Timing Receipt of Funds, Lease Signing, & Move-In

General Landlording & Rental Properties
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Timing Receipt of Funds, Lease Signing, & Move-In

Susan H.Pro Member
Investor/Landlord · NWA, AR · Member since 2016 · 227 posts · 132 votes

It's been 3+ years since I welcomed new tenants, and I've forgotten a lot of details! I'm looking for suggested timelines to collect security deposit & fees, sign the lease, and hand over the keys.

I'm looking at a tight turnaround; current tenants will move out July 24; we have appointment early July 25th for key turn-in. I don't want to show the property while they're moving out, as it's hard to appreciate the place with packing boxes and LOTS of stuff in the house. (I'll note these are fabulous tenants who cared for my property as if it were their own. They're buying a home in town and parents gifted them with appliances, furniture, etc--all of which take up a lot of space.) I toured the property last week and don't see anything that will delay renting out again. I'd like to have new tenants in ASAP and will start advertising and pre-screening probably next week.

I understand some landlords have new tenants sign the lease and collect first month's rent plus deposits and fees on move-in day. Call me paranoid, but what happens if you get to move-in day and the tenant doesn't have the money? I can envision a scenario in which I've turned away other applicants and then end up with no tenant.

What's your preferred strategy? 

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  • Nate T.Pro Member
    Investor · Tempe, AZ · Member since 2014 · 146 posts · 74 votes
    10y

    Ideally have each tenant submit an earnest deposit along with their application and application fee. Make it equal to the first month's rent. Then if they're approved you only have to collect the security deposit at the time of signing. If they are not approved then the earnest deposit is refunded.

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  • Susan M.
    Investor · Columbus, OH · Member since 2014 · 124 posts · 67 votes
    10y

    You are going to get a lot of opinions on this I bet, so I will add mine to the list.

    We almost always have long turnarounds.  At least a month of vacancy where we repaint, do repairs, upgrades, etc.  But generally we have people lined up to occupy as soon as we're done with that process, which means holding a property for someone 20-30 days, sometimes more.  It works for us although others would never do business this way.

    Since we're generally holding properties, we collect a non-refundable hold fee and have them sign a hold agreement as soon as they are approved.  For example, we're doing one tomorrow for tenants who cannot move in until July 15th.  They're going to pay us one full month's rent as a non-refundable hold fee in exchange for us removing all advertising for the property (turning away other potential renters).  The agreement says that if they back out for any reason we keep the full fee as damages.  If we back out, we return their money.  We only do month-to-month leases so we could probably have them sign the lease instead of the hold fee agreement but we feel the hold fee agreement is more clear to everyone exactly what happens if anyone backs out. If they back out at least we've got a month's rent to cover us and hopefully we find someone else to take their place sooner rather than later.

    When July 15th rolls around, we meet again and they sign the lease and pay rent and the hold fee rolls over to their security deposit.  We give them keys, do the walk through and we're done.

    Every time we bring someone on board I question our process.  I always wonder if there's a better way to handle it, but in our market and with our business model this seems to work well for us so far.

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  • Susan H.Pro Member
    OP
    Investor/Landlord · NWA, AR · Member since 2016 · 227 posts · 132 votes
    10y

    @Nate T. I hadn't thought of an earnest deposit. Will have to check and see if they're allowed in Arkansas. 

    @Susan M. your hold agreement sounds very interesting, and might be a good fit for my pending situation. Would you mind sharing a copy with me via PM?

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    10y

    It is always dangerous to rent to a tenant needing a unit on short notice (less than a month). Most people do not plan moves that way and do so usually because they are being forced to move for some reason. That is a very bad sign.

    As far as collection of monies is concerned how it is managed is flexible. The only thing that is not is the handing over of the keys. If you or your tenant decide there is a payment due at time of handing over the keys then the keys do not change hands till the landlord has the cash in hand. Payment must be in full and in cash before keys are turned over.

    You will be amazed how fast tenants can come up with money on move in day when the keys are withheld.

    If there is an agreement to pay and the tenant does not have the money when due you are entering into a relationship that will not turn out well. If you have signed a lease as opposed to M2M you will likely regret the decision.

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  • Susan H.Pro Member
    OP
    Investor/Landlord · NWA, AR · Member since 2016 · 227 posts · 132 votes
    10y
    Originally posted by @Thomas S.:

    It is always dangerous to rent to a tenant needing a unit on short notice (less than a month). Most people do not plan moves that way and do so usually because they are being forced to move for some reason. That is a very bad sign.

    As far as collection of monies is concerned how it is managed is flexible. The only thing that is not is the handing over of the keys. If you or your tenant decide there is a payment due at time of handing over the keys then the keys do not change hands till the landlord has the cash in hand. Payment must be in full and in cash before keys are turned over.

    You will be amazed how fast tenants can come up with money on move in day when the keys are withheld.

    If there is an agreement to pay and the tenant does not have the money when due you are entering into a relationship that will not turn out well. If you have signed a lease as opposed to M2M you will likely regret the decision.

    Excellent point on the keys. Thanks, Greg!

    Because of the location we actually see a lot of "need house right now" sort of tenants. One big reason is vendors moving into the area (the region is home to Wal-Mart, Tyson Foods, and J.B. Hunt Transport) on short-notice transfers. We also have a big university and lots of students/parents who are looking for rentals when they realize the dorm is not suitable or overcrowded. Last year we had students and faculty alike scrambling to find residences within weeks of the fall semester--it was crazy!

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  • Marcia Maynard
    Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    10y

    Tenant accepts our offer to rent to them. Move-in date agreed upon. If move-in date is less than two weeks away, $200 Holding Deposit, refundable when they move-in and pay first month's rent/security deposit/move-in fee, forfeited if they do not follow-through.  If move-in date is more than two-weeks away, we raise the Holding Deposit by $100 per week or portion of a week, forfeited if they don't follow through.

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  • Susan H.Pro Member
    OP
    Investor/Landlord · NWA, AR · Member since 2016 · 227 posts · 132 votes
    10y
    Originally posted by @Marcia Maynard:

    Tenant accepts our offer to rent to them. Move-in date agreed upon. If move-in date is less than two weeks away, $200 Holding Deposit, refundable when they move-in and pay first month's rent/security deposit/move-in fee, forfeited if they do not follow-through.  If move-in date is more than two-weeks away, we raise the Holding Deposit by $100 per week or portion of a week, forfeited if they don't follow through.

     @Marcia Maynard, that seems a reasonable solution. 

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