Last Month's Rent?

Question

I have a $2000 a month rental, and a person or two suggested I was nuts for asking for first, last and security. Yet I am a bit fearful to not ask for last. Opinions?

Jeremy Pace · Answer

@Jason Merchey what does the market support in your area?  If this is what people expect, it makes perfect sense.  If you're the only landlord doing this, then you may find it difficult to fill the unit.

Jason Merchey · Answer

This is all good, if contradictory info. Thank everyone.

Dana Dunford · Answer

@Jason Merchey - You can't use the last month's rent for anything other than last month's rent (for example, it can't go towards damages upon move-out), so I'd only ask for first month's rent and the security deposit. You should also require at least 30 days written notification prior to move-out.

Here is a good BP post related to this topic.

Tyson Hill · Answer

The higher the move-in costs, the smaller your window gets with potential renters. Deposits are very important, but don't let it hurt the main goal of collecting rent!

I personally do lower deposits than my competition in my market. The reason I can get a way with this is by putting good tenants in my homes. If you properly screen, you won't have the catastrophe and usually the deposit, or very little of it comes in to play.

Good luck!

Jeff B. · Answer

In Calif, you can

• ask for first and last
• OR
• first plus security & security must be <= 2x the first
• BUT NOT BOTH

Marcia Maynard · Answer

Are you indeed collecting last month's rent? How do you know how much last month's rent will be? Are you basing it on today's rates?

Better to collect a higher security deposit, if allowed to do so in your jurisdiction, then you will have more flexibility in how you can apply the funds at time of tenant move-out.

However, the market will determine how easy it will be for you to do what you want to do. Also, you will need to see what is allowed by the laws for your jurisdiction. Some put a cap on the amount of security deposit you can collect and whether or not you can collect last month's rent.

One reason we don't collect last month's rent has to do with the confusion it causes when it is indeed time for the tenant to move-out. Tenant decides to move and instead of telling you, just stops paying rent. You serve a pay rent of quit notice. Tenant says, they are leaving and you have your last month's rent already paid in advance. How do you file with the court for non-payment of rent then?  If the tenant holds over and you serve a pay rent or quit notice again at that juncture, are you any better off?

Max T. · Answer

Standard in my market (at least for me) and I've never had a problem with it.

I still require ample notice for lease termination - 60 days.

If rents increase throughout the term then I collect the difference when they give notice that they are leaving. I generally don't raise rents on good tenants who are renewing, unless a basic expense increases drastically (like property taxes did in 2014).

This is a higher end market, but tenants are often the type to buy their own home in a few years so most tenancies last 1-3 years, with my longest so far being 6.

First, last, and security is the way to go!

Marcia Maynard · Answer

Assuming rent rates rise over time, if a tenant stays long term, then if a tenant pre-pays the rent for the last month, we will get less money for the last month than we normally would collect. We have 17 rental units and most of our tenants are past the 5 year mark, some are past 10 years and two are past 20 years.

Fred Dray · Answer

Why are you fearful?  In 22 years, never (besides 2 evictions) had a tenant not pay last month's rent.

Nicole A. · Answer

ahhh! I see! Thank you!

Last Month's Rent?

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