Do you really require the first, last month's rent + the deposit?

Investor · Pensacola, FL · Member since 2016 · 19 posts · 6 votes

I'm a new landlord. I have a 3 br/2 bath rental that'll go for about $900 per month. I'm wanting to know from more experienced landlords/managers do you require people to give first and last month's rent plus deposit. That seems like a lot for people to come up with. How do experienced landlords and property managers handle this? Do you require all three and if so do you let them make payments on some of it or do that have to pay all 3 at once (in my case $2,700) prior to moving in. Thank you!

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John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

Sometimes I do. Sometimes I require a deposit equal to 1.5X the rent. Rarely do I just charge one months rent as a deposit.

I base this on background check and credit score.

I have found that if the deposit is more than one months rent that more tenants will actually pay the last months rent, clean the house and turn over the keys with the house in rent-able condition.

If the rent equals one months rent then they will sometimes not pay the last months rent and tell you to keep the deposit to cover the last months rent. This gives you no money for to cover any damage beyond normal wear and tear.

If they stop paying rent in the middle of the lease the larger deposit gives you a bigger buffer.

I tell them if they have good credit then the deposit is only one months rent. They usually say my credit is not perfect or not good so they are then conditioned to pay a higher deposit due to their credit.

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
6y
Sometimes I do. Sometimes I require a deposit equal to 1.5X the rent. Rarely do I just charge one months rent as a deposit.
I base this on background check and credit score.
I have found that if the deposit is more than one months rent that more tenants will actually pay the last months rent, clean the house and turn over the keys with the house in rent-able condition.
If the rent equals one months rent then they will sometimes not pay the last months rent and tell you to keep the deposit to cover the last months rent. This gives you no money for to cover any damage beyond normal wear and tear.
If they stop paying rent in the middle of the lease the larger deposit gives you a bigger buffer.
I tell them if they have good credit then the deposit is only one months rent. They usually say my credit is not perfect or not good so they are then conditioned to pay a higher deposit due to their credit.
12 Reply
Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
6y
Hi @Blake Jones
Make sure to check your local laws as well. For instance here it is not legal to charge more in a security deposit than one months rent. It is also against regs to collect first/last and security. Gotta love NY
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
In NJ, prospective renters are usually paying (on-market) 3.5 months upfront which makes for better tenants in most cases. If you are thinking already that you are asking for too much upfront, you are going to end up with bad tenants. You don't want a lot of options, you want the best options as tenants which means the best credit score you can get for your area plus cash to rent. We are aggressive when listing rentals and text back to everyone that they need 3.5 months upfront and this takes care of the waste of time showings. It is a lot, especially with higher rents. Here it's first month, 1.5 security and 1-month realtor fee for on-market. So off-market you could alleviate the 1-month realtor fee, but in NJ it's all paid by the renter so there is no reason for a landlord not to use an agent to vet clients and do the background.
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Effram Barrett
Real Estate Agent · Houston, TX · Member since 2017 · 159 posts · 161 votes
6y
I haven't heard of 1st and last months rent up front, but I just did a lease with high risk tenants where the landlord made them put down 2 months deposit plus 1st months rent. They had to come up with over $4K to get the place, but I have a feeling they will be great tenants. As @Jonathan Greene mentioned, if you're nervous about asking for that much up front then they may not be able to pay on time or just might be bad tenants.
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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@Blake Jones Certified check prior to move in. As long as it is allowed by law-I make no exceptions. A tenant who can't come up with whatever the amount is may well cause issues down the road this helps them too-it is like money in the bank, and we have always been fair returning deposits.
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Account Closed
Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
6y
I would charge that and more if I could get away with it where I own. IMO, first month, last month, plus I dunno...lets call it $3k for damage security is about right.

But yes, it's a heck of a lot of money to come up with, and in many markets the tenants will never be able to afford that. That's when market dynamics come into play and we must charge what we can, not what we would like to.

I own where most tenants can't afford all that. I also own where too many slumlords keep security deposits as policy, and wait for legally non-savvy tenants to sue them for it. Argh. What I do is charge a bit more for security (about 1.5 rent) and lose a few applicants because of it. Some of the ones I lose because they can't afford it, and some I lose because they have come to believe they will never get it back. What I also do, is allow tenants to pay security in installments, and provide in the lease they can get their security back the day they transfer the unit back, so long as they move out the right way that is (default law is 21 days here).

I swear to God I am going to start helping tenants chase down slumlords for security deposits.
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Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
It seems that is location dependent. If I tried that here I doubt I would ever find tenants. My average rent is over $1,400 a month. That would be $4,200 to move in. I require deposit and first months rent. No payments. All up front and cleared through my account before they get the keys. I encourage cash for the deposit and first months rent, so there is no waiting. Then, I do not allow cash payments for rent after move in.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
6y
Originally posted by @Anthony Wick:
It seems that is location dependent. If I tried that here I doubt I would ever find tenants. My average rent is over $1,400 a month. That would be $4,200 to move in. I require deposit and first months rent. No payments. All up front and cleared through my account before they get the keys. I encourage cash for the deposit and first months rent, so there is no waiting. Then, I do not allow cash payments for rent after move in.

