Skip to main content

ACH Rent Payments for Property Managers

What are ACH rent payments and how can you leverage them for your portfolio? Learn why property managers turn to ACH to streamline rent collection and grow their business.

ACH, or Automated Clearing House, transactions are more commonplace than ever in today’s digital ecosystem. Businesses, organizations, and private individuals alike use ACH to securely pass payments between banks. But what exactly is ACH?

ACH transactions are electronic transfers of funds. These transfers are made via the Automated Clearing House, a computer-based network that moves batches of payments between bank institutions. This network is overseen by NACHA (National Automated Clearing House Association) and processed by the Federal Reserve and the Electronic Payments Network (EPN).

Altogether, ACH transactions are a quick, secure, and trusted method of payment processing.

Understanding ACH rent payments

You may be wondering where rent payments fit into all of this. ACH transactions cover a wide range of payment exchanges from direct deposits to business dealings. Rent payments are another type of transaction made available through ACH.

With ACH rent payments, residents have the ability to transfer funds directly from their bank rather than having to use a card, check, or other paper payment. Simplified, the journey of an ACH rent payment goes through three main steps:

  • #1: Authorization

When the resident opts to use this payment method, they must consent to providing some required information – typically through an online form. This information includes data such as full name, bank and account details, and the total amount of funds to be transferred. Once requirements are met, the property manager can then initiate the payment process.

  • #2: Processing and clearing

The rent payment is sent through the ACH network in batches for processing. The renter’s bank requests payment through the network, and once the bank confirms there are sufficient funds, transfer of funds to the receiving bank begins. This leg of the process can take anywhere from 1-3 business days.

  • #3: Settlement

Finally, once all of the payment has been transferred, the property owner will receive confirmation of the new funds. The renter will also see the transfer of funds reflected on their end.

Now that you understand how ACH rent payments work, we’ll go over how property managers and residents alike can benefit from the use of ACH transactions.

The benefits of ACH rent payments

ACH rent payments offer property managers enhanced security, convenience, cost-effectiveness, and quick processing, enhancing the overall experience for both managers and residents.

  • Enhanced security 

One standout benefit of utilizing ACH rent payments is their robust security features and safeguards throughout the network. NACHA oversees each batch to ensure strict compliance, minimizing risk of fraud.

While no payment system can guarantee complete immunity from fraud, the ACH network’s rigorous regulatory framework creates a safer environment for processing rent payments.

This protective oversight fosters trust and safety across financial transactions, making ACH a preferred choice for secure fund transfers in property management.

  • Convenience and flexibility

Another advantage of ACH rent payments is the convenience and flexibility. By digitizing the entire collection process, ACH eliminates the need for cash handling, paper checks, and physical receipts.

This allows renters to pay comfortably and even grants them the freedom to set up automatic recurring payments.

  • Quick processing

Historically, ACH transactions were not known for their speed. However, in recent years, significant improvements have made ACH a serious competitor in the payment processing game.

Currently, ACH payments process within 1 to 2 days, with funds generally available in bank accounts within 3 to 5 days. NACHA’s efforts to enhance processing efficiency have resulted in a remarkable 42% increase in the availability of same-day processing since early 2019.

These advancements make ACH a more appealing option for both property managers and renters, who can enjoy quick and reliable rent payment turnarounds.

  • Cost-effectiveness

When it comes to operational expenses, ACH is a highly cost-effective option for rent payments. For one thing, processing paper payments is a task that proves both tedious and costly. One paper check can cost anywhere from $3-10 to process on-site.

Credit card transactions can also come with high interchange or assessment fees. Comparatively, ACH transactions typically incur a modest flat fee ranging from $0.20 to $1.50 or a low percentage fee of about 0.5% to 1.5% per transaction.

This affordability makes ACH an attractive choice for property managers looking to reduce costs in their payment operations.

FREE GUIDE

The 2024 Rent Payment Trends Report

Learn the most effective methods to increase digital rent payment usage amongst your residents with our 2024 Rent Payment Trends Report. Based on research into our own user data, this free report details the top 5 data-backed ways management companies are digitizing their rent collection cycles.

Start reading now

The cost of ACH rent payments in multifamily

One of the main barriers to encouraging residents to pay rent electronically is transaction fees. Renters prefer to avoid any fees, especially given that rent is often their largest expense. In fact, according to SatisFact’s Biennial Online Renter Study, the ability to pay rent without fees ranks as the most valuable tech feature. Meanwhile, the option to pay online with fees ranks as the least useful. With that information in mind, what exactly is the cost of processing an ACH rent payment?

Property management companies that incur ACH processing fees for residents pay about $1 per transaction. This is a relatively small expense considering the benefits. For one thing, processing a paper payment costs between $3 to $10 based on labor and operating expenses. That already makes incurring ACH rent payment fees a worthwhile alternative. Additionally, incurring ACH transaction fees for renters actually increases digital payment adoption across your properties.

When comparing two groups of similarly sized multifamily portfolios, we found that the company absorbing fees for renters enjoyed nearly 40% more digital payment utilization across their properties than the company that didn’t.

