Houston apartment owner Nova Asset Management is using technology to solve a problem that was costing it $30,000 to $50,000 a year: theft of rent payments.
“We would have all types of theft with the night drop-off,” Nova president and co-founder Neal Verma said. “We even brought in mailboxes you couldn’t break from the outside. People would use fishing wire and a piece of gum and would literally go and fish a money order out. We tried everything under the sun to prevent it. It was like a never-ending nightmare.”
The company eliminated this source of loss by changing the way it collects rent at more than 6,000 apartments units. Tenants at its 16 local apartment complexes no longer drop off checks or money orders at the front offices. Instead, they can do so at thousands of retail stores where they might already be shopping.
Verma said he had considered creating vending machines to accept payments but knew it would take time and money to set them up. After explaining the problem to an associate at RealPage, a publicly traded property management software firm near Dallas. The firm said it had already been working on a solution.
RealPage asked Nova Asset Management to test its RealPage eMoneyOrder service, which, after some fine-tuning, is now widely used by property managers across the country, according to RealPage.
Since early 2014, tenants of Nova Asset Management’s complexes have had an option to make real-time cash payments for their rent at 24,000 retail stores such as H-E-B, Fiesta, Wal-Mart or Ace Cash Express that have partnered with RealPage. The rent rolls come up on the stores’ computers, and payments such as rent, water and late fees are applied and pushed out to RealPage, which credits the charges on Nova Asset Management’s rent roll ledger.
The cost to tenants is $2, or about the same as a money order in many cases. Residents still have the option of paying online by check or credit card. It cost Nova Asset Management a few hundred dollars per complex to set up, plus a small ongoing fee.
“I think that it’s a good system for people that do not have Internet service at home. It seems to be faster, since all you do is give the coupon, and they process your payment quickly,” renter Xochlit Rendon said in a statement through Nova Asset Management.
Matt Davis, senior vice president of payments at RealPage, said in an email that while most renters in the U.S. use checks or automated payments for their monthly leases, “there is still quite a significant resident segment that wants to pay in cash or money order.”
While the financial services industry refers to these consumers as “unbanked” or “underbanked,” Davis likes to call them “cash preferred.”
“For this sizable group of tenants, the process is costly and laborious,” Davis said. “First, they must go to a location that sells money orders and purchase one or more to cover the cost of their monthly lease expense. Money orders can be very expensive if you buy them at your credit union or bank, or cheaper if you buy them at the post office. Some retailers place limits on the amount you can buy, so a resident might need to purchase multiple money orders to pay their rent and utilities.
“After successfully purchasing the money orders, the resident must return them to their property office. This process can be costly, time-consuming and can result in lost money orders and unpaid rent.”
Nova Asset Management estimates the change has also saved the company nearly $200,000 in administrative costs. Bookkeepers who used to spend 80 percent of their time processing payments have been freed up to do other tasks and can manage more than one property.
Nova Asset Management, which was founded in 1991 and manages office buildings as well, has bought and sold 20,000 apartment units in Houston. Its 16 complexes average 300 units with an average of 750 square feet each.
From about 2000 until 2014, money orders were the most popular payment method at its Class C properties, which are typically complexes that are at least 30 years old and make up about 75 percent of its portfolio, Verma said. Before that, most tenants at those complexes paid their rent in cash.
Rents at Nova’s Class C properties average $600 a month for one-bedroom units, Verma said. The other 25 percent of the portfolio is Class B properties, which are frequently between 8 and 20 years old and in better locations than the C properties, he said.