100 percent of our rent receipts deposited by the fifth, and our bills paid by the tenth, that leaves the last three weeks of the month to fine-tune the property." Soderberg believes that the greatest benefits of using the Rent Payment Station[TM] include the elimination of the rent posting and bank deposit process, and the immediate notification of rental payments that are refused due to non-sufficient funds.

"Without the Rent Payment Station[TM], the manager is all tied up collecting rents and can't serve the residents," says Soderberg. He has chosen to install his Rent Payment Station[TM] in a common area outside of the leasing office where it is accessible 24 hours a day in order to provide the greatest convenience to his residents. He is not concerned about vandalism.

"It's a pretty solid machine," says Soderberg. Plus, Soderberg Apartment Specialists has been using a similar product by Freedom Systems[R] in their laundry rooms for years, which has actually eliminated the problem of vandals tampering with the machines to get to the coins. Coming soon for Rent Payment Station[TM] customers is a toll-free number where residents can make rental and other bill payments over the phone at any time.

Online rent payments

Properties that are currently using GEAC's AMSI software can look forward to a new way of receiving rent payments in the first quarter of this year. The GEAC design team is preparing to launch a template that the property manager can install on a community's webpage that will allow the residents to pay their rent online. Residents can visit their community's webpage, enter their checking account information in a secure area, and process their monthly payment. Payment may only be made via debit cards or checking accounts, and the fee to the community per transaction is between 30 and 40 [cts.]. Like the solutions previously discussed, GEAC's "web-payment" option eliminates the need for the manual posting and depositing of individual rent checks.

RealPage, the parent company to the Rent Roll software, plans to launch a web-based version of its property management system which will include online rent payment capability.

"RealPage's web-based property management system is used by site personnel to improve the efficiency of site operations, but can be accessed in real time by management personnel from anywhere Internet access is available," says Jim Melson, president of RealPage. A variety of methods to collect the rent will be available. Options include:

* automatic withdrawals from residents' checking accounts; and

* automated clearing house (ACH) electronic charges, and point of sale (POS) terminals where the resident provides their credit or debit card and personal identification (PIN) numbers.

The fees involved for the property management company will depend on which method of payment a community chooses to accept. The property owner may be able to pass these fees along to the resident. Regardless of which method of payment is accepted, web-payments will be automatically posted to the resident's ledger, thereby eliminating the need for manual posting.

Communities without their own web page may be interested in the array of services offered at theRent.com. The website theRent.com is known as an application service provider (ASP), and "links the rental community with a web venue," says Amy Glass, vice president of business development. With a variety of different packages available, theRent.com will custom-build a website for rental communities which includes a virtual resident newsletter, online service request program, and information on local attractions and retailers. Also included is an online rent payment feature through CheckFree Corp. Once a resident makes a rental payment at a community's website, the money is electronically transferred from the resident's account to the community's account. In the case of insufficient funds, the system is able to continue to seek payment from the resident's account until funds are available.

This greatly reduces NSF payments on the property. The community receives notification when the payment is initiated and completed. The website theRent.com is currently working to integrate their system with all of the major accounting software packages, and expect to have this complete by June or July of 2000. For now, the property must use the rental receipts generated when online payment is complete to manually post the payment information to the resident's ledger. Using theRent.com to collect payment, "doesn't create new work, but it doesn't eliminate data entry yet," says Glass. Also in the works are plans to allow residents to select automated payments where the rent is "pushed" from their account to the property's each month on the same day automatically, providing the option to pay bills other than rent from the same web page. There is no charge to residents for theRent.com's service. The property must pay a setup fee to establish a merchant account with CheckFree and a monthly fee per unit.

Started in late 1999, theRent.com has nearly 300 communities as customers, including Gables Residential and United Dominion Realty Trust. Says Glass: "Communities are discovering the advantages of collecting rent through theRent.com which include less administrative hassle and less time for the rent money to hit their bottom line."

A different kind of renters insurance

One of the newest "dot-coms" to enter the multifamily scene is Viva.com, an online locator service that approaches multifamily renting from a different angle. At Viva.com, renters list their preferences and multifamily professionals make lease offers online. When a successful match is reached, the property owner has the option to pay Viva.com to process a credit check and rental application for the renter. Or, the property owner may choose to screen the renter on their own. Renters approved by Viva.com are backed by a guarantee against monetary default, or what Viva.com calls a "Rent Payment Guarantee." What this means to the property owner is that if a Viva.com "guaranteed" renter should be evicted for non-payment of rent, the property owner is entitled to process an insurance claim for reimbursement of up to two months rent.

"Viva.com promises to process the claim quickly and expeditiously, and write a check to the owner within 72 hours of the filing," when the claim is found to be legitimate, says Viva.com's chief executive officer and chairman, Scott Ingraham. Mark Gorman, vice president of the eastern region for Glenborough Realty Trust and a Viva.com customer, couldn't be happier with this arrangement. "That's really putting your money where your mouth is," says Gorman. Glenborough's 37 properties and 10,000 apartment homes nationwide are using Viva.com's service because, says Gorman, "It's a no brainer!"

For the "Rent Payment Guarantee," the property owner must pay a fee of one percent of the monthly rent, due up front for the term of the lease. On an apartment that rents for $900 per month on an annual lease, for example, the fee for Viva.com's "Rent Payment Guarantee" would be $54. Gorman thinks this is a small price to pay for this service.

The idea behind Viva.com's service is, "to provide a great deal of value, and to make the whole process of renting easy and delightful for both the renter and the landlord ... large owners and small owners alike," says Ingraham.

As technology continues to evolve and property management becomes more sophisticated, the rent collection options available to the property owner will undoubtedly increase. Perhaps most exciting is the opportunity that arises when the endless hours of administrative work associated with rent collection are reduced.

Ms. Rice is vice president of Gracehill.com, an Internet resource for multifamily professionals. With nearly a decade of multifamily experience both on and off site, she is a frequent contributor to Units and other industry publications.