The digital world has brought about a paradigm shift for the housing industry, as occupant-facing tasks such as property tours and home inspections, lease signing and rent payments can be completed virtually via mobile apps and computers.
Major regional and national apartment building owners and operators have migrated to payment platforms that integrate with their property management systems.
Cash is no longer the dominant form of rent payment and housing managers no longer need to make personal bank deposits.
While checks and money orders are still widely accepted forms of payment for individual owners of some units or properties, even they are using apps like Venmo and PayPal to allow residents to make digital payments.
While the risk of handling cash has been minimized, each rental payment option comes with its own set of obligations. Even certified funds like prepaid money orders and certified checks are not without problems. Although residents who are consistently late, skipping their rent, bouncing checks, or charging back credit card payments are the exception rather than the rule, these few bad actors can severely damage a condo’s bottom line.
But what if your residents had flexibility in paying their rent and could even choose to pay in installments without jeopardizing your bottom line? What if you could accept credit card or ACH payments without risking chargebacks or running out of funds?
One payment solution for multiple families
Domuso overcomes them all. This financial services platform consists of a suite of payment processing solutions for multifamily home owners and operators, designed to streamline the tenant payment experience. It also improves the financial performance of the individual property and shoulders the risk associated with accepting rental payments.
Domuso recently developed a new form of payment called Online Certified, replacing paper money orders and bank checks. It offers 100% chargeback protection, regardless of whether a payment is converted to a digital MoneyGram payment by bank transfer, credit card or cash.
Santa Monica-based Domuso was started in 2014 by cousins Damian Langere and Keith Wasserman. The couple owned and operated shared apartments in the Los Angeles area.
“They worked in their rental offices and experienced firsthand the pain that comes with collecting rent. They decided there had to be a way to address the biggest risks associated with rent payments,” said Terri Nicholson, Domuso’s vice president of strategic accounts.
“The company differentiates itself by offering alternative credit and digitally certified and automated, logic-driven payment options.”
Bringing in the bankless
Since the switch to virtual shops, some apartment owners only accept online payments. This automatically excludes the 55 million unbanked and unbanked Americans, or 22 percent of all households in the US, according to Federal Reserve estimates in 2018. These households depend on alternative financial providers of physical bank checks to pay their rent and bills.
“There are a lot of people who just don’t use banks for a myriad of reasons. They must pay in cash and typically pay with money orders, which are expensive to acquire and expensive for management companies to process as they are typically capped at $500 to $1,000. They’re also very vulnerable to fraud and theft,” Nicholson said.
Money orders also present property managers with massive accounting problems.
“If you ask a property manager what’s the most frustrating thing about the rental week, they’ll tell you money orders thrown in their mail slot with no name or unit number on them. All they can do at this point is wait for someone to come in and yell at them after getting a three-day notification at their door,” she said.
Domuso partnered with MoneyGram International, Inc., an American money transfer company headquartered in Dallas, Texas and with more than 30,000 locations across the country, to solve this problem.
Nicholson describes a real-world situation where the partnership has saved time and money for residents and owners.
“We have a client with a 1,300-unit rent-controlled property in Los Angeles, where 90 percent of residents pay with money orders. Our integration with MoneyGram allows these residents to bring cash or a paycheck to the nearest MoneyGram location, where they pay a $3.95 fee and their rent money is electronically transferred to the property’s operating account, where it is sent through the property management system to the correct resident is posted to the ledger.
“Money orders have a dollar limit that is often far less than a month’s rent, so a resident paying with numerous money orders increases a two-minute check review by the property manager to eight minutes. With MoneyGram, the resident no longer has to fill out four money orders and go to property management to put them in the slot,” Nicholson said.
Domuso is one of the few platforms that targets affordable portfolios, she said. In early 2020, Domuso released improvements that allow LIHTC, HUD and other affordable housing providers to offer electronic payment options to their residents.
Mobile Check Pay joins in
Last year, Domuso added Mobile Check Pay to its digital platform, giving property managers access to the same underlying technology that banks use to allow customers to deposit checks on the go.
With this feature, property managers can accept digital images of checks as payment from mobile devices, reduce paper usage, replace check scanners and safe deposit boxes, while reassuring tenants that their checks are deposited on time and in the correct account. Because digital transactions require identity verification, Mobile Check Pay also reduces a potential fraud layer. AMC, Weller Management and Bridge Property Management were among the first management companies to use this technology.
Accepting credit card payments is convenient for both residents and managers, but chargebacks are a serious threat to a property’s bottom line. Consumers can dispute credit card payments up to six months after the charge.
Credit card companies then withdraw that money from the property’s operating account until the dispute is resolved, leaving it up to the manager to prove the money is owed. The process can take several weeks or even months, and often disputes are lost simply because the management company does not meet the deadline.
A 2019 study found that 81 percent of consumers admitted they requested a chargeback out of convenience, and many of the disputed cases were lost. Rental chargebacks, while less common, are very typical in the context of application fees.
Clarifying the problem chargebacks cause for property managers, Nicholson said, “We received a frantic call from a property manager saying that he needed to stop collecting rent from credit cards after two occupants of a single property lost rent in a single month had disputed by credit card for six months. The owner saw $15,000 withdrawn from his property’s bank account in a single day, and his knee-jerk response was to eliminate all credit card use on the property. Fortunately, Domuso’s management company knew. They switched to the Domuso platform and today continue to accept credit card payments as the chargeback risk has been transferred to Domuso.
Effects of the pandemic on rents
Covid-19 has created an economic crisis for many responsible residents. The pandemic shut down many businesses deemed non-essential and prompted millions of people to file for unemployment benefits. As a result, homeowners have seen a sharp increase in credit card payments, putting the property management company at high chargeback risk. So far, according to NMHC’s Rent Payment Tracker, in its survey of 11.5 million units of professionally managed rental units, 75.4 percent of residential households have made a full or partial payment as of Dec. 6.
“Right now, consumers think they can cover their credit card payments, but unless people go back to work and have spent their stimulus money on a month’s bills, they will look for other ways to support their families.
“Property owners don’t want to worry about what happens to residents. But if they don’t collect rent, they don’t have the resources to run the property lights, pay the employees’ salaries, or pay their own mortgages and taxes,” Nicholson said.
Today, renters make up more than a third of the US population, and rent is their largest monthly commitment.
“As an industry, we need to offer residents multiple ways to pay rent and it needs to be quick and convenient. COVID-19 has triggered a paradigm shift and is unlikely to go away. This has resulted in an industry that is typically slow to adopt technology, accelerating the implementation of new payment solutions. There were companies that wanted to test different solutions throughout 2021 that had to launch the same platforms in a single month because they knew they wouldn’t survive unless they stayed agile,” she said.
What’s next for Domuso?
“We’re always looking for ways to introduce the next innovations in rental payment technology. We are very focused on mitigating financial risk and being the trusted platform that brings value to our multifamily customers and greater convenience to their residents,” said Nicholson.
Author Wendy Broffman