First and Last Month's Rent + Security Deposit Prior to Move-In?

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First and Last Month's Rent + Security Deposit Prior to Move-In?

Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes

I am surprised at how many LL seemingly do not collect First, Last and security deposit at move in. I thought everybody did? Security Deposit for us is equal to one month's rent. What's y'alls practice on this?

Thanks in advance,

Bjorn

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Kenneth Mooney
Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
6y

@Bjorn Ahlblad if we tried to collect security deposit AND two months rent up front we would never rent a house I believe. We do security deposit equal to one months rent and prorated rent for the first month (second month is full month to get resident on a 1st of the month payment schedule). Majority of our properties are C class with some D class and some B and A class. 80% C class overall. 

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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    6y

    I collect a security deposit of 1.5x the monthly rent plus the 1st months rent.

    2Reply
  • Bjorn AhlbladPro Member
    OP
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    6y

    @John Thedford Do you collect that as a regular check, Money Order or what? We are fine with a regular check; after all these folks have been thoroughly checked out-right? 

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    6y

    I charge first month's rent and the deposit. Deposit amount is based on their risk level, determined by an objective score sheet. the higher the score, the less they pay.

    I require payment by money order or cashiers check for the deposit and first month's rent. After that, they can pay with anything (cash is paid through a transaction processor, not me). Just because they pass your screening doesn't mean their check won't bounce. If you hold the property for a week or let them move in and then the check bounces, you've wasted a lot of time and potentially put yourself in a tight spot.

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    2Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    6y

    I only accept money orders in all transactions.

    1Reply
  • Bjorn AhlbladPro Member
    OP
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    6y

    @Nathan Gesner and @John Thedford thank you. I will change our policy re that first check. If a tenant moves in and check bounces a few days later that could potentially become a disaster.

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    @Bjorn Ahlblad

    Typically 1 month security plus 1 month rent. Never accept a personal check at the get-go, cash or money order/certified funds.

    In Pa it is not legal to get last months rent up front.

    1Reply
  • Kenneth Mooney
    Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
    6y

    @Bjorn Ahlblad if we tried to collect security deposit AND two months rent up front we would never rent a house I believe. We do security deposit equal to one months rent and prorated rent for the first month (second month is full month to get resident on a 1st of the month payment schedule). Majority of our properties are C class with some D class and some B and A class. 80% C class overall. 

    6Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    6y

    @Bjorn Ahlblad 

    We get first month's rent PLUS security deposit, which is equal to the rent. 

    I realize that security deposit can be tricky during move out and tenant disputes damages, so we started doing VIDEO WALKTHROUGH and get the tenant to confirm each room that there is no physical damage, so amnesia when they are moving out. 

    4Reply
  • Bjorn AhlbladPro Member
    OP
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    6y

    @Ola Dantis The videos are so easy to do these days; we have started to take them at inspections if needed. Tenants pay attention when they see you taking a video. ;))

    @Kenneth Mooney As a LL you probably have to stick with what you contemporaries are doing too when it comes to leases and deposits.

    @Matt M. I have heard that PA is tenant friendly.........seems to be a trend these days.

    @Nathan Gesner I like the score sheet if ever there is a question you can demonstrate that everyone is treated equal and it is part of your process.

    1Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    6y

    I don't collect it at move-in, I collect it as lease signing, which is typically 1-2 weeks before move-in. 

    I also have wording in my lease that lease is not valid until first months rent and the security deposit payment are paid and that should either not clear the bank for any reason, the lease is automatically void. 

    4Reply
  • Bjorn AhlbladPro Member
    OP
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    6y

    @Greg M. Good qualification. I think we are on the same page; at lease signing. Glad you pointed that out. Love your avatar!

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    I collect the first months (possibly prorated) rent, and security deposit. No last months rent. I collect these a week before move in.

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    Re collecting at lease signing.  I dont do this. Why? Becuase many of mine lease up to 9 months before move in date. And even for the ones where lease signing in closer to move in date - i only want folks who want to live at my apts. if someone has a life change, i dont sweat it and move on.  I really dont want to be holding others funds until i have to. 

    1Reply
  • Alan G.
    Investor · Newtown Square, PA · Member since 2015 · 132 posts · 149 votes
    6y

    @Matt M. Collecting last month rent in PA is legal.

    1Reply
  • Nicole Cowden
    Member since 2019 · 10 posts · 3 votes
    6y

    @Ola Dantis great idea

    0Reply
  • Kenneth Mooney
    Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
    6y

    @Bjorn Ahlblad somewhat. It depends on how large of an operation you run as well and prospective tenant flow. However, I totally agree, you don’t want to stray too much from the norm for your area.

