Collecting 1st mo. rent, last mo. rent, and security dep?

General Landlording & Rental Properties
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Collecting 1st mo. rent, last mo. rent, and security dep?

Douglas T.
Investor · Dallas, TX · Member since 2016 · 46 posts · 6 votes

Every apartment I've ever rented has required me to pay 1st mo. rent, last mo. rent, and a security deposit equal to the mo. rent.... so 3 mo. worth of rent payments upfront. I'm now using a property manager to find a renter for my Chicago condo. He's telling me that it's unusual to collect last mo. rent upfront and asking if I'd take that requirement away. Several property managers in Chicago all explained that Illinois laws favor tenants in cases of landlords keeping security deposits for damage done to the unit. Landlords rarely, if ever, win and get to keep part of the deposit. Because of this, landlords in Chicago are moving toward non-refundable move-in fees. I'm charging a $350 non-refundable move-in fee and my HOA charges a non-refundable $250 move-in fee. So, I'm not even asking for 3 total mo. in rent up front. I'm only asking for 2.5, in fact. Am I missing something here? He's asking me to take away my move- fee... which leaves me with nothing if damage is done to the unit. Or he's asking that I not ask for last month's rent... which also leaves me unprotected at all if this tenant decides to move out in the middle of the night. Any thoughts on this?

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Account Closed
Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
9y

I looked up IL on landlordology and see there is no max security deposit.  I think it sucks that you cannot use that for damages.  I personally do not collect the last month.  I do a 3 year lease and if they bug out the last month, I don't really care.  I will get someone else in there.  If you screen well and get a good recommendation from their current landlord, I don't see a big downside here.  But if your requirements are that you collect the last month's rent, do that.  If he is unwilling to pay it, go onto the next applicant who is.  I am very upfront when you put in an app of what my monetary requirements are.

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  • Account Closed
    Investor · Charlotte, NC · Member since 2016 · 374 posts · 189 votes
    9y

    I looked up IL on landlordology and see there is no max security deposit.  I think it sucks that you cannot use that for damages.  I personally do not collect the last month.  I do a 3 year lease and if they bug out the last month, I don't really care.  I will get someone else in there.  If you screen well and get a good recommendation from their current landlord, I don't see a big downside here.  But if your requirements are that you collect the last month's rent, do that.  If he is unwilling to pay it, go onto the next applicant who is.  I am very upfront when you put in an app of what my monetary requirements are.

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  • Scott Steffek
    Flipper/Rehabber · Crown Point, IN · Member since 2009 · 482 posts · 216 votes
    9y

    Douglas,

    Illinois is a very friendly tenant state. You didn't mention how much you're charging for rent. I think you're asking a bit much of your tenants. The last month rent plus all the rest, is quite a bit. Remember, you're renting to people who can't purchase a house. But it's your call. The key to all of this, in my opinion, is that you have an outstanding property manager. If they're screening correctly and complete "quality" due diligence, you should be fine. Yes, people lost their job etc; but "things happen". That's part of the risk with renting a property. How much is your PM charging you to place a tenant? Have you checked them out with other landlords? Best of luck to you.

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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    9y

    I always collect 1st, last, and security before signing the lease and giving keys.

    1Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y

    Very State specific issue.  In Calif, we can NOT collect 1st, last, PLUS a deposit, but only:

    • first & last
    • OR
    • first plus deposit & deposit can not exceed 2x the rent

    So it's time you find your State regs on  rentals

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  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y
    Originally posted by @Jeff B.:

    Very State specific issue.  In Calif, we can NOT collect 1st, last, PLUS a deposit, but only:

    • first & last
    • OR
    • first plus deposit & deposit can not exceed 2x the rent

    So it's time you find your State regs on  rentals

     Actually, as far as I know, California allows a max. of 2 months deposit and deposit is defined as money that is not for the present month, but which would stay in escrow. So, it would be acceptable to collect 1st, last and deposit, because 1st month is now and last and deposit would be the 2 months deposit. 

    But overall, it's very much up to regional preference. If you want to have 2 months deposit and every other landlord only asks for 1 month, you'll likely not going to find a tenant, who wants to rent with you.

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @Michaela G.:
    Originally posted by @Jeff B.:

    Very State specific issue.  In Calif, we can NOT collect 1st, last, PLUS a deposit, but only:

    • first & last
    • OR
    • first plus deposit & deposit can not exceed 2x the rent

    So it's time you find your State regs on  rentals

     Actually, as far as I know, California allows a max. of 2 months deposit and deposit is defined as money that is not for the present month, but which would stay in escrow. So, it would be acceptable to collect 1st, last and deposit, because 1st month is now and last and deposit would be the 2 months deposit. 

    But overall, it's very much up to regional preference. If you want to have 2 months deposit and every other landlord only asks for 1 month, you'll likely not going to find a tenant, who wants to rent with you.