@Blake Jones

Similar in San Diego. Average rents are likely near $2500 (average 2 BR apartment is approaching $2300). The standard is first month's rent and a month of deposit. Legally we can charge 2 months deposit for unfurnished and 3 months deposit for furnished but the local market does not and therefore if you tried to do so you would have more difficulty renting (but with a vacancy rate of 3% you likely would still get it rented but it would take longer/more effort).
I suggest when you do your rent analysis that you also look at what the standard move-in costs are and that you do similar to what is standard for your market.
Good luck

@Blake Jones
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Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
6y
@Anthony Wick
I bought my first house with less than $4200!
In my area, I’d never rent the houses asking for basically 3 mos up front
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Catherine Emert
Realtor · Bend, OR · Member since 2018 · 323 posts · 224 votes
6y
I have noticed that a lot of landlords are choosing not to require last month's rent. I see a variety of security deposits, but baseline is usually 1.5 times the rent plus additional per pet. But I agree with everyone else to check your local and state regulations - sometimes cities have added regulations above what the state requires.
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Max T.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Yes.
Class A/B are the bee's knees.
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Raymund Emperoa
Member since 2018 · 4 posts · 1 vote
6y
Hi Blake,
I worked with a Property management company before and as a requirement for rental alone are the following:

1. Check if the tenant has at least 3 year rental history - to show that they are of good standing and no Eviction. If they do not have any history, this is the time that you will require 3 months affront and 1 month movein fee. But if they have 3 months Rental history, 1month affront and movein fee.
2. The gross income of tenant should be 3x than the rental fee so that you can assure they can pay.
Hope this can help
0 Reply
Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6y
@Blake Jones
I charge first months rent plus the security deposit. The security deposit is never equal to the rent amount so it’s not assumed it’s the last months rent. Based on there tenant criteria and score I may require 2 months security deposit. I do this is geographically driven. Depends on your market.
0 Reply
Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
@Blake Jones The answer a lot to do with what is customary and legal in your local area. Where my rentals are, pretty much everyone just charges 1st month's rent and a security deposit (which is what I do). So if I tried to charge any more than that (like also charging last month's rent), I'd be at a big disadvantage when trying to rent my properties.

Whatever you decide to do, I'd recommend you do NOT accept payments. Everything due upon move-in needs to be paid in FULL before you hand over the keys. No exceptions.
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Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
6y
I charge first full month + any prorated month + 1.5 month for security deposit.
Typically the first month and pro-rated month would have been paid to the prior landlord, so the tenant should have this money available for me. If they don't have enough for a deposit on top of this, then they are living paycheck to paycheck and that is not the type of tenant that I want to rent to.
I'm in an extremely high demand area with little inventory so no one ever complains.
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
We charge first month rent and security equal to one month. (sometimes more)
No one around here collect last month's rent up front.
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Brian Ellis
Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
6y
Typically I charge first, last and security. But, if I have knowledge of how the person lives prior to move in I will either skip the security deposit all together or charge less.
Im going through a turnover now where I will be keeping the security deposit. But I am still obligated to pay them the interest accrued over the course of the lease.
If I didn't charge it I would be out a couple thousand dollars. Broken window and storm doors, bugs in the fridge, piss and **** all over the bathroom. A good tenant turned bad within 4 months.
0 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
I do the deposit and first month's rent. I can see doing a higher deposit if the rents are lower to cover damages.
0 Reply
Fred Cannon
Rental Property Investor · St Augustine, FL · Member since 2019 · 264 posts · 279 votes
6y
@Blake Jones I do one month deposit plus 1st month rent to move in. I break my deposit up and part of it is admin and cleaning and is none refundable. For example. Rent is $1050. Deposit is $800 refundable and $250 non refundable.
0 Reply
Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
6y
As stated above, this is very market-specific.

It should also be risk-based:

If an applicant meets all of our screening requirements (i.e., good credit, income 3X rent, no evictions, stable employment, and good rental history), then we normally take a deposit equal to one month's rent (as a property manager, I'd prefer to take more because it gives us more breathing room if things go bad, but we have to take what the market will bear).

If an applicant meets all of our requirements except one (everything looks good, but they have a 580 credit score, for example), then we reserve the right increase the deposit requirement. Technically, this is considered an adverse action and requires an adverse action notice to the tenant. But this is also part of our published screening requirements and is spelled out in our application, so the applicant knows the situation going in.

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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
As others stated, it is market dependent. Check what others are doing in your area. If you are the only landlord requiring last months rent at the time of move in, it could make it much harder to rent your property. We do first months rent and security deposit and require a cashiers check.
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Bob Prisco
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
6y
@Blake Jones ask for it, you will be surprised, If not 1st and SD, works ITS ALL about screening
Good Luck
PS if credit is questionable then 100% get 3 months, I have gotten 5 months upfront
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Blake Jones
OP
Investor · Pensacola, FL · Member since 2016 · 19 posts · 6 votes
6y
Thanks everyone for responding. This clears up things a lot. Thanks again!
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Nate Bell
Member since 2018 · 150 posts · 140 votes
6y
I’m in multiple markets with rents between $800-$1500 and always get first, last & security. The security on the $1500/mo place is $1000. So yeah, it’s $4000 to move in. If you don’t do this, eventually you’re going to have a tenant that knows they’ve destroyed the place move out during the eviction process without telling you.
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Mike H.
Rental Property Investor · Atlanta, GA · Member since 2017 · 127 posts · 75 votes
6y
Originally posted by @Blake Jones:
I'm a new landlord. I have a 3 br/2 bath rental that'll go for about $900 per month. I'm wanting to know from more experienced landlords/managers do you require people to give first and last month's rent plus deposit. That seems like a lot for people to come up with. How do experienced landlords and property managers handle this? Do you require all three and if so do you let them make payments on some of it or do that have to pay all 3 at once (in my case $2,700) prior to moving in. Thank you!

Yes!!! If it’s legal in your hood. I take sec deposit at lease sign. First month paid at first month. And let them pay last month over the first three months of the lease or they can pay all at once. Always get it

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