Tenant delaying lease signing should i get deposit

Flipper/Rehabber · Colorado Springs, CO · Member since 2016 · 499 posts · 167 votes

I asked tenant 3x if he would have the cash for the deposit and prorated rent tomorrow, and he promised he would. Now he only has the security deposit and I don't have a signed lease. He says he gets paid this Friday so will have the funds Saturday (in 6 days) but has no other financial commitment to me. So he could just walk away and leave me with loss of a week. I think I should get a fairly large deposit from him which would be deducted from the total he owes on lease signing. The rent for the house is $2000, i think i should ask for $1000 deposit. Getting tired of chasing these people.

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Greg M.

Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes

The rent is $2000 and the guy has to wait until he gets his paycheck to give you the prorated rent? Doesn't exactly sound like a qualified tenant to me. He's living paycheck-to-paycheck. I suspect that you will have issues with him paying rent on time.

I'd keep looking for another tenant. I tell all potential tenants, until the lease is signed and the security deposit and first months rent is in my hand, I will keep advertising the unit as available and if someone else comes along, you're out of luck.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
@Jane S. I always get a deposit equal to half the rent, so $1000 is the minimum. I would tell them that they have til noon on Saturday or you will find another tenant. If they want it, they need to be honest up front and it doesn't sound like they are off to a good start.
2 Reply
Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
6y
The rent is $2000 and the guy has to wait until he gets his paycheck to give you the prorated rent? Doesn't exactly sound like a qualified tenant to me. He's living paycheck-to-paycheck. I suspect that you will have issues with him paying rent on time.
I'd keep looking for another tenant. I tell all potential tenants, until the lease is signed and the security deposit and first months rent is in my hand, I will keep advertising the unit as available and if someone else comes along, you're out of luck.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y
No signed lease and no money means you have nothing. They're either not interested, are trying to string you along as their backup while they look at other stuff, or are truly broke and can't afford it anyway. In any of those cases, you should move on.
We tell the lessees that we allow 48 hours for signing and payment. At that point we begin consideration of the next application in line.
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Anthony Dooley
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
6y
This is a preview of every month this person rents from you. They don't do what they said they would do, when they said they would do. I would find another tenant.
15 Reply
Jin Tan
Los Angeles, CA · Member since 2017 · 8 posts · 7 votes
6y
Living paycheck to paycheck and doesn't have enough reserves to cover the move-in funds. Huge red flag. At least he's honest about the reason and not stringing you along with some other BS excuse.
Move on to other applicants. Just be glad that this problem showed itself before you went into a contractual relationship.
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Stephen J DavisBusiness Member
Rental Property Investor · Houston, TX · Member since 2017 · 529 posts · 467 votes
6y
@Anthony Dooley is right. Find another tenant that keeps their promises.
1 Reply
Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Jane S.
He’s either unable to afford it (sounds like he’s straight up telling you it’s paycheck to paycheck at his resort) or he’s still shopping. Either way, adios.
0 Reply
Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6y
@Jane S.
He has the security deposit but not the rent, but he can’t pay till next Saturday. That doesn’t make sense. If I am going to commit to a tenant which means I am going to take the property off the market I need a deposit down. I require 50% of the rent. This is why this makes no sense. He has the security deposit so use that unless it’s not at least 50% of the rent. I always ask on my tenant application do you currently have the funds for rent and security deposit. The story doesn’t add up. Did you confirm his income, credit and background check, previous landlord reference, etc?
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
Originally posted by @Jane S.:
I asked tenant 3x if he would have the cash for the deposit and prorated rent tomorrow, and he promised he would. Now he only has the security deposit and I don't have a signed lease. He says he gets paid this Friday so will have the funds Saturday (in 6 days) but has no other financial commitment to me. So he could just walk away and leave me with loss of a week. I think I should get a fairly large deposit from him which would be deducted from the total he owes on lease signing. The rent for the house is $2000, i think i should ask for $1000 deposit. Getting tired of chasing these people.