A graph from Zego's 2024 Rent Payment Trends Report which features the average annual digital payment adoption rate for multifamily companies who incurred ACH utilization vs those who passed. The graph shares multifamiliy companies who incurred ACH utilization had an average annual digital payment adoption rate of 84.71% while those who passed had a 47% average annual digital payment adoption rate.
Our takeaway? Taking on this small expense minimizes the strain of costly paper payments while increasing overall digital payment utilization. With the financial implications in mind, let’s discuss how to implement ACH rent payments effectively, ensuring a seamless transition to this modern payment method.

Implementing ACH rent payments, and best practices for success

Setting up ACH payments may seem complicated, but as an operator, you won’t be responsible for the behind-the-scenes processes involved. There are two primary options for collecting ACH rent payments online:

  1. Working directly with your banking institution
  2. Using property management software

While going through your bank might seem like the safer choice, it has its drawbacks. The in-person setup process is often not tailored for rent collection. This may lead to significant gaps in reporting that hinders your ability to maintain accounting records. Additionally, you may encounter unexpected costs, such as setup fees and monthly minimums.

On the other hand, property management software specifically takes your needs into account. Software vendors consider all aspects of rent collection and the unique scenarios that may arise. The initial setup can be as simple as signing in and verifying your bank account. You can then work together to create a personalized, professional, and automated system to manage incoming rental payments.

Four strategies to enhance ACH rent payment adoption

  • #1: Incentivize adoption by incurring ACH transaction fees

As discussed above, we recommend multifamily companies incur the small ACH transaction fee in exchange for the benefits of cost savings and higher digital payment rates. While some companies view absorbing these fees as an added expense, doing so can significantly enhance digital payment adoption and improve operational efficiency. This is a win-win situation for both property managers and residents.

To drive this point home, SatisFact ranked which tech features residents found most useful in their Biennial Online Renter Study. According to the data, the ability to pay rent without fees ranked as the most valuable tech feature among renters, while the option to pay online with fees is the least useful.

  • #2: Simplify the enrollment process

Make the sign-up process as easy as possible by integrating ACH rent payment options directly into the resident onboarding experience. Utilizing online platforms where residents can securely enter their banking information removes tedious barriers and encourages more residents to choose ACH.

  • #3: Send regular reminders and notifications

Regularly remind residents about upcoming rent due dates via email or SMS. Be sure to include links or instructions for making payments through ACH as well. By making it convenient to act on these reminders, you can help transition more residents to ACH rent payments.

  • #4: Share ACH educational campaigns

Crafting and sharing educational campaigns around ACH rent payments can also help to drive more people toward utilization. Educate residents about the benefits of paying through ACH. Some examples of benefits include convenience, security, and reliability. For example, renters on the fence about ACH may change their mind once they’ve been educated on the network’s reduced risk of lost or stolen checks and fraud safeguards – especially compared to other payment methods.

Additionally, providing clear instructions on how to set up and manage ACH payments empowers renters to take those steps themselves.

By implementing these best practices, property managers can effectively adopt ACH rent payments, streamline their processes, and enhance the overall resident experience.

Challenges associated with ACH rent payments

While ACH transactions offer many benefits, they are not without their challenges. Here, we explore a few challenges associated with ACH rent payments.

  • ACH payment rejections for insufficient funds 

Just like paper checks, ACH payments can “bounce” if a resident’s bank account lacks sufficient funds during the transaction. This issue may not be realized until after payment batches process, potentially leading to late fees for residents and delays in the revenue flow.

  • Transaction limits on ACH payments 

Banks often impose various limits on ACH transactions, including daily, weekly, monthly, or per-transaction caps. These limitations can significantly affect tenants who use ACH frequently and may restrict the number of transactions they can complete.

The specific restrictions vary widely among different banks. Therefore, it’s crucial for property managers to educate themselves on these limits ahead of time, especially when scaling operations or managing numerous transactions effectively.

  • Access challenges in ACH processing

Direct ACH transaction processing can pose challenges for property managers, as it typically requires establishing relationships with banks or financial institutions. However, modern property management software can alleviate these challenges by simplifying ACH access and setup.

Connecting renters to the ACH network through a property management software service can make the sign-up process more straightforward and less labor-intensive—an especially valuable feature for busy property managers.

While there are challenges associated with ACH rent payments, such as potential payment rejections and transaction limits, these issues can be mitigated through careful planning and proactive management. Property managers who remain informed about these challenges and leverage the right tools can navigate these obstacles effectively.

As we move forward, it’s important to recognize the numerous advantages that come with embracing digital payment solutions like ACH. By integrating ACH payments into their operations, property managers can not only streamline the rent collection process but also enhance the overall resident experience in today’s digital landscape.

Embracing digital payment solutions with ACH

In summary, ACH rent payments present a range of advantages for property managers. This includes enhanced security, convenience, cost-effectiveness, and quicker processing times. By considering the benefits associated with ACH payments, property managers can enhance efficiency and improve resident satisfaction at their properties.

Implementing ACH at your communities

Discover the ease and benefits of implementing ACH payments in your multifamily communities with Zego Pay. Schedule a demo today to experience more secure and faster rent collections firsthand.

Related Content