Money orders are a common method used to pay rent. Usually a money order is quick and easy for everyone. A tenant uses their cash to purchase a money order, gives it to the landlord, landlord deposits the money order, all is good. Well, maybe.
What if the money order gets stolen? It then becomes not so easy. For both you and the tenant.
As a landlord, I generally appreciate money orders. They are basically money in the bank. They can’t bounce because the money has already been paid. Plus, we are not lugging around large amounts of actual cash, which can be a pretty tempting target.
But if lost or stolen, money orders can be pretty difficult to replace. Money orders are not like checks which can be easily canceled and then rewritten. A money order has to instead be reissued, which often takes cash the tenant does not have.
Think about it. Your tenant saves up money all month. The tenant then uses this money to purchase a money order to pay you the rent. The money order then gets stolen, leaving both you and the tenant high and dry. It can be difficult for some tenants to catch back up, and do you really want to evict an otherwise good tenant for something that was not really their fault?
The money order provider can perhaps cancel the money order, perhaps not. They may eventually refund the money or re-issue the money order to the tenant. But it is up to the tenant to demonstrate that the money order was stolen by providing a police report and then following up with the procedures of the company that issued the money order. Trust me when I say that this is not as easy as it sounds.
The above scenario does not happen very often, but it does happen. And it has happened to us more than once. The best solution for us landlords is to stop accepting checks or money orders and require tenants to go electronic with a service such as clearnow. We used this service for years and it worked great.
Some folks are however “unbanked,” meaning they do not use banks. Yes, even in this day and age people still run to the post office or wherever, wait in line and purchase money orders. These folks will not be able or want to use a system like clearnow. But the costs of trying to clean up messes which occur with stolen money orders, may mean that unbanked tenants will just have to select another landlord when looking for some place to live.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
