Rental payments done in-game or in RL?

What is the normal method of collecting payment from renters? Do renters pay in-game using Lindens or pay in RL with something like paypal? Is it acceptable for landlords to ask for payment outside of the game?

Yes to both ways. Some people use paypal, some collect L$. It is really up to the landlord. I suppose you could even do it via the postal service if you really wanted too.

Depends entirely on the landlord and what you're renting.

Most automated rental systems for mall merchant space or simple apartments is paid in-world, in L$, via a prim at the rented location. Some of those systems also tie into a web-based system where you can pay by PayPal or credit card, via the web.

I've paid rent on a private island parcel both via manual in-world payments each month to the landlord, and via a web-based PayPal agreement that automaticly pays the sim owner each month.

It is of course alot less burden on the renter if you provide the ability to pay in $L.. and I suspect it's less fee-heavy on both ends of the transaction. The better rental systems, such as Hippotech, will automatically calculate the correct $L amount based on the current exchange rate. Obviously this is somewhat problematic when you as the landlord go to the exchange to sell, as the rate fluctuates. You might gain a few cents or you might lose a few cents on each dollar.. but all around, the convenience is probably worth it.

I understand that it is probably easier for the renter to pay with lindens and it is more probably more profitable (and safer) for the landlord to take payment with paypal... but looking from a landlords viewpoint, which one charges higher transaction fees to withdraw real USD from the system, via linden exchange or via paypal?

Well there are some bigger property groups, such as Otherworld, that only work with a US dollar Pay Pal system on land you own from them. Others such as Anshe Chung give a choice between rental or ownership although both also require Pay Pal.

Finally Caledon works on a pure Lindon dollar basis although the tier level can vary to reflect Linden Dollar exchange rates.

Providing the tier or rental is fair, that is comparable to the corresponding Linden tier with aded advantages of Island land I think it is hobsons choice as we say in England, in other words no real difference.