Any tax person will tell you that you should save a receipt for every business-related purchase, no matter how small. Even so, many landlords are not keeping a paper trail of what’s often their most significant form of monthly income: rent.
A rent receipt is a simple document that shows that your tenant is paying rent. In this article, we’ll walk you through why you need a rent receipt, how to fill one out, and how to accept rent payments online.
What is a Rent Receipt
A rent receipt provides landlords and tenants with proof that rent was paid. They’re often more for the tenant’s benefit than the landlord’s because it gives the renters evidence that they’ve honored the terms of their lease. It’s harder to prove this if they pay in cash or with a cashier’s check.
Rent receipts are physical (sometimes digital) documents that make keeping track of payments easier. They can also be extremely helpful for landlords or property managers. Also, a rental receipt can aid their collection efforts if a renter’s check bounces.
Why Keeping a Paper Trail is Important
First off, we get it. Landlords have plenty to do already, and providing a rent receipt for them and their tenants to sign sounds tedious. Also, most tenants won’t request one—some don’t even know about them! However, like many things in life, you never need them until you do—and when you do, you’ll probably be grateful to have them.
In addition to having physical proof of payment for monthly rent, here are a few more reasons why using rental receipts is important:
- Rent receipts may be required. Several states, including Washington, require landlords to provide rental receipts if a tenant requests one. If they fail to do so, the tenant can submit a complaint with their local department of consumer affairs or a comparable agency in their area. The landlord may receive a fine as a result.
- Rent receipts can prevent disputes. A rental receipt can nip in the bud before a conflict arises if a tenant or landlord agrees about whether or not rent was paid. If a tenant always requests a receipt upon paying rent but cannot find one for that month(s) in question, they may think twice before accusing their landlord of double-charging them.
- Rent receipts can resolve disputes. If a landlord insists that their tenant hasn’t paid rent yet, but the tenant can provide a rental receipt proving that they have, it can prevent a disagreement from evolving into something more. Also, if a tenant wants to dispute receiving a late fee, a rental receipt will show them when they paid their rent. If it was paid on the 10th and their rental agreement states that a late fee will be charged if rent isn’t received by the 5th, the tenant will know they’re responsible for paying the fee.
- Rent receipts give landlords and tenants peace of mind. A physical document proving when rent was paid. Eliminates any gray area regarding whether or not a landlord received payment.
How to Fill Out a Rent Receipt
Completing a rent receipt is a simple task and should only take about a minute of your time. If you create a rent receipt template, it’ll be even easier!
Here’s the process, step by step:
- Enter the payment date and receipt number at the top of your form:
- Write down the property address and the name of your tenant. If you’re using a rent receipt template, you can automate the address and have the tenant write their name instead.
- Include the amount paid and their method of payment.
- Identify the rental period the receipt is for. If there’s a remaining balance due (for the month in question or carried over from previous months), include that here as well.
- The tenant then prints and signs their name, proving they received a rental receipt.
- Next, the landlord provides their contact information (which can be automated using a rent receipt template) and signature.
- Finally, the landlord can make a copy of the rent receipt for their records. You can receive an email with an online rent receipt that the document is signed.
Here is an example below.
What if a Tenant Pays Rent Online?
If you’re a landlord or property manager who isn’t accepting online payments yet, you should be!
Worrying about whether or not a tenant will pay on time is usually the main concern of landlords and property managers. These days having to write or mail a check physically is often considered an inconvenience.
Think of it this way: the average age of a renter is someone who is under 40 and has grown up with the internet, email, and all things digital. Many renters only have checkbooks because their landlords only accept checks. While this may sound trivial, this extra step could lead to them paying late and getting charged a fee or forgetting to mail the check altogether.
And when someone falls behind, it can be challenging to catch up.
Here are a few more reasons why you should consider making online rent payments an option:
Tenants prefer it
83% of people want to pay their bills online, and 57% already do. This is up from 24% in 2020 and 17% in 2019.
Tenants can automate payments
When a tenant sets up their online profile, they usually have the option to automate their payments. By opting to do so, they can pay rent automatically every month—and these payments will be made on time, so long as they have the money in their account. This takes the human error of procrastinating or forgetting to pay rent out of the equation.
Online payments are safer
Using an online system to pay rent is one of the most secure options available to tenants. Paper checks contain a lot of sensitive information, including your name, address, and bank account information. If they get intercepted, you are vulnerable to fraud.
Automated rent receipts
Lastly, online payments can automatically sync with your accounting system and provide you and your tenant with proof of payment. You won’t have to worry about producing a physical receipt every month for your and your tenant’s records.
Conclusion
Maintaining a paper trail is always important whether you’re looking to switch to online payments or prefer the traditional method. Even though producing a rent receipt can seem mundane, you’ll be grateful to have one if one of your tenants disputes payment.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