Jane, with all due respect, you have got to educate yourself and develop some good processes. I highly recommend "Every Landlord's Legal Guide" by NOLO or "Managing Your Rentals" by Brandon Turner, for starters.
When something comes up, like screening applications, you should think through the process and everything that could go wrong. Then find ways to prevent the problems before they happen. For example, I tell applicants up front that I do not take the property off the market until I have money in hand. If they want it, they pay. If they can't pay, then I continue looking for renters until I find someone that can pay. The first applicant can always come back two weeks later to see if the rental is still available, but I don't hold property off the market based on promises from strangers.
I highly recommend you sit down at the computer and think through your process:
1. I'm advertising a vacant rental. How do I know it's priced right? How do I know it's equal or better than the competition? How will I expose it to the right people? How do I avoid getting 50 calls a day from people that will never qualify?
2. I've received an application. Is it complete? How do I know this is a real person? How do I verify what they are telling me is true? What items are important to check? What if they fail in one area but not the others? What kind of person will I absolutely not rent to?
3. The application was approved and the person wants to rent my home. How do I seal the deal? Do I require money down? Should they sign something? What if they want to make payments or ask me to wait two weeks? They seem like the ideal tenants but now they want to negotiate the price or talk me into allowing a pet.
Just a few examples. In your situation, I would contact the individual and tell them they clearly can't afford the place and their application is denied. Don't negotiate; just give them the answer, thank them for the time, and walk away.
In the future, you should never take a property off the market without certified funds (cash, cashiers check, or money order) in your hand and they should sign something that explains what they are paying, why they are paying it, and what happens if they fail to follow through. I use a "Holding Agreement" that says they will rent the unit no later than [DATE] for [TERM] and [PRICE] and if they change their mind - for any reason - then they forfeit the deposit and I put it back on the market. I also won't normally hold a property for more than seven days; after that, they have to sign the lease and start paying rent, whether they occupy it or not.
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Jane S.
OP
Flipper/Rehabber · Colorado Springs, CO · Member since 2016 · 499 posts · 167 votes
6y
All great answers. The property was never off the market. There is little i can do if their numbers check out until they don't (time to sign). There must be someone out there coaching people in how to suck in landlords.
0 Reply
Jane S.
OP
Flipper/Rehabber · Colorado Springs, CO · Member since 2016 · 499 posts · 167 votes
6y
Nathan G, "with all due respect", when I hear that I know some "stuff" is on the way. You just summarized pretty much my procedures that have worked so far. This particular house is in a C+/C- city neighborhood with mostly older owned SF houses that are paid off therefore the rent/mortgage is low for the market and location, it's a walmart type of economy where the existing low rents pull us all down. The county taxes are also low. There are some strong market trends pulling rents lower in this tiny enclave, and it's extremely hard to fight this. My other properties in B/A locations rent fast. Lesson learned! In a year the numbers will be more favorable as houses turn over.
1 Reply
Andrew B.
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
6y
Originally posted by @Nathan Gesner:
Originally posted by @Jane S.:
I asked tenant 3x if he would have the cash for the deposit and prorated rent tomorrow, and he promised he would. Now he only has the security deposit and I don't have a signed lease. He says he gets paid this Friday so will have the funds Saturday (in 6 days) but has no other financial commitment to me. So he could just walk away and leave me with loss of a week. I think I should get a fairly large deposit from him which would be deducted from the total he owes on lease signing. The rent for the house is $2000, i think i should ask for $1000 deposit. Getting tired of chasing these people.