    1Reply
  • Richard Queen
    Eastern KY · Member since 2019 · 30 posts · 43 votes
    6y

    I typically do first months rent and deposit equal to one month rent. Must have it in hand before keys are exchanged. One thing that's really helped too is the way I collect this the first time. Say rent is 750 do it would be 1500 to move in. I require a 100 check and the rest cash. This gets me my cash up front but also gets me there checking account info should I ever need it. I tell them why too so if anyone has a problem with it, I don't want to rent to them anyway. After that, I set up cozy to collect with no effort on my part.

    1Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    @Bjorn Ahlblad

    A lot of people probably don't do that because of their individual state laws. For example in Ohio, if I collect more than one month's rent, I have to pay them 5% interest annually on their security deposit.

    Also, as others have said you would exclude so many possible tenants because they couldn't afford that much up front.

    1Reply
  • Bryan Devitt
    Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
    6y

    @Bjorn Ahlblad in some places that much is illegal and you can only get 1 month and a security deposit. In MA 1st, last and security is standard though. The state maxes it at those 3 plus a "reasonable lock changing fee"

    1Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    Not every state allows it, for example, in NH you can only have one of two - Last or Security. There's also the liability aspect of the triple damages clause. Tenant class has something to do with it, when you move certain communities cannot afford that upfront cost so some owners will add that into the rent until they've paid up. 

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  • Gregory H.
    Real Estate Agent · Philadelphia, PA · Member since 2013 · 451 posts · 369 votes
    6y

    @Alan G.court ruling last year in PA declared that collecting last month's rent is the same as a security deposit. In PA you can collect 2 months worth of security deposit for the first year of tenancy, if the tenant remains after one year, one month of security deposit must be returned. Therefore, for a tenant you expect to only be a year tenant, you can hold both security & last month's rent, for a long term tenant, you cannot. I am a realtor and this court ruling was presented to our entire brokerage by an attorney that specializes in real estate.

    1Reply
  • Alan G.
    Investor · Newtown Square, PA · Member since 2015 · 132 posts · 149 votes
    6y
    Greg, I stand corrected. We have always collected 1 month security deposit, first, and last. Was to much of a hassle returning 1 month security after 1 year since we knew that was the law. However, didn't know about last months rent. After researching you are clearly correct.

    Thanks! This is why I read these forums. I'm in a local REIA group and the president is a RE attorney. Will bring it up at next meeting.
    0Reply
  • Account Closed
    Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
    6y

    We do first last and security, if they can’t afford that upfront I seem to have issues with them paying rent on time and so it’s almost another screening process for me. 

    1Reply
  • Mark F.
    Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
    6y

    @Bjorn Ahlblad To your first post. Why dont all LL collect first, last, and SD? Because that is a lot of money for many people. I currently rent and that would be $4500 right then and there at lease signing for two months of living space. Which my rent is average in my area. Think about the average person and their savings. Try and see it from their perspective.

    I know some tenants who skip over those properties. First and security was plenty for me when I was a LL. I understand why you do it 100%, but depending on your rental market, it might not be ideal to ask for that much money up front. I think of it like pets in a rental. Not everyone is thrilled about it but you lose out on some good tenants.

    0Reply
  • Jennifer T.Pro Member
    Investor · New Orleans, LA · Member since 2014 · 1k+ posts · 944 votes
    6y

    If collecting first, last, and security was standard practice in my area, then I would definitely do that.  I wish that were the case, lol!  But it isn't.  I'd have a really difficult time finding tenants if I required last month's rent, on top of first and security, when nobody else does.

    With that said, I've sometimes been able to collect last month's rent in one of two ways.  If there is a red flag on the application...not carte blanche...but something I'm okay with, if given the extra protection of last month's rent plus security.  I also live in a landlord-friendly state where it usually takes less than one month to evict someone.

    For tenants who pass the normal screening, I give them the option of paying last month's rent for about a 20% discount of the normal rental rate (just for the last month's).  I even give them 90 days to pay the last month's, if they want to go with this option.  That will also cover their last month, even if the rent goes up in the future.  I also sell it that, when they're ready to move on to their next place, it is that much more money they'll have for their move.  Whether closing on their own home or needing to pay the next landlord's first/security.  People love the idea, but most pass on it.  Not surprising.  But it's a win-win for the ones who can do it.   

    1Reply
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