All of our rental agreements are month to month. To incentivize people to stay longer, we charge a move in fee that can be added forwards the refundable deposit if they stay over a year. Example: rent is $1000, move in fee is $400, refundable deposit is $600. Tenant moves out after 11 months, he can get the max of $600 back. Tenant moves out after 12 months, he can get the max of $1000 back. Being month to month agreement, I can raise the rent on my tenant with just 30 days notice. So, in theory, I could get a new tenant, raise the rent by $1000 on month 2, they decide to leave because it's so expensive, and now I can keep their move in fee! I have never done that - but the concept sounds so wrong to me. In real life, I just raised the rent on a tenant after 6 months by 4%, and she let me know that she will look for different housing. And if she does move out before 12 months, I can keep her move in fee. I am not predatory and I don't want to be shady to any of my tenants, but I realize that I could take advantage of them and they might not understand what this type of agreement entails. But it can also be a good alternative that I offer month to month instead of a typical lease, and they have to be aware the rent can be increased with the proper notice. Anyway, just my thoughts and wanted to see what comments the community had about my rental agreement.

Well You can say it’s not predatory but it is in essence . Basically Your trapping them and that is shady business by being darned if you do and darned if they don’t . Nothing to be proud of

The strategy itself is not shady, it depends on the execution. If you move them in and then raise the rent in month 2 to keep their $400 then yes, that's very shady.

I like M2M for several reasons. However, move in fee + rent increase prior to 12 months = Shady-Lady.

Even if I was on M2M, as a tenant I would be pretty pissed to get a rent increase of 4% only 6 months into my tenancy.......if you started out at market rent at the beginning, then market rates rarely change that much in 6 months. Sorry but that's pretty shady in my book.... In my opinion....and likely in most tenants minds...... is that the market is reassessed once a year and rent increased on an annual basis....not 2-3x a year. And the opinion that "well you are an adult and signed the agreement" is not justification to screw people. A large portion of people that get conned or scammed are adults and decent people.....doesn't justify the scam artist screwing them. All the people that got scammed by Morris Invest....Bernie Maydoff.......and numerous others......doesn't mean they got what they deserved and the scammer did nothing wrong. So if you have some ethics, don't justify doing something that has an excellent chance of being a real bad deal for the other party just because the other party doesn't notice it.

To me this is incredibly shady. I realize that it might not be your intention but to get a new tenant and then raise the rent and then when they say they want to leave, to then not give them their money back is robbery. Again, I'm sure that wasn't your intention, but ethically speaking, this is immoral, unfair and predatory.

@Julie Marquez So best case you have deposit equal to 1 month, but their is incentive for the tenant to stay a year or longer to get a larger portion of their deposit back. I have a 1 year lease and I charge a larger deposit than one month. My tenants incentive is to stay the whole lease and leave place clean in order to get their large deposit back. If they break the lease or stop paying the rent I have a large deposit as a cushion. I tend to keep the same tenant for many years with cuts down on turnover costs and losses.

Keep it simple. Vacancies and turn over gets expensive. In CA, it is illegal to charge anything non refundable in the way of a deposit, aside from actual rent. Keep it simple, charge a deposit equal to a full months rent, and make applicants sign a 12 months lease. The only way I'd do it the month to month way is if the rental was in a highly transient market and the 12 month commitment scared off applicants. Turn over is expensive. Most renters expect a 12 month lease, just give that to them

I don't see a problem with the move in fee. In my area you can't go over a 1 month deposit. I do wonder why you did a rent increase after 6 months, did the market change that much or do you just want this tenant to leave?

Am I a Shady Landlady?

Mike Greco

Member since 2019 · 4 posts · 6 votes

7y

I'm in somewhat of a disagreement here on this. I think there is a greater value in a M2M lease than in longer term leases. It provides a greater degree of flexibility. Of course, a M2M lease should come with the highest $/unit cost. So perhaps a move-in fee could be eliminated.

