Should I collect first & last Month Rent?

Question

Hello,

I'm bit of a newbie. So, please excuse me for not quite knowledgeable for I'm here to seek advise. I've a couple of rooms to rent in our home on a month-to-month rental lease in S. California. Rent per goes for about $800-$900/mo. Should I collect 1st and last (non-refundable) plus another $300-$500 for security deposit at move-in? I can accept installments for the last month non-refundable rent if the lump-sum is quite high (4 mos rental minimum). Or, should I just collect first month rent upfront ($800) plus equal amount ($800) for security deposit? My concern is if tenant fails to pay rent few months later and I give 3-Day Pay or Quit Notice to problem tenant: can I use the security deposit to pay for the past due rent legally? And if eviction drags out for 2 mos+ thru the sloooooooow court proceedings, I'll be at a loss because I didn't collect 1st and last upfront! Your advise is much appreciated and needed.

Thank you.

TW

Tony Wang · Answer

Thank you Nathan and Thomas. I sure will keep your advise in mind and just ask the tenants to pay for the reports and I'll subsidize them if need be.

Thomas S. · Answer

@Tony Wang

"credit karma for pre-screening? Are they adequate?"

Absolutly not. You never allow a applicant to provide their own credit report. They are too easily fordged. Use a proper credit screening company that will charge a applicant a fee.

In this business the last thing you ever do is trust anyone. People are inherently untrusworthy and applicants will always lie about something. It is your job to find the lie and reject the applicant.

Nathan Gesner · Answer

@Tony Wang I prefer to charge a higher deposit equal to two months rent for higher-risk tenants. Even better is to never risk to high-risk tenants. Increase your standards and screen thoroughly.

There are dozens of ways to check a credit/criminal background. I personally like Tenantscreening.com but haven't used it in years and there are probably better ones out there. Be sure to find one that allows the applicant to fill out an online application and that provides a full report. It should show identity verification, address history, criminal history, eviction history (this doesn't show very often but is nice when it does) and a full credit report.

Go to google and search for "Tenant screening" or search BP for hundreds of conversations on this topic.

Tony Wang · Answer

Thank you Patricia. Would you suggest any of the credit report freebies from any of the big 3 agencies and others such as credit karma for prescreening? Are they adequate?

Patricia Steiner · Answer

What is the standard in your market? In mine, first month's rent and security deposit are the standard. In most jurisdictions, "the security deposit is not to be used for the last month's rent. It is used to pay any damage that the tenant may have caused to the property during the tenancy."

Your concern about the tenant not paying for a couple of months...that's not acceptable. Be sure you have a good tenant screening process in place to ensure that you have tenants with good credit scores indicating their willingness and ability to pay. Have a strong lease - and stress that rent is due on the 1st. If payment is not received on the 1st, you need to be collecting it on the 2nd and setting a standard that it is not acceptable to be late or not to pay. Collecting first and last and deposit is all well and good - but having a tenant who respects your property and who has a history of paying obligations is a must.

Should I collect first & last Month Rent?

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