Rent Increase and Security Deposit Question

3 Replies

Good Morning BiggerPockets!

I work with a management company and team of investors in the Philadelphia area. We have received mixed feedback on security deposit/last month increases that go along with annual rent increase. So my question is as follows:

When rent is increased, is it common practice to increase the security deposit and last months rent to match?

Looking forward to your responses!

On vacant properties, yes. On occupied properties, no. 

We do not typically increase the SD if there is a rent increase, You could do that but you would have to rewrite the lease agreement and the tenant would have to agree with the new terms. I know that you have to do this with the rent and I can see the reasons why but I can also see how it could cause a lot of time, conversations and bad blood between PM and tenant. All for a few hundred dollars, I do not think the time wasted on dealing with it is worth the money. Technically that money is the tenants so the landlord is not able to use those funds anyways so its not like they are making more money.

NO  it's to mixed up when you go to calculate interest on the security deposit,, like first year was 500 at 1 % then next year if you increase deposit to 600 you have to add 1 % to the original amount and it is a headache,

Keep it simple,, match what your competitors are requiring for your area,, so some may not require last month's rent. 

Better to screen for higher credit score maybe.. than to require last months rent besides sec deposit

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