     I've gone through this more than one and stand by my statement - - it's almost a verbatim quote from Calif.

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  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y

    @Jeff B. , this is California law. : 2 months, in addition to 1st month, unless you have furnished rental. 

    CIV §1950.5.(4)

    (c) A landlord may not demand or receive security, however denominated, in an amount or value in excess of an amount equal to two months’ rent, in the case of unfurnished residential property, and an amount equal to three months’ rent, in the case of furnished residential property, in addition to any rent for the first month paid on or before initial occupancy.

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y

    @Michaela G.  See

    http://www.courts.ca.gov/1049.htm

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  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y
    Originally posted by @Jeff B.:

    @Michaela G.  See

    http://www.courts.ca.gov/1049.htm

     Huh? That says exactly the same: security deposit of 2 months rent, other than the advancement of rent, which would be the 1st month. So, again, you can collect a total of 3 month's payment for move-in, 2 would be deposit (deposit is anything that's not 1st month rent) and 1 would be 1st month rent. 

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    9y

    I always thought first, last plus 1 month security is a lot but it works in some places and I would not be surprised if it was asked for when I was renting. Here it is more typical to have first plus 1 month security (max security allowed). I can collect also last but this is the first I am trying to do that (first/last/half month security). Switching because the biggest thing is usually the rent people owe for leaving early and not damages I can charge for. If a typical move in fee is 350.00 for your area and yours is $500 that puts you out of the running. 

    Does the PM have competitive data to show you that you are too high? Would dropping move in to $400 total still be too much for people? When do you owe the HOA? Does the tenant pay the HOA or do you? Maybe you can show that HOA fee is a pass through or if you are potentially dropping your move in charging it later might work as an option? or waiving if she brings you a tenant with stellar rental history? Just trying to think of possible solutions.

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  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    9y

    In California, first month and a deposit.  Last month payment is rare. In fact, generous sometimes return partial deposit to help tenants move out.

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @Michaela G.:
    Originally posted by @Jeff B.:

    @Michaela G.  See

    http://www.courts.ca.gov/1049.htm

     Huh? That says exactly the same: security deposit of 2 months rent, other than the advancement of rent, which would be the 1st month. So, again, you can collect a total of 3 month's payment for move-in, 2 would be deposit (deposit is anything that's not 1st month rent) and 1 would be 1st month rent. 

     Which is what I said originally :)

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  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y
    Originally posted by @Jeff B.:

     Which is what I said originally :)

     No, this is what you wrote: 

    "In Calif, we can NOT collect 1st, last, PLUS a deposit, "

    Yes, you can collect 1st, last, plus deposit in California

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @Michaela G.:
    Originally posted by @Jeff B.:

     Which is what I said originally :)

     No, this is what you wrote: 

    "In Calif, we can NOT collect 1st, last, PLUS a deposit, "

    Yes, you can collect 1st, last, plus deposit in California

     If the deposit is 2x the rent, then you can collect the first or the last - - not a good deal, so it's first Plus deposit.  Enough of this ; UNCLE!

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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    9y

    It seems like a lot of money up front until you consider:

    Assume the tenant prepaid their last months rent at the old place. That means they haven't paid for their final month recently and should have that cash.

    Assume that the tenant is a good tenant and will get most (or all) of their security deposit back.

    These are all assumptions, but in my (strong) market, if a tenant can't pay the move in costs up front that is a bad sign.

    1Reply
  • Account Closed
    Medford, MA · Member since 2016 · 85 posts · 44 votes
    9y

    @Douglas T.

    Long story short, charge the first, last and security unless it is becoming difficult to rent out the property. 

    If you think first, last and security is a lot, out here in Boston renters are easily paying First months rent, Last Months rent, a Security Deposit equal to 1 months rent AND this g-d damned (telling you how I truly feel) finders fee which is also equal to 1 months rent. Additionally it's extremely hard for me to trust any property managers, brokers & real estate agents out around in Boston because they aren't familiar with their own laws and rent out places that aren't even habitable or to state code ( for brokers/real estate agents not their responsibility but seriously, that's just morally wrong). 

    1Reply
  • Tim S.
    Northeast, WI · Member since 2016 · 44 posts · 13 votes
    9y
    Could you include a clause to return the move in fee if they stay a certain duration. I'm not sure if it's legal or anything but I'm just thinking if they were to stay for 2+ years you would have less turnover and would be easier for you to eat the move in fees. Then again $350 may not be enough to sway someone to stay any longer so I don't know.
    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Douglas T.:

    Am I missing something here? Any thoughts on this?

     My 1st thought is you must charge either a move in fee or deposit.  We use move in fees for our properties in Illinois.  If you're PM won't do it then find a new PM.  The move in fees we charge are equivalent to rent.  How much depends on the property.

    312-681-7487
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