EPMEPM: Technology & Social

The Rental Payment Puzzle

Collection and payment of rental funds to landlords – it’s the nuts and bolts of every property management department across Australia. Ian Farquhar, from NAB explains how you can solve the rental payment puzzle.

There are now several banks with highly developed real-estate specific services aimed at simplifying your payment procedures and enhancing the security of your rent roll and business. By removing unnecessary paperwork and tail chasing in daily property management accounting, you’ll be left with more time to positively build your business by growing your rent roll through natural attrition (should this be organically) or rent roll acquisition.

There are a new range of payment methods to offer your tenants allowing them a convenient payment choice without convoluting the systems and processes in your own office. What your property management department ultimately needs is a win-win situation, where your tenants find paying their rent easy, your landlords are dazzled by payments made on schedule and you are free to work ‘on’ your business rather than ‘in’ it.

In my role as NAB’s National Director Manager for Real Estate Banking, I’ve travelled Australia meeting with Principals and property management teams in businesses both big and small. The concerns repeated by property managers nation-wide were similar – they all wanted to create systems which streamlined the collection and disbursement of rental monies whilst taking the minimum of time from their busy days. They wondered how to change the ‘payment’ culture of both tenants and landlords from archaic methods such as cheque or cash to direct debit or rent card. They wanted easy reporting facilities that complimented their existent property management technology.

Of course, legislation changes from state to state in relation to the collection and distribution of rental monies. In Victoria and NSW, all agencies must offer a no-cost rental payment solution for tenants. When you are looking to integrate a new payment system in your office, you’ll need to examine the demographic of your tenants and landlords (in addition to the requirements of state legislation) to see what will fit your business best. Are your tenants savvy with technology? Are they young working families or retirees? There is no singular ‘one-size-fits-all’ option with this important decision – so take the time to brainstorm with your team.

Also, examine what reporting facilities are available with your new system. Does the new banking facility integrate easily with your real estate software package? Having easy reporting facilities means less time manually reconciling and chasing rental arrears – your time is much better spent sourcing new business than being frustrated with a banking system. No singular payment system is going to suit 100% of your clients – but if you manage to convert 90% of them to a payment procedure whichprocedure that simplifies their lives and is easy to reconcile at your end, you’ll already be increasing the time-management productivity of your business.

There are several reasons why innovating your rent collection process enhances your property management business (apart from a time-management component, which we’ve already touched upon). By offering your tenants multiple options in the payment of their rent, you create an instant point of difference. Sure, it is a convenience for your tenants. But it’s also impressive to your potential and current landlords. In a market saturated with agencies, every specialist point of difference really counts. Make your approach to rental collection a string to your bow!

One of the most popular methods of receiving payment from tenants is in the form of a “rent card”. It’s a convenient system for your tenants, as they no longer need to visit your office to pay with a money order or credit card – they can instead use internet banking just as if they were paying a bill. Each rent card is individually numbered and attributed to a tenant in your database, allowing you to swiftly reconcile payments made in combination with your property management software. . Some banks also offer agent branded rent cards that are great for reminding tenants of your brand. By instituting a secure rent card system, you also create a safe’cashless’ office environment for your employees – minimising any occupational and health safety issues inherent in taking cash.

Another method of receiving payment which has become increasingly popular (particularly with larger rent rolls), is a direct debiting system – the ultimate in transactional streamlining. With direct debits a part of our daily lives (think gym memberships and phone bills), direct debiting is something that many tenants feel comfortable with. Using direct debit as a payment method will likely improve cash flow in a business, as the tenant’s payment will be made on an agreed cycle – often easily reconciled into property management software. Direct debit removes the chance that a tenant will forget to make their rental payment by placing more control in the agency’s hands. A drawback to the direct debit system is the dishonour penalty fee charged should a tenant not have enough funds in their nominated account.

Another option of ‘automated payment’ includes the use of credit cards. Being able to collect outstanding payments over the phone or on the internet by keying in the card details of tenants reduces arrears immediately – and is also convenient for the tenant if they are unable to make a payment from their bank account due to insufficient funds. Credit card payments can be programmed to surcharge the tenant, making this form a payment a no-fee transaction for the agent. There is no hierarchy of payment methods in property management – each agency (in consultation with an experienced real-estate specific banking partner) will need to examine their demographic and client demands to come upon a solution.

Regardless of size, real estate businesses require similar functionality from their banking services. Larger rent rolls require more sophisticated reporting facilities to manage different aspects of their property management business – which enhance control and management of the rent roll asset overall.In the last decade there have been many cultural changes in real estate banking, with two primary influences being the average age of Pprincipals (52-54 currently) and the advent of internetInternet technology. Technology and easy internet banking has enhanced the speed of all business transactions, with instantaneous communications expected by stakeholders in all industries. Rent rolls are growing through acquisition programmes, as some principals are transitioning to retirement and selling their asset to exit the industry, or buying rental rolls to consolidate for the future. The managerial structure of a real estate business will determine whether principals and property management staff are caught up in administration, or if they have the capacity to take a global view of their business. Succession planning is also a focus for principals, as a business exit or equity sale may take a couple of years to achieve. Banks with devoted real estate services such as NAB can help simplify this transitional period with principals and new equity partners alike.

Geoff King, a colleague of mine, is the Senior Manager, of Transaction Banking at the NAB, and acknowledges that the real estate business is an extremely high-transactional industry. Reconciliation achieved with the minimum of difficulty is the core focus for Principals and senior accounting staff. Naturally, any changeover in banking systems requires diligent education of both your tenant database and your property management department – and this is likely a less onerous task than you’ll initially perceive. “From a transactional perspective, we’ve seen many changes in real estate banking with a rapid decline in cheques being issued, and a growing acceptance of online alternatives to receive or make payments. We support our busy principals and property managers who make important transactional banking changes by giving them access to an on-hand project team to assist them in bringing a new banking system to their business without letting other elements of their role fall to the wayside.”

Instead of taking a ‘one size fits all’ approach to real estate banking and the management of your property management department, we suggest looking at your core client demographic before making any important decisions. Experienced banking groups with real estate specialists (like NAB) will ideally take time to meet with you and consult on the best possible solution for your particular business. By understand the threats and opportunities to longevity in the high-transaction real estate industry, your business will benefit from an efficient payment process. Now more than ever, it is important that pPrincipals take the time to sit down with their property management team to review how efficiently they transact. With that knowledge in hand, you can construct a transactional banking solution tailored to meet your current needs, whilst simultaneously future proofing your brand for growth.

To find out more about how a NAB Real Estate Banking partnership can help improve the way you bank day-to-day, manage rental properties and grow your businesswith your agency, contact National Director Manager of Real Estate Banking Ian Farquhar by emailing Ian.M.Farquhar@nab.com.au or visit nab.com.au/realestate.

Ian Farquhar is the National Manager responsible for the Real Estate Industry specialisation in NAB. Ian has over 25 years of banking and finance experience across Retail Banking, Trade Finance, Corporate Banking, Business Banking, Credit, Franchise Banking and Private Wealth. For more about NAB’s Real Estate Banking Solutions visit nab.com.au/realestate.

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