A recent article from Barefoot Investor Scott Pape has called attention to a product called “Rental Rewards”, a product that allows real estate agencies to outsource the collection of rental fees from tenants (and the merchant fees associated it).

Tenants create an account on the rental rewards system and then submit either bank details or credit card details to have their rent paid automatically.

It sounds good in theory, especially for the real estate agents, who get to outsource all the work around collecting rents. But the kick in the guts for the tenants is that both of these methods incur fees, which very quickly add up.

By Scott’s calculations, a tenant paying $350 a week in rent could end up paying an additional $264 a year in credit card processing fees to rental rewards (based on the 1.45% processing fee listed on their website). A case study within his article showed another tenant paying $78 a year in direct debit fees, even without the use of a credit card.

We do need to point out that in line with some state’s requirements to have a ‘fee free’ payment method, Rental Rewards do offer an alternative. But what is that alternative? Personal cheque or money order – which, of course, the banks or post office charge you for.

While many real estate agents are using the rental rewards system, it’s certainly not a popular with tenants. A search on productreview.com.au shows 44 reviews at the time this article was created, with almost all of them being one-star and with many raising some serious questions about the company. Unfortunately for the tenants, many of the big real estate groups are on board with Rental Rewards and that leaves tenants feeling trapped into having to pay fees to pay their rent. Scott finds this unacceptable. I agree.

As a property investor, you know that good tenants are one of your most valuable assets. If you’re renting your investment property, I urge you to contact your managing real estate agent and ask them if they’re using Rental Rewards. If they are, move to an agent who has more respect for your tenants.

Whether you ultimately decide to proceed on your own or not, this strategy session is one investment that you shouldn’t question.