I'm taking over a building and leaving the tenants in the space. They are all long term tenants (newest is 2 years). The leases are now month to month. They said they have not given any security deposits or similar. If you were taking over a place, would you now charge your tenants' security deposits? And if so, how would you do this? Slowly over a few months? I'm already planning on raising rents closer to Market rates over the next 2 years, so they will already be getting some increases.
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
6y
As far as the deposit goes, I most likely would not try and add one at this stage. There is nothing you can say about the condition when they moved in. Hole in the back of a door? "Yeah that was there", Missing drain pipe "It was like that" and you will have nothing to go back to. If you go to an established tenant (5 years) and say "Hey I need an extra months rent to hang on to" They will start off defensive already.
Investor · Louisville, KY · Member since 2017 · 199 posts · 253 votes
6y
I would provide a 30 day lease termination letter. This will end the current month to month lease.
I would then inform them that the unit will be rented at (whatever your fair market value is) and will require one months rent security deposit.
They now have a choice: Pack up and move and pay fair market rent plus one months rent at a new rental unit or not move and pay fair market rent and one months rent security deposit.
What ever direction they go, you will end up with a tenant that is paying fair market rent and you will have one months rent security deposit.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
We've not only inherited tenants with no deposits but also have a few that never had a lease of any sort. We have been slowly raising the rents but I agree with others that trying to collect a security deposit at this point would be difficult. Almost certainly there's no move in inspection form and thus no reference to have a baseline of unit condition. Best bet is to have a clear lease and rent policies for new tenants upon turnover.
We are acquiring a property that the tenant is paying $750 and market rent is $1250.00. The property won't even break even at $750 so we'll just give them notice of a new rent amount and they can leave or pay a huge increase. We can't not increase them unfortunately even though they want to stay.
Rental Property Investor · Evans, GA · Member since 2014 · 74 posts · 65 votes
6y
Don't sweat the deposit if they never paid it. Just make sure you get it in writing that they never paid a deposit.
Some landlords do not require a security deposit. If the numbers make sense to purchase the property, they should make sense without a security deposit. Inspect the units and make sure you know what you're buying and satisfied with the condition.