Security Deposit upon Acquisition

3 Replies

Quick Question - when you are buying an already rented/leased building (4-plex in this case), how do you think about the security deposit for the current tenants?  Do you adjust your price accordingly? 
For example using easy #s, if I'm considering offering $100K for a 4-plex and the 4 existing tenants have combined security deposits totaling $4k, should I offer $96k, making an allowance that I (as the future owner) will have this liability?

Thanks in advance forum geniuses!

@JJ Mayer

No. That has nothing to do with it. Your purchase offer will state seller is to give buyer all security deposits and prorated rates at day of close. Then you will take those security deposits and place them in a separate account and not touch them until tenants move out. And then, after close set up walk through of all units and document the condition and any damage. Then the tenants are responsible for any future damage since you now know the condition at purchase.

@JJ Mayer

*prorated RENTS at day of close. And make sure the language is clear that it doesn’t matter if seller has actually collected that months rents, they are to pay you the prorated rents.