Ever since I became a landlord I’ve always felt that collecting rent via checks was a painful process. This is 2017 after all. For a long time I simply cashed checks at the bank which eventually morphed into taking pictures of checks for deposit after I left my job where the bank was in the office. Whenever a prospective tenant mentioned they’d like to automate rent payments from their bank account I got excited. There was one problem though: doing this manually with a bank is time consuming and it involved sharing my bank account information. Despite a tenant’s best intentions they always ended up dropping the ball and not following through.
In 2016 I learned of a new service called Cozy.co from popular financial blogger and landlord Paula at Afford Anything. She mentioned Cozy briefly in one of her posts on collecting rent. I did some research on my own and decided to give it a try. Simply put, Cozy acts as the intermediary between tenants and the landlord. Their basic service is completely free and I’ve found it incredibly simple to use. My tenants have spoken highly of it from their experience as well. Besides managing payment they also offer background check services which I haven’t utilized (I handle background checks on my tenants myself using a public records search my state offers).
Before we get to how the process works I’d like to share some additional information that Cozy.co sent me when I reached out. Note that I am not receiving compensation for this review of Cozy and the links in this post are not affiliate links. I’m simply trying to spread the word about a fantastic product that has simplified the way I collect rent.
Cozy uses bank-level encryption and connections to transmit data. According to Cozy (as of June, 2016):
Many tenants come feeling nervous about providing bank information or a credit card, but in many ways, we’re more secure than the online shopping sites they use. We are trusted by over 60K property managers nationwide, processing $300M in rent every year.
You can read more about their security practices at https://cozy.co/security-and-privacy. According to Cozy they are also one of the few screening tools that does not require the applicant to give their SSN to the landlord. Similar to the way you collect rent, the landlord has no access to the bank account nor the SSN, but is able to view the full credit and background check. The company is seeded by Google, and partners with several real estate associations.
So How Does Cozy.co Work?
There isn’t anything complicated about using Cozy. You simply setup leases by inputing the property address, monthly rent, whether you’ve collected a security deposit, the tenant’s email and a few other small details. Once the lease is created, Cozy will email the tenant inviting them to signup to pay through Cozy. For new tenants you’re able to login into your account and see whether the tenant has setup their account to pay. This can take a few days since tenants need to verify their bank account information.
Below is a screenshot of the navigation once logged into your account – it is extremely simple and straight forward.
Once you have active leases and properties added, you are presented with a dashboard when you login.
You can also view the current leases and whether payment has been initiated by the tenants.
I very rarely login to my Cozy.co account since I get emails updating me when payments have been initiated and the anticipated deposit date. I also only own two properties so it’s easy for me to track. Below is a copy of the email I received leading up to February rent being due.
Downsides of Cozy.co
I personally don’t view this as a downside, but it is worth mentioning so it isn’t a surprise if you decide to use Cozy. Since money is deposited from one bank to another it is done using ACH, which is an extremely slow process, sometimes taking up to 5 business days for funds to deposit. Cozy offers a premium service to speed this process up called Express Payouts:
Receive your renters’ ACH payments in just 3 business days with Express Payouts. (Regular ACH payments typically take 5 business days to deposit.) For every enabled property, Cozy will charge you $2.99 per month (only if we collect an ACH payment). There are no limits on amounts or the number of transactions per property, and we won’t charge you if we don’t collect an ACH payment.
I do not pay for the premium service for three reasons:
- My mortgage payments aren’t taken out until the 5th day of each month which means funds most likely have reached my account by then.
- I ask my tenants politely (and explain the reasoning) to start the transfer process a few days before the end of the month.
- I can see whether the tenants have initiated the transfer so even if I don’t have the money yet, I know it is on the way and they have “paid” rent.
In my opinion the benefits of automated rent payments far outweigh this minor inconvenience of our ancient banking system. I believe this will eventually be solved with technology.
Wrap Up
So there you have it, a full review of Cozy.co to automate rent payments from your tenants. If you’re a landlord and are still cashing checks I encourage you to check out Cozy.co. I was apprehensive at first to try it and I had low expectations for a free product but was blown away. I have been using it successfully for many months now. Plus there is an added benefit that many tenants (especially younger generations) also want to automate their rent payments as well. Please feel free to ask any questions in the comments section as I’m happy to answer them.
This information was very helpful. Thanks for taking the time put a review online.
Hi I have a real estate property that has and will have renters. I do not pay taxes until I take a distribution. I am concerned IRS will get confused and want me to pay taxes twice. Any recommendations?
Hi Art, I’m not sure I understand your situation. You self report your rental income when you pay taxes. Your way of claiming income is no different whether you deposit a check or it is deposited automatically via Cozy.
