The PROPERTY DOCTORS, Sydney Australia Novak Properties

EP. 1308 Pay rent via 3rd party? Watch for extra fees! #RentTips #MoneyMatters

Mark Novak, Cleo Whithear Season 28 Episode 1308

Discover why Macquarie Bank's decision to eliminate cash and checks from November 20th might just signal the end of an era for rent payments. As traditional methods face obsolescence, we tackle the pressing need for secure, fee-free alternatives in the rental market. Navigate the complexities and challenges of this transition with us, as we unravel how these changes could redefine the future of banking and tenant transactions. Say goodbye to the headaches of bounced checks and hello to seamless, digital payment systems designed to keep stress at bay.

Join our exploration of digital payment options that promise flexibility and enhanced communication for tenants, landlords, and agents alike. We break down the advantages of third-party gateways over direct transfers or BPAY, even considering the small fees involved, and how they are transforming the rental industry. Learn why these gateways are more than just a convenience—they're a smart choice for managing tenancies. With valuable insights and practical advice, we guide you through adapting to these modern solutions, ensuring your rent transactions are as efficient and hassle-free as possible.

Speaker 1:

Okay, so paying what fees should you not be paying? Should you be paying? And the death of the cheque? When it comes to paying rents, cheques are being abolished, so we're going to talk about that today. Stay tuned, I'm the ringleader. So what's up? Goodbye, check, bye, bye, check. Rest in peace. Check.

Speaker 2:

See you later. Pass book, pocket book, check book.

Speaker 1:

Oh, what happened there? Like the checks of, if you have. If you've missed it, guys and girls, um, first move macquarie bank in. Uh, november I think it's the 20th of november no more cash or checks in or out of macquarie bank. And it makes you think, well, when are the banks going to be moving next on checks, which I think will be sooner than cash? But you know, a cashless society, no checks. And now it's moving over to our tenants because they're saying we've got to have one free method to pay our rent. And if we can't do checks, what can we do?

Speaker 2:

That's right. It's always been a little bit of a contentious point when it comes to the fee-free options. Every agency is different in what fee-free option they have to offer, but, to be fair, there's only a couple really. You can't pay your rent with cash. We't collect cash for um rent for more than 15 years ago, from what I remember, and even then it wasn't you know, nobody wanted to take it because it was liability to the office of that. Excuse me, that's where these third-party companies have evolved and you know we're in a society where you know apps. We rely on all our apps and all our internet banking and things like that, so it was only natural that that would come about. That you know there's a safe, secure way to pay without checks or cash. But let's talk about checks a little bit.

Speaker 2:

You know checks can bounce. So when you receive a check, you're effectively paying the owner for money that you hope to be there. Check, you're effectively paying the owner for money that you hope to be there and then three or four days later the accounts team goes all that check bounced and now we have to reverse that money back from the owner. But since we've already paid it to the owner, how do we reverse that payment? We have to wait for the tenant to then make a replacement payment to then reverse the payment that bounced, and then there's a fee attached to that, because that's a lot of manpower for accounts that you know you've got to stop the check with the bank you've got. You know all these people are involved and I think from when I first started it was $30 dishonest check fee that we used to charge. Yeah and um. You know if, even if you didn't have the money to pay rent, you could just bring rent in in a check you know it's like um yeah, I'm trying to think of the movie of leonardo dicaprio.

Speaker 2:

You know, we used to forge all those checks and just pay everyone.

Speaker 1:

Um, it's an archaic method really, but it's amazing how many people are still solely reliant on them. I'd say it's probably 2% to 3% of our portfolio demands checks. So that's obviously finished now. The choice was taken away because of banks, other rental, but still, phil. What I don't understand is did people have cheque accounts as a free method? I never thought cheques were free to write out.

Speaker 2:

I don't know what their banking fees would be annually for a cheque book, but to write a cheque and pay someone for it yes, you're not paying a merchant fee or a service fee for that, so I don't know.

