Rental requirements up front
Member since 2022 · 13 posts · 1 vote
Rental requirements up front
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3yQuote from @Zachary Stein:
Collecting last month's rent is not "unusual" but it also isn't "standard" for most Landlords. Study your market to see what other Landlords are doing. I personally charge a deposit equal to one month of rent or up to two times the rent. How much I charge is based on the strength of the applicant. The higher the risk, the more they pay. It works well for me and with 400 rentals under management, I rarely have Tenants leave owning more than the deposit.
There are a lot of questions, many that you probably haven't even thought of yet. I recommend reading a couple books that you can get an understanding of what management entails and start developing a plan for how you will deal with problems like late rent, unauthorized tenants or animals, lease violations, early terminations, etc.
Check out "Managing Rental Properties" by Brandon Turner or my personal favorite, "Every Landlord's Legal Guide" by NOLO. Written by attorney investors, it's full of practical advice pertaining to management of investment property, has sample forms that can be edited, and - most importantly - they tell you what your primary state laws are and where you can read them. It's updated every year and is the best $40 you'll spend as a Landlord. There is one book for 49 states and a separate book for California. They also have a great website with the same information, but a book is easier to read/reference.
The DIY Landlord Book4.7247 Reviews
9 Replies
- 3yJoseph BeilkeBusiness MemberReal Estate Agent · Palm Coast, FL · Member since 2018 · 364 posts · 244 votes
1. First, Last and Deposit is some time hard to come up with depending on the type of property you have. If you are renting a 4 bed 3 bath house on the water for $4500 a month, the likely hood of qualified applicant for that property to be able to pay all that is very high. But you also may not need last month rent with type of tenant because chances are they are going to good tenants. The opposite might apply for a 2/1 in a C class neighborhood.
2.BP has great leases in the tool section. We use the lease written for FL and find they are much better than the standard FL Realtors lease. It spells out a lot of the things your asking about.
Lastly, why are you leaving some furniture? You either furnish or you don't, a random couch or a bed in a single room does not add value. I would remove them or provide us more Information as to why you are leaving just those few items.
Enkore Real Estate & Property Management4.836 Reviews - Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes3y
Well said by Joseph above.
I'll add here that I personally dislike collecting Last Month's rent upfront because it seems more prone to creating "coasting" tenants at the end of a lease AND disputes over who owes what in the move-out and repairs discussion.
Also, it would be prudent of you to take a dynamite PM in your area out to a nice lunch and learn from them. Our industry exists to help protect folks like you and improve returns and I'm thinking you and your wife would get some gold from that.
Remi Emerson Residential is a stellar resource and anyone on their team could be an asset to you.
- 3yDave PoeppelmeierBusiness MemberRealtor · Maumee, OH · Member since 2015 · 491 posts · 722 votes
@Zachary Stein First of all, congrats on purchasing your first Rental Property! Most people don't ever get to that point, and get stuck in Analysis Paralysis. However, it seems you have a little catch-up to do, since these are very basic processes in RE. I would suggest looking in the BP Rookie Podcast and Real Estate Podcast for episodes regarding managing a rental property to give you some more guidance. There's also tons of articles and posts on here with great advice, and it's all free!
To get to your question, I agree with Joseph and Will. Asking for First and Last Month's rent is outdated I feel, and I remember even as a young professional there was an apartment that I wanted to rent, and they asked for first, last, and security deposit, and there was no way I had that much free cash available. A local RE attorney can definitely help you know what your local rules and regulations are regarding rent collection, deposits, etc... but you can also get this information for free (along with leases) at a local REIA or Investors group. It's good to have an attorney in your back pocket for when you will eventually need them, but this kind of stuff is what the RE community is for!
Again, congrats on your purchase, and best of luck to you.
Keller Williams Citywide | Dave Poeppelmeier534 Reviews - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Zachary Stein:
Collecting last month's rent is not "unusual" but it also isn't "standard" for most Landlords. Study your market to see what other Landlords are doing. I personally charge a deposit equal to one month of rent or up to two times the rent. How much I charge is based on the strength of the applicant. The higher the risk, the more they pay. It works well for me and with 400 rentals under management, I rarely have Tenants leave owning more than the deposit.
There are a lot of questions, many that you probably haven't even thought of yet. I recommend reading a couple books that you can get an understanding of what management entails and start developing a plan for how you will deal with problems like late rent, unauthorized tenants or animals, lease violations, early terminations, etc.
Check out "Managing Rental Properties" by Brandon Turner or my personal favorite, "Every Landlord's Legal Guide" by NOLO. Written by attorney investors, it's full of practical advice pertaining to management of investment property, has sample forms that can be edited, and - most importantly - they tell you what your primary state laws are and where you can read them. It's updated every year and is the best $40 you'll spend as a Landlord. There is one book for 49 states and a separate book for California. They also have a great website with the same information, but a book is easier to read/reference.
