First last and deposit

15 Replies

@Anthony Wick , we’ve rented 3 this way w no issues but honestly I assumed it was local practice. Now I’m not sure. I’ve got an interested person who was very surprised about putting that much down. But she’s surviving on disability, child support and her adult child’s income. Now that I’m typing this, it sounds crazy to even considers her. Suddenly seeing the value in a property manager so all the emotion can be kept out of it.

I believe this varies by city/state, but in California, designating a prepaid "last month rent" means that it can only be used for that purpose (even if the rent goes up during tenancy) while the security deposit may be used for repairs, damage and for any unpaid rents. Unless there are specific reasons why a last month should be collected, I suggest calling it a security deposit.

i did some research since yesterday and learned in IL there is no limit on amount of deposit one can require. Also read our contracts and we didn’t add last month. We just required a deposit of double the rent. I added this question to a landlord Facebook group I’m a part of and it’s generated a lot of different practices and opinions. After reading everyone’s responses, I’ve determined that I can’t negotiate with someone who can’t pay a deposit equal to 1 months rent to hold the property. Thanks all!

I don't charge last-month's rent. I determine the level of risk a tenant presents and then charge a higher deposit. About 80% of my tenants pay a deposit equal to one month's rent. About 15% pay 1.5x a month's rent and 5% pay 2x a month's rent. Since instituting this system two years ago, I very rarely have a tenant leave owing more than we have on file.

It's not typical in my area, but I do it.  It drastically decreases the VOLUME of interest in my properties, but not the NUMBER of qualified tenants.  The people that get past my pre-screening really have their act together.  I keep rents just under market and better quality than my competition, so my cash flow is a bit less than the status quo, but I don't have many expenses for damage or turnover.  I also only offer MTM leases.

Originally posted by @Julianne Croegaert :

First, last and deposit - is this asking too much at once?

That’s my minimum requirement.   If they can’t come up with that much then you are asking for trouble   

What class property do you own?  A and B class typically don’t have issues with that amount of money and C class if they can’t pay that amount then you will have issues paying rent on time. 

 

Originally posted by @Julianne Croegaert :

@Eric C., how do I look up the class code for my properties?

It’s not something you can look up per say.  But you can search on BP for some examples.  

This is normal for my area as I live in a college town. Where my rental is, it’s not typical (45 min south of here).

One time I had a tenant with bad credit but a stable and good paying job. I told him we would work with that and ask for last month’s rent up front. He was fine with it and has been a good tenant for two years now. He’s been late a few times but always contacted me to let me know and paid the late fee without complaint. They keep the house up nicely and don’t make a lot of maintenance requests.

I try to be understanding of each person’s situation and make things work if I think they will be a good tenant. If you really would prefer to get the last month’s rent, maybe split it so she can pay that with her second month’s rent instead of right now with first and deposit. Or you could forgo it altogether. Or you could choose another applicant. You’re in charge.

If someone has credit that is less than I would like I'll ask for double deposit. If you call it "last" rent then they'll use it for that. If you call it double deposit then you can use it for repairs OR if they skip out on the last month of rent. Works for me.

This post has been removed.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here