Cincinnati landlords cant ask for security deposits anymore!
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6yYour headline is false. Landlords can still have "security deposits" but they have to limit the amount or provide alternatives:
1. Traditional deposit but made in payments;
2. Deposit "insurance" where the Tenant pays a small, non-refundable premium each month; or
3. Reduced security deposit of no more than 50% of a month's rent.
I see the writing on the wall and am already heading this direction. Starting next month, I will be offering my tenants a deposit alternative. Instead of a $1,500 deposit up front, Tenant can opt to pay a monthly fee of $10 and Obligo will ensure protection of up to $1,500 for me as the Landlord. If the tenant causes $800 in damages, I file a simple, online claim with Obligo and they pay me the $800 with no questions asked, then they pull the $800 from the Tenant's bank account or credit card.
All my applicants are given a score and that score determines how big of a deposit they pay. If they are low-risk, they pay a 1x deposit while high-risk pays a 2x deposit. Paying $1,000 for first month's rent and $2,000 for a deposit is difficult for most anyone. If they could instead pay $1,000 for first month's rent and a $15 monthly fee, suddenly it's affordable for a lot more people. I can rent the property and still get the same level of security as a traditional deposit. I'm also making it easier for tenants to move into my rentals which makes my rentals more desirable and will reduce vacancy time.
If anyone's interested in learning more, send me a private message.
The DIY Landlord Book4.7247 Reviews
47 Replies
- Fort Collins, CO · Member since 2019 · 158 posts · 117 votes6y
OMG - And I was looking at Cincinnati properties?! Back to looking at Michigan.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Your headline is false. Landlords can still have "security deposits" but they have to limit the amount or provide alternatives:
1. Traditional deposit but made in payments;
2. Deposit "insurance" where the Tenant pays a small, non-refundable premium each month; or
3. Reduced security deposit of no more than 50% of a month's rent.
I see the writing on the wall and am already heading this direction. Starting next month, I will be offering my tenants a deposit alternative. Instead of a $1,500 deposit up front, Tenant can opt to pay a monthly fee of $10 and Obligo will ensure protection of up to $1,500 for me as the Landlord. If the tenant causes $800 in damages, I file a simple, online claim with Obligo and they pay me the $800 with no questions asked, then they pull the $800 from the Tenant's bank account or credit card.
All my applicants are given a score and that score determines how big of a deposit they pay. If they are low-risk, they pay a 1x deposit while high-risk pays a 2x deposit. Paying $1,000 for first month's rent and $2,000 for a deposit is difficult for most anyone. If they could instead pay $1,000 for first month's rent and a $15 monthly fee, suddenly it's affordable for a lot more people. I can rent the property and still get the same level of security as a traditional deposit. I'm also making it easier for tenants to move into my rentals which makes my rentals more desirable and will reduce vacancy time.
If anyone's interested in learning more, send me a private message.
The DIY Landlord Book4.7247 Reviews - Investor · San Diego, CA · Member since 2017 · 190 posts · 117 votes6y
@Justin B.
Wow. This is crazy! Even with what @Nathan G. said, this is still troubling. Substantial security deposits are s natural deterrent for bad tenant behavior. I know the work needs to be done on the front end to ensure you get a quality tenant in the house but c’mon this is kind of crazy.
- Rental Property Investor · Cincinnati, OH · Member since 2019 · 21 posts · 8 votes6y
@Nathan G. This is accurate. I have a colleague that sat in while this motion was passed. Things in Cincinnati will be changing!
- Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes6y
Originally posted by @Nathan Gesner:
Your headline is false. Landlords can still have "security deposits" but they have to limit the amount or provide alternatives:
1. Traditional deposit but made in payments;
2. Deposit "insurance" where the Tenant pays a small, non-refundable premium each month; or
3. Reduced security deposit of no more than 50% of a month's rent.
I see the writing on the wall and am already heading this direction. Starting next month, I will be offering my tenants a deposit alternative. Instead of a $1,500 deposit up front, Tenant can opt to pay a monthly fee of $10 and Obligo will ensure protection of up to $1,500 for me as the Landlord. If the tenant causes $800 in damages, I file a simple, online claim with Obligo and they pay me the $800 with no questions asked, then they pull the $800 from the Tenant's bank account or credit card.