Jane, with all due respect, you have got to educate yourself and develop some good processes. I highly recommend "Every Landlord's Legal Guide" by NOLO or "Managing Your Rentals" by Brandon Turner, for starters.
When something comes up, like screening applications, you should think through the process and everything that could go wrong. Then find ways to prevent the problems before they happen. For example, I tell applicants up front that I do not take the property off the market until I have money in hand. If they want it, they pay. If they can't pay, then I continue looking for renters until I find someone that can pay. The first applicant can always come back two weeks later to see if the rental is still available, but I don't hold property off the market based on promises from strangers.
I highly recommend you sit down at the computer and think through your process:
I'm advertising a vacant rental. How do I know it's priced right? How do I know it's equal or better than the competition? How will I expose it to the right people? How do I avoid getting 50 calls a day from people that will never qualify?
I've received an application. Is it complete? How do I know this is a real person? How do I verify what they are telling me is true? What items are important to check? What if they fail in one area but not the others? What kind of person will I absolutely not rent to?
The application was approved and the person wants to rent my home. How do I seal the deal? Do I require money down? Should they sign something? What if they want to make payments or ask me to wait two weeks? They seem like the ideal tenants but now they want to negotiate the price or talk me into allowing a pet.
Just a few examples. In your situation, I would contact the individual and tell them they clearly can't afford the place and their application is denied. Don't negotiate; just give them the answer, thank them for the time, and walk away.
In the future, you should never take a property off the market without certified funds (cash, cashiers check, or money order) in your hand and they should sign something that explains what they are paying, why they are paying it, and what happens if they fail to follow through. I use a "Holding Agreement" that says they will rent the unit no later than [DATE] for [TERM] and [PRICE] and if they change their mind - for any reason - then they forfeit the deposit and I put it back on the market. I also won't normally hold a property for more than seven days; after that, they have to sign the lease and start paying rent, whether they occupy it or not.
I was gunna comment, but this is much better than what I would have said.
0 Reply
Rochelle Thea Fabrizio
Investor · United States · Member since 2020 · 47 posts · 40 votes
6y
Although it may seem cut throat I agree with @Nathan Gesner I made mistakes with my first tenants very similar to this. They ended up being absolutely terrible renters and a complete nightmare. I had a similar situation recently with the same house and a potential tenant that swore up and down that she wanted the property...I waited one day to place the home on the market and than despite her desires I had to move forward with marketing because I am not going to trust a stranger with no proof. Luckily I was right and she never produced anything needed to rent the home and because I didn't waste time, I had the house occupied the day after it was vacant and cleared. It is strictly a business deal. No money = no deal. Hope this helps and I wish you all of the best moving forward!
3 Reply
Iris Y Tang
Realtor · Western MA · Member since 2020 · 13 posts · 3 votes
6y
I'll find a new tenant, since chasing after monthly rent is a burden
0 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
@Jane S. even if the home is still occupied, you don't want to "take it off the market" for someone that hasn't put money down. You asked 3x if they had the money and didn't get an answer until when it was time to sign the lease.
Again, what is your policy regarding notification of application approval? Mine is that I will tell them they are approved and they have 24 hours to put money in my hand or I continue marketing and looking for someone else. I tell them once. Not twice, not three times, not every day until I get a response. They either want it, or they don't.
What is your policy if they fail to respond or put money down? Mine is to continue marketing and looking for someone. It doesn't matter if it's already occupied and won't be vacant for another month. Keep it on the market until someone has put money in your hand and agreed to rent it.
Far too many Landlords have no policy, or a really weak policy, but they claim "it works" just because it hasn't blown up in their face. Lack of failure doesn't mean success; it most likely means you've gotten lucky. You need to develop policies that ensure luck is not part of the equation. Most of my rentals would be considered C+ or B- properties but I don't have problems because I educate them from the beginning and throughout the process.
I'm not saying you're doing it wrong; I'm just spouting off thoughts based on the information available. Good luck!
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2 Reply
Debbie J. Skora
Investor · TX · Member since 2020 · 56 posts · 54 votes
6y
@Jane S. None of that has anything to do with how you interact with (prospective) tenants. You asked for advice, and people have responded thoughtfully. Your rationale just sounds like excuses, honestly. Set rules and follow them, or you can only expect tenants to push you around.
0 Reply
Andy WebbPro Member
Rental Property Investor · Carrollton, TX · Member since 2013 · 750 posts · 538 votes
6y
@Jane S. - Sounds like it is time to move on.

0 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
6y
This early in the process, you are finding a tenant that is not doing what is expected. Forgo the month of loss rent, and find a better tenant? That should be one of your options.
0 Reply
Lisa HallPro Member
Real Estate Broker · Chicago, IL · Member since 2017 · 5 posts · 4 votes
6y
Hi Jane,
Unfortunately, I think this is a sign of things to come with this tenant. Not starting out on a good note - red flag, run!
1 Reply
Christine Kankowski
Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 782 votes
6y
Sounds like they will be problematic. Keep looking for someone else. IF you don find someone by sat, rent to the new people. There is no commitment on either party until a lease is signed and deposit received. @Jane S.
0 Reply
Brendon Sturgis
Rental Property Investor · Buckeye Arizona Los Angeles California, San Bernardino California · Member since 2020 · 3 posts · 1 vote
6y
@Jane S. I'd move on. We had the same issue come up with one of the worst tenant experiences of my fledgling real estate career. I used a service on www.cozy.co. completely free to use and easy to have money transferred into your account. They also have tenant credit and background check.
The tenants we have now are amazing and I thank it all to cozy.
0 Reply
Ralph Chiaia
Real Estate Agent · Jacksonville, FL · Member since 2019 · 75 posts · 43 votes
6y
@Nathan G. I think the OP may be best served by hiring an agent or property manager to handle all this
3 Reply
Sheila F.
Investor · Statesville, NC · Member since 2015 · 113 posts · 58 votes
6y
@Jane S.
I don’t stop showing a property until deposit and first months rent is in hand. My hand. Time is money.
2 Reply
Kenny Dahill
Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
6y
@Jane S., lots of responses already. Here is my take.
- Security Deposit: If your regulations allow, I would push for security deposit that equals rent. At minimum.
- Holding Property: Simple rule. First qualified applicant to provide a full security deposit earns the lease. Until then, property continues to be listed.
- Rent for Keys: Security deposit only reserves the property. They must pay rent to receive the keys. I would state a 1 week tolerance for moving rent due date back, then they forfeit security deposit and you find the next best applicant.
- Proof of Income / Funds: It is important to confirm income and funds during the tenant screening process. By reviewing their last 2 bank statement it should clearly indicate whether these tenants can afford rent. Are they living paycheck to paycheck? Are they operating on a deficit monthly budget?
0 Reply
Alyssa K.
Member since 2018 · 156 posts · 106 votes
6y
@Jane S. If you don’t have a signed lease you don’t have a tenant. Sounds like you need better screening. If you are chasing people down, either your system or your price need adjustment; possibly both.
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