Instead, I'd look to include some sort of long-term reward for those tenants that stay 24 month (or whatever is above your average) or longer.

5 Reply

Ariel K.

TX · Member since 2018 · 154 posts · 92 votes

7y

@Julie Marquez

Did you know about the dog before she moved in? Perhaps the issue here has to do with your pet policy. Was the dog bite bad? Can you sue her? I think having clear expectations in the future will help all parties involved.

I personally like 12 month leases and since yours is essentially that, I would make it easy on everyone. I’m no expert but on a MTM lease vs 12 month lease, evicting someone would take the same amount of time. Your lease comes down to keeping the move in fee or not.

1 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

7y

@Julie Marquez it is customary to charge a full months rent for deposit, so comparing your fees to that, it seems very reasonable. Your total fees with move-in are only one months rent. Offering the month-to-month flexibility day one is a bonus for tenants who only need a short term place to live. Given the circumstances of why you raised the rent 4% after 6 month, it seems reasonable. If the dog had bitten me, I would have asked her to move out. Especially with your small children living on the property, it is not worth the 4% or any money to risk the safety of my family.

As far as being shady. If the policy is clearly communicated to tenants up front, I don't see this as shady. Unhappy tenants will move and the market will respond. Half the perspective tenants that are looking at my properties tell me they are moving because their landlord jacked rent. Whether it is at 6 months or 1 year, tenants will move when you raise rent to unreasonable levels.

It is funny how some landlords are getting after you for raising rent after 6 months, but many of them are happy to push even larger increases at 12 months. Not really much difference in my opinion.

5 Reply

Sophia Coleman

Real Estate Broker · Chicago, IL · Member since 2019 · 23 posts · 10 votes

7y

@Julie Marquez why not have the option of

6,7,8,9,10,11 and 12 month leases

Anything below 12 months put an up charge per month towards the lease. (Explain this to them) before they sign the lease.

But if the tenant says off back their look for a long term lease, Yes 1month rent and security deposit will be great to do!

If you’re a great landlord they’ll be with you for forever that’s all that counts within this world of renting.

2 Reply

Sam Shueh

Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes

7y

What is the purpose of move in fee? It is unknown here.

2 Reply

Julie MarquezPro Member

OP

Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

7y

@Sam Shueh The purpose of the move in fee is to cover some of the turnover costs if the tenant stays less than 12 months. We explain that up front.

@Ariel K. @Joe Splitrock I realize that the rent increase is kind of my workaround for the dog issue. We allowed the dog, but after the bite, I should have asked the dog to leave immediately (per our pet policy). I could also give her a 20-day notice to vacate. Maybe my 4% rent increase is my subtle way of asking her to leave, and now she can do it on her own, in case she needs more than 20 days to find a place that will rent to a large dog.

@Steve K. I definitely don't want to be that person, but as I this situation has evolved, I realize that I could come across that way!

@Sophia Coleman Having options is definitely something to look in to, I wonder what tenants would choose

2 Reply

Joel Fine

Rental Property Investor · Leander, TX · Member since 2018 · 183 posts · 264 votes

7y

Just revise the terms slightly:

"Move-in fee converts to refundable security deposit after 12 months or any increase in rent, whichever comes first."

Boom, not shady any more.

9 Reply

Jesus Francisco Gonzalez Medina

Flipper/Rehabber · Austin, TX · Member since 2019 · 4 posts · 3 votes

7y

As a consumer and not an investor...

I live in Austin and I have yet to find anything like a month to month agreement. Honesty, I'd love be in a deal like yours.

If it was outlined in the contract and/or you gave them a heads up about it, then I don't see why this would be considered sketchy.

2 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

7y

First I would say it's unlikely you can be a "shady landlady" because a), you're asking the question, and b) having talked to you here I don't think it's in your character.