All my applicants are given a score and that score determines how big of a deposit they pay. If they are low-risk, they pay a 1x deposit while high-risk pays a 2x deposit. Paying $1,000 for first month's rent and $2,000 for a deposit is difficult for most anyone. If they could instead pay $1,000 for first month's rent and a $15 monthly fee, suddenly it's affordable for a lot more people. I can rent the property and still get the same level of security as a traditional deposit. I'm also making it easier for tenants to move into my rentals which makes my rentals more desirable and will reduce vacancy time.
If anyone's interested in learning more, send me a private message.
This is an interesting concept that probably warrants it's own discussion. Have you tested this before rolling it out? I'm curious what the claim process would be and what avenues the tenant might have to fight it. - Real Estate Agent · Cincinnati, OH · Member since 2018 · 5 posts · 13 votes6y
Another thing to point out here - owners of 25 units or less are exempt from this new law. While this a significant change for some, I do not think this should deter someone from continuing their small portfolio goal in the Cincinnati market.
- Knoxville, TN · Member since 2019 · 111 posts · 57 votes6y
What stops the tenant from simply canceling the insurance after one month, paying say $15 to move-in and leaving the landlord with zero security?
I'd be requiring a year pre-paid (non-refundable) of the insurance, one year term leases, non-renewable without another year of insurance.... eventually the tenant gets eaten up in fees and has no security deposit coming back at the end. Probably need higher rent, too, to offset the risk. Don't see tenants winning anywhere (but at least the economy was stimulated, right?).
- Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes6y
How is this going to work with low income tenants who have no credit card or bank account.
Originally posted by @Nathan Gesner:Your headline is false. Landlords can still have "security deposits" but they have to limit the amount or provide alternatives:
1. Traditional deposit but made in payments;
2. Deposit "insurance" where the Tenant pays a small, non-refundable premium each month; or
3. Reduced security deposit of no more than 50% of a month's rent.
I see the writing on the wall and am already heading this direction. Starting next month, I will be offering my tenants a deposit alternative. Instead of a $1,500 deposit up front, Tenant can opt to pay a monthly fee of $10 and Obligo will ensure protection of up to $1,500 for me as the Landlord. If the tenant causes $800 in damages, I file a simple, online claim with Obligo and they pay me the $800 with no questions asked, then they pull the $800 from the Tenant's bank account or credit card.
All my applicants are given a score and that score determines how big of a deposit they pay. If they are low-risk, they pay a 1x deposit while high-risk pays a 2x deposit. Paying $1,000 for first month's rent and $2,000 for a deposit is difficult for most anyone. If they could instead pay $1,000 for first month's rent and a $15 monthly fee, suddenly it's affordable for a lot more people. I can rent the property and still get the same level of security as a traditional deposit. I'm also making it easier for tenants to move into my rentals which makes my rentals more desirable and will reduce vacancy time.
If anyone's interested in learning more, send me a private message.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Originally posted by @Trent Arey:
@Nathan G. This is accurate. I have a colleague that sat in while this motion was passed. Things in Cincinnati will be changing!
I know the story is accurate; it's the headline to this thread that is not.
The DIY Landlord Book4.7247 Reviews - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Originally posted by @Karen O.:
What stops the tenant from simply canceling the insurance after one month, paying say $15 to move-in and leaving the landlord with zero security?
I'd be requiring a year pre-paid (non-refundable) of the insurance, one year term leases, non-renewable without another year of insurance.... eventually the tenant gets eaten up in fees and has no security deposit coming back at the end. Probably need higher rent, too, to offset the risk. Don't see tenants winning anywhere (but at least the economy was stimulated, right?).
You have to use a company that specializes in this. I'm going to use Obligo. The tenant has to have a bank account and credit card, both with an available balance of at least $800. Obligo continues to check the card and account each month to ensure it's open. If the Tenant closes their account, Obligo goes after them and they notify the Landlord. As the Landlord, it would be a violation of the lease and I would start eviction immediately but I'm still safe because Obligo will guarantee the covered amount and it's their responsibility to go after the Tenant that closed the accounts. I personally think it's better than a traditional security deposit.
