Up front cost payment plan

Investor · MA · Member since 2020 · 6 posts · 2 votes

Hi,

With recent legislation in Cincinatti and Seattle, certain landlords have to offer an installment payment plan for tenants to pay upfront costs. As a real estate investor myself, I am very curious to see if anyone has statistics or anecdotal estimates on what percentage of tenants actually use these payment plans? It seems like this may be something that more cities adopt, so I am trying to prepare in advance for when that happens. Thanks in advance!

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Michael HaasBusiness Member

Real Estate Agent · Sammamish, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 725 posts · 3k+ votes

We actually first learned about this legislation from a tenant bringing it up (whoops!). We currently have 7 doors being rented long term, and only 1 tenant has requested and taken advantage of the payment plan for their security deposit. I think the legislation is reasonable - we actually don't charge first and last months rent, just first months, out of a understanding that moving is expensive and that can be a very large sum of money due at signing in a high rent market like Seattle.

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Michael HaasBusiness Member
Real Estate Agent · Sammamish, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 725 posts · 3k+ votes
6y
We actually first learned about this legislation from a tenant bringing it up (whoops!). We currently have 7 doors being rented long term, and only 1 tenant has requested and taken advantage of the payment plan for their security deposit. I think the legislation is reasonable - we actually don't charge first and last months rent, just first months, out of a understanding that moving is expensive and that can be a very large sum of money due at signing in a high rent market like Seattle.
[email protected]408-439-7873
HouseHack Seattle | Michael Haas & Team572 Reviews
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Conor Brennan
OP
Investor · MA · Member since 2020 · 6 posts · 2 votes
6y
Wow! That's so interesting. Have you heard of any other landlords or property managers who've had tenants dealing with this?
It seems like it puts the landlord at much higher risk, so I wouldn't be surprised to hear landlords are trying their best to keep tenants away from the payment plan option.
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Brian Hughes
Seattle, WA · Member since 2017 · 275 posts · 223 votes
6y
The problem with the payment plan requirement, at least the city of seattle implementation, is if the tenant defaults on it, I believe the ordinance specifically states that this default cannot result in additional fees, ever; and cannot be used as grounds for eviction. In other words, the deposit and last months rent are optional (at least, the 5 installments after the initial move in)

Mitigations: charge full month for deposit and full month for last months rent if market will bear. You are at least guaranteed 1/3 month up front then, not a huge cushion but in the range of some deposits before the rule. Advertise in advance of availability, and charge a holding deposit equal to security deposit for the new occupant, holding deposits I believe are still allowed. And, of course, review your criteria insofar as creditworthiness, rental history, etc.

You also don't have to offer a payment plan if the total of move in costs is less than 1/4 months rent, I think. That's practically nothing though insofar as a deposit goes, unless you have a rental you can charge $2000+ in rent on.

I typed most of this from memory, so anybody reading this should ignore me and go read the ordinance instead to make sure I got my facts right.

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Account Closed
Member since 2019 · 1 post · 0 votes
6y
Conor, I had the same question actually. I am looking to buy a place, but am worried that I might be at high risk if I have don't get all the upfront costs. Michael, how do you make sure that you aren't at too much risk with only a month upfront? Thanks!
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Michael HaasBusiness Member
Real Estate Agent · Sammamish, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 725 posts · 3k+ votes
6y
I'm a landlord in Seattle - I'm always at risk, no getting around that. I try to pick good tenants, pride myself in being kind and understanding, and make sure all my tenants know that their rent is a significant source of income for my, my wife's and, our one year old's living expenses. I treat my tenants very fairly, and hope for and expect them to do the same. So far so good...
[email protected]408-439-7873
HouseHack Seattle | Michael Haas & Team572 Reviews
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