I have read many different perspectives on the deposit that landlords ask renters to pay before moving in. What is a fair amount to ask the renter to pay? I would like to get the equivalent of the monthly rent as a deposit. I figure any damage that will be accounted for will cost at least a couple hundred dollars. Opinions and recommendations welcome!
@Ryan Billingsley That is a common amount, one month's rent as a security deposit. Of course there will be those who want to "break" that amount up over several months for whatever reason. My opinion is not to do that, if the person has trouble with the deposit, any unforeseen financial circumstances they encounter could result in no rent for you (though I know others are ok with this). I found a link to a pdf of the tenant landlord law for Missouri, it has a section on security deposits. You should know the specifics of the law as well though, it looks like this is a broad overview.
@Steve Osowicz Thanks for sharing. I have talked to people who do only half the monthly rent as a deposit. But when renting for 650, a 325 deposit is not a good security blanket for unexpected damages. Also I feel the larger the deposit, the more motivation the renter has to try and get it back.
One month's rent is a good deposit amount...however you can always charge more or less, depending on market conditions and the creditworthiness of the occupant. Apartments and landlords frequently run "move in specials" to get places leased out ASAP
@Steven G. We bought the 2 properties from a fellow investor who rented them as well. He was surprised with what we plan to rent them for and the deposit we are asking. He rented them well under market value and asked for a minimal deposit and he was content. I guess it all comes down to the level of performance you expect from your investments and the demand for rentals in the market.
Normally, I do one month's security deposit. I don't take partial payments of the first month's security deposit. No sec dep and first month rent then no keys.
However, when the prospective tenant's situation is a little less clear cut as to qualification, I will take a second or an extra half month's security deposit. Occasionally, I will allow the tenant to pay those over the first two months of the lease. To reiterate using your example of $650, they would have to give me $1,300 before they got the keys. Then if I felt the situation warranted it, I would allow them to pay an additional $325 or $650 over the next month or two.
Every jurisdiction is different and you may not be able to take more than one month's rent for a security deposit. However, from my understanding you can in the preponderance of jurisdictions.
I always charge 1 1/2 month's rent as a security deposit. Even though they aren't supposed to, some tenants don't pay the last month's rent and the security deposit goes toward that. Then I still have 1/2 month's rent for damages, if needed.
@Ryan Billingsley I also think that the larger the deposit, the more motivation they have to get it back.
We've always just charged one month's rent, but up in Northern Virginia, where that home is located, that's over $2,000 which is usually plenty to touch up some paint, clean the carpets, etc.
@Michelle L The bigger the deposit the better!!! I think we will start with just 1 month rent and go from there.
@Brooks Rembert 2000 is a great security deposit! I would assume when rent is 2000, its a nice property!
@Ryan Billingsley Our duplex units rent for $690 and our small houses rent for about $1000. We charge a flat amount for our base security deposit ($600 on our duplex units and $800 on our houses) and raise it by $200 if the tenant is a little riskier for us to accept based on thier past history or current income stream.
We purposely don't make the security deposit equal to a rent payment, because there is greater chance of the tenant thinking they will just not pay last month's rent and the security deposit will cover. Of course it doesn't work that way, but there is no accounting for tenant mentality and it just makes it clearer for them if I make the security deposit a little less or a little more than the rent.
The reality is that a good tenant move out will usually cost us $100 or less from the deposit and a bad tenant move out will cost us $1000 or more. The security deposit is never enough for bad tenant move outs and we do our best to avoid renting to rogue tenants. But sometimes a tenancy will go south, so we have other reserves to cover that kind of situation. If our market could bear a higher security deposit, I would do what I could to get it!
Marcia Maynard, Fischer Properties | Podcast Guest on Show #83
@Marcia Maynard Thank you for sharing! Charging a slightly different amount makes sense. It sounds like something you do because of past experiences. That is great advice to help a new landlord succeed!
Be aware that the amount you can charge for a SD is often regulated by state law. Make sure you know what the law is where you are renting.
I do $100 to $150 more than rent on my properties. These rent for $650 to $1100.
@Paul Ewing That can't hurt to ask for more! Gives the landlord a little more piece of mind and the renter more reason to keep the property in good shape.
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