You misunderstand how the insurance works. Once the tenant signs up and makes that first payment, the Landlord is covered. Period. If the tenant shuts down their account the next day, that's between them and Obligo. I'm still covered as the Landlord for the agreed amount.
The tenant gets a HUGE benefit. Instead of paying a $1,200 deposit for a one year lease, they pay $10 a month or $120 a year. This makes it much more affordable for tenants to move in without increasing risk to the Landlord. What about high-risk tenants that require a double deposit of $2,400 and first month's rent? Instead of paying $3,600 to move in, they can pay $1,200 and a $12 monthly fee or $144. Yes, it's non-refundable but most tenants would prefer a monthly fee over a large lump sum up front.
You guys should read up on it. This is the way of the future.
The DIY Landlord Book4.7247 Reviews - AZ · Member since 2018 · 78 posts · 40 votes6y
@Nathan G. I actually did this 5 years ago as a renter. I paid a one time fee of 60-70 bucks for the deposit to an insurance company like you mentioned. If I messed anything up, I’d still be responsible for any repairs or damage. This is actually a good idea especially for good tenants that knew they will keep the property in good condition because I didn’t want my money sitting with a management company.
- Rental Property Investor · OH · Member since 2014 · 60 posts · 8 votes6y
This is just the latest cincinnati has done. In 3 “pilot” neighborhoods they are creating a rental database.
According to the 8 new ordinances, Cincinnati landlords will now be required to register with the city of Cincinnati at a cost of $1.00 per unit if you don’t you will be fined up to $1,200. The registry will list how much the landlord is charging for rent, the size of the rental and how many rooms it has, plus contact info for landlords.
They put a cap on late fees and that residents will get more notice before they can be evicted. They also establish a pilot program of rental inspections, if a tenant complains to housing authority or code dept there is a $100 inspection fee no matter what.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes6y
I agree with @Nathan Gesner The writing's been on the wall for a very long time now. And it's very clearly because of abuses of the free market, a lot of landlords pulling a lot of crap that they shouldn't be, especially down in C and D-class level properties where the tenants are weakest and the landlords have the most power. On the one hand you have the big guys with in-house property management, who take what they can get away right up to the line, on the other, you have the amateurs who will do practically anything to make their one or two rentals work like their spreadsheet says it should. The experienced small mom and pop operator can still make a good living pitted against these two groups. No amount of rent control legislation has ever changed that basic reality anywhere in America, despite all the hand fluttering and pearl clutching.
We live in a country where no one has any money aside and Bankrate.com estimates that a $1K emergency would push 60% of Americans into debt. That's a country full of completely-exposed financial weaklings practically begging to be manipulated and taken advantage of by stronger, richer people with more resources than them. That's the paycheck-to-paycheck world the banks, the media, the corporations, the billionaires have been steadily working to create for generations. So now we have it, a nation of batteries whose sole mission in life is to make money for other people, and that's why rent control legislation and other measure to curb the greed and cupidity of landlords who can't help themselves from "maximizing their income per tenant" are going in everywhere. Because batteries always need a housing to be properly drained.
We can whine all we want that the sad shape this country is in on a personal finance level is cramping our landlording style. We very much helped bring it on ourselves. How many threads a day do we get here in the forums about how to shaft your tenant with this expense or that? How many times do we hear about people buying small MFs and throwing everyone out to remodel, force appreciation, and charge much more in rent? Hey, it's just business. There are hundreds of regular users on this board who think sending pay-or-quit notices on the fourth of the month if the rent hasn't been paid has no long-term consequences. Sorry. The practice creates enormous bad faith with renters, and that bad faith turns around to bite us all.
Pigs get fat. Hogs get slaughtered. The gubmint is just whetting its knives now. Wait for a downturn in the economy and see what kind of protectionary measures for tenants go in. Just you wait.
- Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes6y
Does Obligo allow month-to-month leases?
I looked into this with a similar company, and they had a minimum of a one-year lease. Unfortunately, term leases give the control of your property back to the tenant. So, if term leases are required, you may be trading one problem for another if MTM is your business model based on class/region.