So you could look at this a number of ways:

1. The tenant knows what s/he is signing up for when they get in.

2. The setup is structured such that you can easily make it work to gain some extra cash.

3. Even if they move out partway through and you keep the fee, the trade-off (getting the unit ready again, showings, etc) is probably not worth the extra money.

If the M2M works for you and the market accepts it, then there's no need to change that. Most strong tenants want to have at least a 1-year lease because it guards against this very scenario (changing the rent in 6 months). I would guess that there's a decent number of tenants that take this strategy because they don't have a lot of other options (I wouldn't take it, for example, if I was looking to rent). So on that side of things I get where you are attempting to mitigate some of your risk of midnight flyers by essentially forcing them to leave some money behind.

Most tenants can't think 12 months down the road (or many of them wouldn't be tenants in the first place). To that end, you - wittingly or unwittingly - are taking advantage of their lack of forethought and perspective. Whether you consider that unethical is probably a personal question (I would, maybe with a few exceptions).

I suppose if I were to say anything, it is that you are asking the tenant to guarantee a long tenancy but stacking the deck in your favor by requiring them to honor that request without equal protection for their interest. In essence what you are saying is "If you don't honor a year residency, I'm keeping this extra money, and you may have to absorb rent increases or other issues in order to get that money back at my discretion." In this case, I think @Dennis M. is correct - if you were brought to court over the issue, there's a good chance your actions would be viewed as predatory by the court and damages assessed against you. I don't think your position could withstand an examination of being reasonable in court, and aside from your conscience, that's all that really matters.

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5 Reply

Julie MarquezPro Member

OP

Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

7y

Originally posted by @Joel Fine:

Just revise the terms slightly:

"Move-in fee converts to refundable security deposit after 12 months or any increase in rent, whichever comes first."

Boom, not shady any more.

SOLUTIONS! I love this!

2 Reply

Julie MarquezPro Member

OP

Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

7y

@Jesus Francisco Gonzalez Medina I appreciate the consumer opinion - I do think we offer something that is actually beneficial in some cases. And you would be okay with the fee?

0 Reply

Julie MarquezPro Member

OP

Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

7y

@JD Martin Thank you! I know I am not shady and I do have a conscious, and want to be fair to my tenants. I just saw a loophole that allowed me to be contractually right, but unethical, and it shocked me! Otherwise, we aren't in the business of jacking up people's rent, we just want the freedom for either party to breakup without too much heartache. And like you said, we deal with a lot of tenants that can't think 12 months down the road, and they have to leave and we don't have to deal with breaking a lease. Or they stay for years and the fee has not effect on them.

2 Reply

Anthony Wick

Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes

7y

@Julie Marquez The information is up front, and all sides are agreeing to sign on the dotted line. It seems pretty simple to me. You haven't hidden anything from your tenants. That would be like asking; "I got a great deal on a rental property, should I offer a higher price than the seller agreed to?" The market is the market. If you can charge $2,000 a month, why would you charge $1,500?

0 Reply

Julie MarquezPro Member

OP

Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes

7y

@Joe Splitrock Everything you are saying is what my brain is thinking, but just more eloquent! In my particular situation, the dog is playing a big role (though I'm probably not expressing that enough here).

1 Reply

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

7y

I do m-m as an exception, usually at the tenants' request, or they are a little higher risk (1st time renter, for instance) and I want the flexibility if not working out.

My deposit is close to 1 month's rent. If exactly the same, the tenant may think it's the last months rent and just not pay their last month of occupancy.

Anyway, I refund 25% beginning month 4, 50% month 5 and 100% month 6+. If I ask them to leave, it's 100% refundable, even if month 2. A dispute and indigestion with an ex-tenant just ain't worth it to me. The refundable deposit carrot gets my property vacated properly.

I don't raise rent (4% of $1k is only $40, but look at the drama so far...) during the first year no matter what. Like a couple hundred dollar security deposit refund dispute, this $40 or $80 a month is not worth the indigestion to me.

Deposit disputes and nickel and dime early rent raises disrupt my nap schedule. Some people will wreck a whole day or 3 dealing with dramatic tenants over small crap.