The DIY Landlord Book4.7247 Reviews - 3yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
I charge first last and deposit when I have a bunch of applicants or when they have a lower credit score or I at least charge a larger deposit than one month's rent. This encourages them to pay the last month's rent and clean the house to get their deposit back.
Most people will likely have their own furniture. I'd go ahead and sell these items so you don't have to get rid of them last minute.
Yes absolutely have a late fee. My rent is due on the 1st, late on the 6th. Many tenants wait till the 5th to pay.
- Real Estate Professional · Tampa, FL · Member since 2015 · 176 posts · 252 votes3y
As a property manager, I generally advise against first/last/security as it starts to seriously limit the pool that we draw from in the Tampa area. Plus, if you go to any large complex, they are almost never charging that much to move in. If your unit is renting for 2,000 + per month, you're talking about $6,000+ upfront for move in. My experience has been that becomes harder to come by from tenants, and limits the pool of potential applicants.
Renting an apartment is not unlike any sales transaction. The greatest motivator is a diminishing supply of something you want. So ideally you want a situation that will produce the most applications, so you can choose the best one. I would say the most typical situation here in Tampa for a 1/1 is first months rent and security up front. Typically security will be somewhere between $500 for applicants with solid credit, to 1 months rent for applicants with fair credit. Applicants whose credit score dips below 600 you need to scrutinize a bit to figure out why their situation is where it is and if it's someone you want to work with. If a tenant has credit issues but shows solid income, I'll usually ask for a higher deposit.
- Flipper · Chicago, IL · Member since 2017 · 25 posts · 3 votes3y
Zachary,
The state specific leases are available with pro membership here on BP; and fortunately they do address many issues you may encounter with a unhappy tenant departure and generally seem much more comprehensive-esp. for states that are very tenant friendly. That said, I have an addendum list of requirements (such as all cash (bank check/money order) to move in for first month and security fees, plus receipts for utility initiation. Last few years, we do not accept rents any method but ACH transfer after move in..no check/zelle or paypal as these can be reversed, plus the paper trail can come in handy when memories fail. Tenants should not only agree to pay but want to pay on schedule. We also use a rent collection portal that contributes to reporting on the tenants credit to reward them for on time payment.
Definitely agree with others here- would be nice to donate the extra furniture to a good cause (or sell.)
All the best in your new adventure and congrats of acquiring insurance!
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes3y
Aloha,
1) What does local law ALLOW you collect prior to move in? Many locales limit you to an amount equal to one month rent for deposit, and the first month rent. Secondarily, what is customary in your market at your price point?2) How/when to pay rent is pretty basic...due on the first, late after x number of days with late fee of x. If the last late day falls on Saturday, Sunday, or Federal/State Holiday, they get until close of business the next business day. Be sure you specify method of payment and location. I recommend against allowing tenant OR subsidized programs to deposit directly to your bank account, unless you establish an additional "sweep" account which you monitor daily to transfer deposited funds out to your "regular" operating or client trust account.
Your real estate agent can likely provide you a State RE Board approved Rental Agreement that will cover a broad spectrum of issues. Security Deposits are available as per local law for tenant damages, and possibly late rent and fees.
Local courts will ultimately decide Deposit disputes, with their interpretation of "normal wear and tear". Prepare your evidence starting with proper documentation of move IN condition. Document all issues during tenancy by saving emails and copies of Violation Notices or Delinquency Notices. Finalize your evidence with proper move OUT documentation, including copy of the notice you received/gave for vacating notice per local law; actual third party estimates for repairs to tenant damage ONLY (or actual invoices of repairs/cleaning completed within the time requirement of the law); and a copy of the tenant ledger showing the past year of charges and payments. Its not a bad idea to attend a session or two of LL/Tenant court to gain some insight, but generally YOUR labor has no value to the courts...only actual third party business expenses and estimates. You also will not likely get away with replacing rooms of carpet or certain other depreciated assets unless you can produce records showing they are less than 5 years old.
Items we add to tenant restrictions are 1) no outside storage (or under house, attic, as appropriate); 2) no window AC without approval (to ensure proper installation that will not damage the property or create hazard); 3) Quiet Hours 10 PM - 8 AM Daily; 4) All vehicles must be currently licensed, insured, and operable; 5) if tenant responsible for yard service, must be maintained at least every 15 days; 6) Assistance Animal Policy (attached as addendum to rental agreement).
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Not unusual. What do you mean pay rent? It's your property
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