I see that it’s free for landlords. So how does cozy.co make money? Who or what is the product? Does the renter pay them some upfront money? Also, how does it handle a deposit and a pet fee?
Thanks for writing this review!
Hi Robert, great questions. There are a few ways I am aware of that Cozy makes money.
1. Through their Express Payouts which basically speeds up the ACH process for funds to reach your bank account.
2. Through using their tenant application product which charges a fee to the tenants. Landlords are provided with a background check. I have never used this service since I do my own background checks but I imagine it is valuable for bigger landlords.
3. Selling other products: They recently added renters insurance and as a landlord you can require proof of insurance or the tenant can purchase is directly on the platform. This feature is new and I haven’t yet explored it.
You can require a security deposit when you sign up a tenant. I usually receive the security deposit at lease signing so I just select that the security deposit has already been received. For pet fees I’d just increase the monthly rent based off the additional charges. Hope that helps!
Ok, that makes more sense now. Thank you so much for replying!
Do they have landlord/tenant contract agreements that you use? If, yes, has that worked well, If not, do you know where to get the best (most “air tight”) ones?
Hi Elle, they do not offer leases. The “lease” contract you create on the website is not contractual, just a method of setting the basic terms for length of lease and payments. Your best (and most expensive) route is probably to work with a lawyer to get a lease drafted, or at least get a lawyer to help review one you create. I personally took one from a landlord I had rented from many years ago who owned large multi-unit buildings. It appeared as though they had a lawyer review their leases since it was very thorough. I then just removed and added parts to the lease where it made sense with my rentals.
Hello, I have a LLC. I assume the tenant can make payment to my LLC which is also the bank account it will go to. Do I have this correct?
Yes, you can just use the bank account of your LLC for payments to be deposited into.
Thanks I was looking for a back up if Venmo ever stops working right now it’s fast and free but that could change, so thanks
I can’t say I’ve used Venmo, but Cozy offers some other benefits in my opinion beyond just the straight payment piece so something to look into anyway depending on your situation. Thanks for stopping by!
I have a rental property that has two tenants. Do I need to set up two ccounts? i.e. 1st floor, 2nd floor?
Hi Beverly, note that you will not need multiple Cozy accounts. Within Cozy you can achieve this either way. When you setup a property Cozy will ask you whether it is a Single Unit or Multiple Unit property. With respect to the single unit you could add both both addresses separately which is what I did initially because one tenant still wrote me checks. In the case of setting it up as a multiple unit in Cozy you just need to specify a different “Unit Name”. Note that you can add units later even after setting it up. Hope this helps!
The only question i have about cozy.co is what if there third party (stripe) goes out of business and or claim bankruptcy. this happened with erentpayment.com . so what assurances do we have from them when they collect out tenants money that we get paid? Is Cozy.co insured and are we the landlords insured for our money for this 4-7 days processing time?
thank you
Hi Jerry, this is a great question and one that I admittedly hadn’t thought about so I reached out to Cozy to help answer. Here is their response:
Good question! We get asked this one a lot. Stripe carries liability insurance, and all user funds passing through Stripe are kept in “FBO” bank accounts separate from Stripe’s operating funds. Check out this blog post for details:
https://cozy.co/blog/how-payments-work-at-cozy/
I am a tenant and was told to set up payments online to my landlord through Cozy.Though I love the idea of is being automatically taken out each month.I don’t like the $17 dollar fee
Hi Kristina,
This fee must be charged separately by your landlord. Cozy does not charge fees on a monthly basis to pay rent. All of my tenants pay me rent at no extra cost to them.
Does that mean you pay the fee associated with a debit card payment?
Hi Eric, for the most part tenants are paying via a bank to bank transfer (ACH). They can also pay via credit card in which they are charged an additional fee (2.75%). ACH transfers are slow, but one of the benefits is that you can see that payment has been sent with anticipated deposit date. The only optional fee to the landlord is expediting the ACH:
From Cozy:
“Get paid faster. For $2.99 per month per unit, payouts for payments made with checking accounts occur in 3 business days, about half the time of normal checking account payments.”
If you use a debit card, you will be charged a fee, you have to use your account and routing number and it’s free of charge
Can I use Cozy.co for renting out rooms (housemates) in a house?
Yes, you definitely could use it for this purpose.
Thank you very much!
can you require the tenant to pay the fee online payment or is it charged to the landlord and they just have to raise the rent to include the fee?
Any fees like paying via a credit card are charged to the tenant. Cozy makes their money (at least at this time) on the tenants (application/screening fees, offering renters insurance) and on landlords (expediting ACH, and a service which provides details on your rental market). I want to be clear that I’ve been using Cozy for several years now and have paid them $0. All of my rent comes in directly to my bank account.
More details here: https://cozy.co/pricing/