Myths about flexible rent payments (Part 1)

Pulling back the curtain to reveal what forward-thinking residential property owners are learning for themselves: rent payment flexibility is a game-changer for profitability.

Thanks to companies like PayPal and Venmo, the way we pay has evolved in recent years. There have never been more ways to pay (benefit-rich credit cards! walk-in bill pay! Cash App!), and new innovations like buy-now-pay-later are making large consumer purchases less stressful. Billers clearly benefit from less friction in the payment process. After all, it’s in every company’s best interest to make it easier for their customers to pay. 

Payment flexibility is one of the best ways to improve on-time collection, but common myths discourage properties from embracing this transformative approach. Just so we’re on the same page, flexible payments refers to an approach that lets residents pay in 1 or multiple installments across the month, on a schedule of their choice. It can (and should!) also include multiple payment method options and the ability to make last minute changes.

In our conversations with properties, it’s clear that the concept of flexible rent payments is at best unknown and at worst terrifying. In fact, flexibility is an easy-to-implement solution that tackles universal challenges from high collection costs, manager turnover, evictions, and poor resident relations. Unfortunately, common myths and misconceptions are standing in the way of this big solution to the industry’s big problems. 

Myth 1: Payment flexibility gives residents another excuse not to pay on time.

There is a belief that residents will do anything to not pay rent. From our extensive experience working with residents, we know that most residents absolutely want to pay rent as it’s their most important monthly bill! They are well aware of the consequences that skipping rent would have: financial instability, disrupted access to education and health resources, job insecurity, and more.

Rising rents, income volatility, and high inflation mean residents aren’t as a whole negligent or defiant - they’re scrambling to find ways to make ends meet. Sometimes, a few extra days makes all the difference. Letting residents commit to a payment schedule that works for their household eases the burden of coming up with full rent on the first of the month.

Why should properties care? Because giving residents some freedom to choose when and how they pay results in better cash flow forecasting and dramatically improved relations with residents. With Circa, residents manage all of their payment activity within an app within a range of pre-approved options by the property. Property managers don’t need to spend countless hours chasing down late payments. At any time, a  manager can see who is paying what and when, with the confidence to know all payments are “in range” according to the property’s allowances. 

Myth 2: Letting residents pay when they want just delays the inevitable.

Some property managers believe that if a resident can’t pay on the 1st, then they won’t be able to pay at all. As mentioned above, paying rent is often a juggling act. A household may receive two paychecks in a month, and - when spending 50% or more on rent - it can be difficult to fight off other expenses throughout the month to ensure rent is covered on the 1st. Unexpected medical bills and car repair happen, after all. 

The best financial planning tool is to align payments with paydays. Large, sophisticated billers (i.e. insurance companies) have done a tremendous amount of research on the best days to debit their customers’ accounts, pinpointing withdrawals within 1-2 days after a customer receives a paycheck. 

Flexibility actually increases the likelihood that a resident will be able to pay in full in any given month. Circa’s 7 payment plans were designed to accommodate all typical pay cycles. While 70% of residents paying with Circa choose to pay upfront at the beginning of the month, about 30% choose a flexible plan. Properties earn fee revenue by offering their residents a choice about how to pay vs. by levying a punitive late fee that sets some households up for failure. 

Myth 3: Rent is and has always been due on the first. 

This isn’t the case everywhere. In Europe and elsewhere, rent is often paid bi-weekly or even weekly, sometimes at the beginning of the month and sometimes at the end. Properties don’t experience added cash flow issues or an increase in costs. There are significant differences in the market and regulatory requirements, but there are still learnings to be had. 

What’s more notable is that rent in the U.S. hasn’t been reexamined or modernized in decades. Life today looks almost nothing like it did 50 years ago. Technically speaking, payment systems have evolved well beyond cash and check-in-the-mail. We have the means to be more efficient, more effective, and more economical - just by adopting the right mix of tools. 

While “rent day” hasn’t changed, the behind-the-scenes of how rent is actually getting paid absolutely has. Over 70% of renters pay late at least once per year, borrowing from friends and family or turning to payday loans. Taking on predatory debt can be financially destabilizing or worse. By allowing residents to pay on a schedule that makes sense for them, properties ensure more residents stay financially healthy so they can pay on-time, every time. Few evictions, lower turnover, and better community relationships - all by offering much needed flexibility at no cost to you. 

Are you still with me? Great!

We often hear these myths from property managers, and we love showing them the powerful benefits flexibility can bring. Property managers who start from a position of disbelief and mistrust are now some of our most powerful advocates. Properties using Circa see a 30%+ improvement in collections efficiency, 2-4x improvement in on-time payment, and dramatically improved resident relations. Jennifer Roebuck of Elevate validates, “Circa’s unique take on rent gives residents a much easier way to pay, especially the residents that need extra support. Instead of fielding calls and emails from residents asking for accommodations, we the managers can finally spend less time on collections and more time on improving other areas of community life.”

We hope this article not only dispelled some of the common myths, but also got you excited about flexible payments! At Circa, we strongly believe flexibility is - and will continue to be - an incredibly important tool for the future of residential real estate.

Stay tuned for Part II of this series, in which we will unpack more myths and outline additional benefits of giving the flexibility your residents want and need in order to give your managers - and your bottom line - a boost. 

Still don’t believe in flexible payments? Let us convince you! 

Curious about how Circa can boost your bottom line? Get in touch! 

Contact us at [email protected] to schedule a demo.