- Real Estate Agent · Port Huron, MI · Member since 2012 · 295 posts · 82 votes6y
Remember when down payment and credit requirements were lowered so more people could buy a house because people couldn't save for a down payment? The government always has a way of lowering the bar instead of helping people up and it often comes at a cost to the middle class.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Originally posted by @Wesley W.:
Does Obligo allow month-to-month leases?
I looked into this with a similar company, and they had a minimum of a one-year lease. Unfortunately, term leases give the control of your property back to the tenant. So, if term leases are required, you may be trading one problem for another if MTM is your business model based on class/region.
According to my phone conference with them, they require the tenant to have at least three months remaining on their lease. So I can offer this to existing Tenants with four or more months remaining. They could sign up for Obligo and, once approved, get their traditional deposit refunded.
The DIY Landlord Book4.7247 Reviews - Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Originally posted by @Jim K.:
I agree with @Nathan Gesner The writing's been on the wall for a very long time now. And it's very clearly because of abuses of the free market, a lot of landlords pulling a lot of crap that they shouldn't be, especially down in C and D-class level properties where the tenants are weakest and the landlords have the most power. On the one hand you have the big guys with in-house property management, who take what they can get away right up to the line, on the other, you have the amateurs who will do practically anything to make their one or two rentals work like their spreadsheet says it should. The experienced small mom and pop operator can still make a good living pitted against these two groups. No amount of rent control legislation has ever changed that basic reality anywhere in America, despite all the hand fluttering and pearl clutching.
We live in a country where no one has any money aside and Bankrate.com estimates that a $1K emergency would push 60% of Americans into debt. That's a country full of completely-exposed financial weaklings practically begging to be manipulated and taken advantage of by stronger, richer people with more resources than them. That's the paycheck-to-paycheck world the banks, the media, the corporations, the billionaires have been steadily working to create for generations. So now we have it, a nation of batteries whose sole mission in life is to make money for other people, and that's why rent control legislation and other measure to curb the greed and cupidity of landlords who can't help themselves from "maximizing their income per tenant" are going in everywhere. Because batteries always need a housing to be properly drained.
We can whine all we want that the sad shape this country is in on a personal finance level is cramping our landlording style. We very much helped bring it on ourselves. How many threads a day do we get here in the forums about how to shaft your tenant with this expense or that? How many times do we hear about people buying small MFs and throwing everyone out to remodel, force appreciation, and charge much more in rent? Hey, it's just business. There are hundreds of regular users on this board who think sending pay-or-quit notices on the fourth of the month if the rent hasn't been paid has no long-term consequences. Sorry. The practice creates enormous bad faith with renters, and that bad faith turns around to bite us all.
Pigs get fat. Hogs get slaughtered. The gubmint is just whetting its knives now. Wait for a downturn in the economy and see what kind of protectionary measures for tenants go in. Just you wait.
This is true, but I think individuals need to take some responsibility. You have to remember out colleges are teaching "Feminist Film Theory" and "Zombies in Popular Media" because people are willing to pay for it. Why do they pay for it? Because mommy foots the bill or the kid gets easy money through student loans. Colleges would collapse if we did away with student loans and forced them to work and pay as they went. But we like the easy way.
I don't think Uncle Sugar is setting anyone up for the slaughter. I think they're setting everyone up for dependency. They want us living paycheck-to-paycheck so we will rely on government for our safety nets like healthcare, retirement, and soon they will add housing. And the politician that gives out the most "free" stuff will be the one that continues to win elections.
The DIY Landlord Book4.7247 Reviews - Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes6y
@Justin B.
Lol the fact that they don't have $2k in savings is the bigger issue here.
And can you just charge them double 1st month rent and they get a bonus for returning the unit back the same as they got it?!
- Member since 2019 · 8 posts · 0 votes6y
@Meir Greenblatt
Some guru landlords out there have suggested that calling it a non refundable move in fee out load and on your agreements is a way around this and a way to not have to escrow it or return it. You might check into this and see if being somewhat creative could overcome this change. The insurance does sound like a really great alternative.
- Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes6y
@Jonathan Brazer
Thanks the Insurance does sound great and I will look into it even though I'm not in Cincinnati.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
A couple more benefits I forgot to mention:
1. Some states require deposits be returned in 21 days. That's not much time to turn a unit around, collect utility bills, or whatever else. With programs like Obligo, there's no money held and nothing to return so the security deposit deadline doesn't appy. Even better? Tenant agrees to let me charge them for up to 60 days.
2. Tenants behave better. Why? With a traditional deposit, the money is already gone. The tenant may have mentally already written it off as a loss, especially if they are used to dealing with dishonest Landlords that keep the entire deposit just because the tenant failed to clean the over. Out of sight, out of mind. With Obligo, the tenant has money in their account and I have the authorization to reach out and take it. That gives them more incentive to return it in good condition.
The DIY Landlord Book4.7247 Reviews - Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes6y
That sure as hell sounds like a damned good reason we want kids to learn calculus and program robots in high school (to do the jobs of tomorrow) but they never have to write out an amortization table (to figure out how they're getting screwed today).
I'm still trying to figure out what kind of slick moves were pulled to kill Home Economics and basic cooking instruction in every high school in America. Left us all arguing which processed chicken noodle soup is better: The red can! No, no, the blue can! Mmm, mmm! There's such a thing as chicken noodle soup that doesn't come out of a can? Whoa...mind blown...
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Originally posted by @Jim K.:
That sure as hell sounds like a damned good reason we want kids to learn calculus and program robots in high school (to do the jobs of tomorrow) but they never have to write out an amortization table (to figure out how they're getting screwed today).
I'm still trying to figure out what kind of slick moves were pulled to kill Home Economics and basic cooking instruction in every high school in America. Left us all arguing which processed chicken noodle soup is better: The red can! No, no, the blue can! Mmm, mmm! There's such a thing as chicken noodle soup that doesn't come out of a can? Whoa...mind blown..
LOL! You and me both, brother. My kid is in high school and he's allowed to listen to music and stare at his screen as long as his work is done. He's literally playing games, watching movies, and complaining about boredom. I was once invited to talk about real estate to some seniors taking a business class. About 15 kids in the room and at least half of them were on their phones at some point, several had their heads down and were sleeping. The two teachers asked over a dozen questions but I didn't get a single question from the kids. Schools hand out laptops and iPads and have $2,000 computers for kids to "work" on so they're prepared for the future but they don't know how to cook, change a diaper, or hammer a nail.
The good news? Between our current education system and recreational drugs, I'm looking smarter every day!
The DIY Landlord Book4.7247 Reviews - Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes6y
Originally posted by @Nathan Gesner:
A couple more benefits I forgot to mention:
1. Some states require deposits be returned in 21 days. That's not much time to turn a unit around, collect utility bills, or whatever else. With programs like Obligo, there's no money held and nothing to return so the security deposit deadline doesn't appy. Even better? Tenant agrees to let me charge them for up to 60 days.
2. Tenants behave better. Why? With a traditional deposit, the money is already gone. The tenant may have mentally already written it off as a loss, especially if they are used to dealing with dishonest Landlords that keep the entire deposit just because the tenant failed to clean the over. Out of sight, out of mind. With Obligo, the tenant has money in their account and I have the authorization to reach out and take it. That gives them more incentive to return it in good condition.
A great thread and very interesting issue. My initial feelings are mixed. You touch on what I worry about, which is why would the tenant bother to take care of a property if they have insurance, and insurance that is ridiculously affordable???
Your take is they will have more incentive, because the money is in an account instead of already "spent" as you say. But if the landlord has the power to take that money, is that really so different? Does this Obligo have rules that apply to when a landlord can go after that money? I dunno...maybe I'm not seeing it, but I'm not seeing much of a difference on that score.
The other issue I worry about, and I suppose this is no different than now, is how about when the damage exceeds what a landlord can get back? To me, if a renter has less skin in the game than they have now, that problem is likely to get worse.
Again, my feelings are mixed. On the one hand, this seems like a very good solution for all sides. I would personally like to see the amount of coverage increased ten-fold. However, as I already touched on, I worry that with this safety net, it will be a free-for-all and units are going to get trashed. Will the insurance cover the vacancy and hassle of fixing a unit too? Or just the cost of repairs???
I dunno...I dunno...sometimes solutions cause more problems...
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