Speaker 1:

So paying your rent, guys, guys, if you just tuned in check, no good cash, no good. Not acceptable for most agents for paying rent. What, what else is not acceptable?

Speaker 2:

uh, I mean goods. We don't receive goods for payments as opposed to currency. I guess goods for payment as opposed to currency. I guess um bitcoin yeah, definitely no bitcoin, nothing like that. Um gold or whatever.

Speaker 1:

All right, so what? What methods are accepted by real estate agents? Then, towards the end, we're going to talk about the free methods that are accepted by real estate agents when paying rent. Now, and and people are having this arm wrestle with their agency all over Australia, all over Sydney, new South Wales, because, you know, agents operate and use different systems. For example, some agents will give you their bank number to deposit into their bank, which is pretty rare. Some agents will use a third party provider we call it a gateway so they'll actually have a company that will actually handle the payments and then there'll be clearance days. Cleo, you know about those clearance days. Can you explain what a gateway is?

Speaker 2:

yeah, it's a third party, like you said, that manages the rent for the tenant and it gets processed on their end and then they deliver it to us in a bank pay file cleared funds and that's important, that they're cleared funds. Once we've received those, they go to the owner directly. Now the gateway is there to allow convenience from the tenant, so they don't have to come into the office. They can basically log online if they wish, manage the transactions themselves or, like the majority of our tenants, they have a direct debit arranged, fortnightly payments the Monday of every fortnight. The money just automatically comes out the Monday of every fortnight, the money just automatically comes out.

Speaker 2:

That is probably the most popular way to pay rent in today's. You know times, you are busy at work. You know you have direct debit set up for your energy, your gas, your phone book. So it is, from what I know, common. But I do also get pushback from tenants regarding the third party and the only reason is that there's a transaction fee of 80 cents. Now that 80 cent transaction fee regardless whether or not it's just the principal or it's the amount is 80 cents. So if you pay monthly, you could check, you could chop that down and only have one transaction fee of 80 cents.

Speaker 2:

Um, so you know, and people don't realize, when you go to the shops and you tap your card, you know you're paying a surcharge for that as well, like on your debit card. You think, oh, it's free, I'm just tapping. But if you go into your statements and you look, there's merchant fees everywhere that you're unaware of what you're paying. So that 80 cents is quite minimal. And when I'm saying that I'm saying that delicately because I do know that it's still money. 80 cents can add up. I understand that, but we all pay these fees everywhere that we go. So, legislatively, I understand there has to be a free method. So this is the contentious point of why we get pushback on using a third party.

Speaker 1:

Even some of these third party gateways I've noticed, actually have some incentives, for they do a point system, like a credit card point system, where they you can actually make back a lot more, you can donate that these points to charity, um, but you know, for you know, two thousand dollars worth of rent or four thousand dollars worth of rent to to be hit 80 cents, not bad, not bad no, and's safe.

Speaker 2:

You get a unique identifying number that's only allocated to you and your tenant property. You get incentives. Like you said, you can actually use your third party as a what do you call it? So when you go to the bank and you want to get a loan and they can give you a transaction of all your payments, same with your ledger, and that can go towards, you know, your merit system there. But the only thing with a third party that I would say if you're moving out and you're moving out and it's last minute, you need to cancel your direct debit. This is where property managers and tenants feel that the third party fails them, and it's not really. It's not a big deal about the fee for a lot of people. It's more that sometimes the debit hasn't been stopped in time and money's come out of your account and you've already moved and then we we get the blame for it and we put it in writing letting the guys know that are moving out.

Speaker 1:

Hey, don't forget to stop your payment gateway, your third-party gateway, and they forget, and then a payment comes out. Now we agents cop crap on social media over the these, over some of these things. You've taken money out of my account that I didn't know about friends and we for instance, we had one on Facebook a couple of weeks ago. How the hell does that happen with? Is that what we're talking? Talking about here, that people don't stop, or was it a different situation?