To each their own. But after she tells everyone she knows how she was gouged, don't be surprised when the WA legislature comes out with new law proposals like SB 5600. Hammering LLs across the state...

6 Reply

Joseph Walsh

Brookfield, WI · Member since 2016 · 191 posts · 108 votes

7y

Seems overly complicated, as a result, sounds like more work. I rent month to month in one locale due to the legal benefits. Lease is nearly impossible to evict bad tenants and they know how to work the system. Month-month is more protections for me. I have had one tenant for 5 years. Although I have never raised the rent, it's already near market. Two things I would of done differently if i were you: Full months deposit, no pets. If you do allow pets, require the renters insurance to explicitly cover the dog, in writing. Although, in your specific case I would of just done no pets, since they are sharing your personal property. If you want to incentivize a 1 year+ stay, you could always add a "after the first full year" tenant will receive $100 off the next months rent, or something. I don't like a rent hike after 6 months, seems like it should be at most annually or at turnover. It sounds like you have a good tenant. Assuming they aren't trashing the place/appliances, might not want to try and squeeze every dollar out of them. rent and forget is nice to have.

2 Reply

Bomani Howze

Developer · Member since 2018 · 9 posts · 16 votes

7y

@Julie Marquez yeahhhh that’s shady. There are so many other reasons, mostly related to property management that makes tenants stay longer.

This is an interesting concept, however. I’d only subject a tenant to this play if I received some chronically late paying, existing tenants in a new acquisition of a property.

1 Reply

Joseph Walsh

Brookfield, WI · Member since 2016 · 191 posts · 108 votes

7y

Originally posted by @Bomani Howze:

@Julie Marquez yeahhhh that’s shady. There are so many other reasons, mostly related to property management that makes tenants stay longer.

This is an interesting concept, however. I’d only subject a tenant to this play if I received some chronically late paying, existing tenants in a new acquisition of a property.

I just learned to send them one warning letter, then next time, an eviction notice after 5 days. After that, the late payments stopped.

1 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

7y

Originally posted by @Steve Vaughan:

I do m-m as an exception, usually at the tenants' request, or they are a little higher risk (1st time renter, for instance) and I want the flexibility if not working out.

My deposit is close to 1 month's rent. If exactly the same, the tenant may think it's the last months rent and just not pay their last month of occupancy.

Anyway, I refund 25% beginning month 4, 50% month 5 and 100% month 6+. If I ask them to leave, it's 100% refundable, even if month 2. A dispute and indigestion with an ex-tenant just ain't worth it to me. The refundable deposit carrot gets my property vacated properly.

I don't raise rent (4% of $1k is only $40, but look at the drama so far...) during the first year no matter what. Like a couple hundred dollar security deposit refund dispute, this $40 or $80 a month is not worth the indigestion to me.

Deposit disputes and nickel and dime rent raises disrupt my nap schedule. Some people will wreck a whole day or 3 dealing with dramatic tenants over small crap. To each their own.

This is more or less my entire philosophy. Except for the naps, which I haven't quite made it to yet :D . My experience is that RE rental investing can be as much or as little work as you want to make it. I like the "set it and forget it" model, which means that I probably sacrifice a few dollars here and there, but I have enough profit and slack in the system that it really makes no difference. I accept that slack as the cost of doing business, since I don't want to kill myself doing this, and so far it's paid off handsomely with virtually no drama.

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2 Reply

Michinori Kaneko

Rental Property Investor · NY · Member since 2018 · 571 posts · 332 votes

7y

@Julie Marquez do you charge pet fee/pet deposit as well? My PM charges $250 non-refundable deposit and $25/per pet rent increase. Just thought i'd ask.

Maybe the best practice is for you to put in that the earliest you can raise the rent no earlier than 12 month from when the tenant move in (so you don't take advantage of that situation).