Speaker 2:

no, I mean people think that we have control and and the control that we have is setting you up as a tenant user and if you have an authorized email or form because I have to fill in forms to sometimes create a one-off payment sometimes tenants say I've didn't have money in my account, can you please draw this week again, and then we log on again and draw that week. Any payment that a tenant makes towards their rent goes to their rent, to their ledger. If it's overpaid, it gets paid back automatically. You can't have a vacate date of tomorrow and rent be then transferred. It sits in a tenant holding fund in the software and then, once that money is clear, it goes back to the tenant. So yeah, we do. We get a lot of backlash so we have always put it um in our vacate letter that if you're vacating it's your responsibility to cancel your automatic debit you.

Speaker 2:

You can do that two ways. You can do it directly through the gateway, so whoever the provider is, or you can even do it through the banks. You know, like apps and things, you can say I've got this direct debit set up, I want to make sure it doesn't go any further than this date, and they can do that as well, so you can have, you know, double security. If you're very conscious of that, well, we're all human.

Speaker 2:

Sometimes things happen. You know, um, we, we have the clearing processing days, which are a contentious point. So if it's come out of your account and you've overpaid, we don't receive it for a few days, and we understand that can be devastating for some people. Um and I guess this is what's arisen out of social media backlash that we sometimes get but once that money clears, we put it back straight away, like it gets transferred back to the tenant. And then we do sometimes say well, you know, look at your vacate letter. It clearly states you need to cancel your debit. It's not my fault or the property manager or accountant's fault that that's come through. We are all here to, you know, fix the problem, the solution. I mean this doesn't happen all the time, but it's happened enough for you know people to write about it, and let's face it, we all cop.

Speaker 1:

It's an issue.

Speaker 2:

Yeah, and the third-party service, like we said, is there to help manage tenants' rent. It's there to be convenient. It's not there for any other reason other than to have a secure way of paying rent now, with free methods of paying rent free.

Speaker 1:

Free, yeah, so tell me a freight nothing's free.

Speaker 2:

No, you know, like you said, it's very rare that an agency will allow funds to be deposited directly into a trust account, especially an agency of our size of over 2,000 tenants. I am not just a tenant, I'm forgetful. Sometimes I transfer, I don't put a reference in. So if you could imagine the accounts person with I don't know $200,000 worth of rent payment coming in every day and people don't put their reference numbers in, your rent is now just on a ledger in a trust account and it will show you who it belongs to, which is another reason why these third-party gateways were created.

Speaker 2:

So mistakes aren't made in that reference. Your rent won't get lost. It's always going to be your rent. It's not going to be receipted manually to the wrong tenant. These transactions get receipted manually that go from a trust account. So anyone that's got a similar name or a similar property oops, we accidentally receded it to this tenant or this property.

Speaker 1:

Yeah, huge problem so that gets eliminated with a third party gateways. Now you've um. What is the free method?

Speaker 2:

it used to be check but now there is no checks. So you know we we have struggled and you know really well you've tried and helped and you know we're trying to figure out the best free method. That's not cash or checks for tenants to pay rent. Um, there is a b pay option for some agents and some properties. We've been looking into something similar. At the moment I can't, off the top of my head, think of any other free other than direct transfer or BPAY.

Speaker 1:

Yeah. So, guys and girls, that's what you're chasing for. Yeah, um in the industry, for if you're going free. But I do have to say that flexibility, uh, for 80 cents, um, for the guys we use simple rent, um, and for that flexibility for um, tenancies, um, and agencies, um, and harmony between landlord, tenant, agent, I think the third-party gateways have much, much better flexibility. That's what I'd be chasing out there if I was a tenant or a landlord. But it's a real pinch point for the industry and for tenants and landlords and agents alike out there. So we just thought we'd cover that today. A little bit on gateways, third party gateways, free rent.

Speaker 2:

Oh well, I hope that's helped some people understand the third party gateway.

Speaker 1:

Cleo, thank you so much.

Speaker 2:

No problem, bye, bye, bye, bye. Thank you so much. No problem, bye.