If you are uncomfortable with the dog, i think that is a good enough reason so kick her out. your health and safety is more important than rent or being a landlord... just my 2 cents!

0 Reply

Joshua S.

Rental Property Investor · Chesapeake, VA · Member since 2017 · 100 posts · 75 votes

7y

Being in WA, you may want to check your local Landlord/Tenant laws. I'm not a lawyer, and this is not legal advice, but if you take a look at RCW 59.18.285 (link below), it states:

"No moneys paid to the landlord which are nonrefundable may be designated as a deposit or as part of any deposit. If any moneys are paid to the landlord as a nonrefundable fee, the rental agreement shall be in writing and shall clearly specify that the fee is nonrefundable. If the landlord fails to provide a written rental agreement, the landlord is liable to the tenant for the amount of any fees collected as nonrefundable fees. If the written rental agreement fails to specify that the fee is nonrefundable, the fee must be treated as a refundable deposit under RCW 59.18.260, 59.18.270, and 59.18.280."

RCW 59.18.285

So, if you're charging a "move in fee," the lease must state that any non-refundable fee is written as non-refundable, which means you wouldn't refund it to the tenant no matter how long they stay. If it's not written in the lease as a non-refundable fee, then it's automatically considered a deposit and you must return it (minus any reasonable repair expenses of course). So in order for you to put in the lease that it's a separate fee that you'll refund if they stay 12 whole months, you wouldn't be able to call it "non-refundable" and it would automatically be part of the deposit.

Again, this is my interpretation of the law and it may or may not apply to your situation. I am not a lawyer. It would be best to contact a lawyer for more information. Also, since it's a month to month lease, if you're raising the rent in hopes that she'll leave (I know of no other reason to increase rent after 6 months, other than maybe a rare market boom), that wouldn't be necessary on a month to month lease. You could just tell her that it's not working out and that you're not going to renew her lease for another month. If you're raising the rent versus not renewing her lease solely so she will move out and you simply keep her $400, then in my opinion that would be unethical. Hope this helps!

1 Reply

Sam Shueh

Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes

7y

No one wants surprise. To avoid a confrontation they need to be mentally prepared.

0 Reply

John FortesPro Member

Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes

7y

We are currently in the process of implementing non refundable move in/transfer fees and going away from security deposits. The move in/transfer fee is lower than the typical first, last, security and implementing this is already being down in the state but not in our current area.

Everyone has their own style and process that works for them and their area.

1 Reply

Eric WilkinsonPro Member

Chelsea, MI · Member since 2019 · 50 posts · 52 votes

7y

If you have to ask the question, your behavior probably falls into the shady category.

A true shady landlady would never think to ask the question.

Whether it is legal or not is a different question.

1 Reply

Barry O.Pro Member

Investor · Imperial Beach, CA · Member since 2008 · 51 posts · 14 votes

7y

So actually not the 4% increase for profit, but a way to have her and her dog move out, but not actually tell her "you go now". Which could also be why you like the M T M rental agreement. It gives you the flexibility to tell her to go without actually telling her to go.

I understand she does not have a well trained animal and with children on the property,anybodies but yours especially, you want the dog gone. Dogs reflect the requirements of their owners, so she has not trained a member of her family!~ Now she must suffer the actions of that untraining she neglected or refused to do. A 4% increase gives both of you a way to save face and allow her to leave and you to give her a rental recommendation based on you raised the rent and she left. Never had a problem with her before that!

As a regular practice for tenants that do not have any issues, this would be a shady way to raise the rents before a 1 year anniversary of renting. Certainly legal with your rental agreement, but not a landlording prectice I would want my name associated with!

On Animals, I own 2 large dogs and heaven help you if you tried to enter my house at any time I was not there. But if I am home, they will follow you around looking for treats and pets! Good training and knowing their boundaries!

Loved "the move in fee converts to a damage deposit after 12 months" fix above. So stealing that!

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Am I a Shady Landlady?

Am I a Shady Landlady?

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