Rental Property Investor / Construction Manager · Raleigh, NC · Member since 2015 · 201 posts · 103 votes
Hey BPer's
I am just getting going with rentals and I am curious what everyone does on day one that the tenant is approved?
This might be a silly question but I want to understand what is consistent with the industry. I have reviewed the current laws for North Carolina and basically, a LL can collect 2x base rent for a security deposit when the lease is annual. Is everyone also collecting first and last months rent?
For example:
Monthly Rent = $1k
Then, Security Deposit = $2k
If, 1st and last months rent is collected = $2k
This would be a total of $4k initially. This seems steep for a tenant. Please correct me if I am wrong.
Thanks in advance
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
9y
@Shaun Palmer Here is the exact process we use for our own rentals here in CT as well as rentals we fill for our clients:
Upon being approved as an applicant the tenant needs to give the equivalent of 1 months rent as a deposit. This essentially holds the apartment for them until the start of their lease. We explain to them that we only stop showing the apartment after an approved applicant gives their deposit. This gives incentive for the approve applicant to move quick to make sure they don't lose the apartment to another qualified applicant.
When we collect the deposit from them, which sometimes could be 2-3 weeks before the lease date start, we have them sign a form saying that by giving the deposit the apartment is theirs as long as they sign a lease and give the balance of the required move in money on or before the lease date start. If they back out, that is fine but they will not get their initial deposit back
We send them the lease docs via email in advance to review and sign and the goal is to have all of the paperwork signed before move in day.
On move in day, they give us the balance of the move-in money (1st months rent and any additional security deposit) and we give them the keys and we are good to go.
Investor · Haverhill, MA · Member since 2015 · 761 posts · 328 votes
9y
depends on your area and tenants.
In Metro Boston, I charge f, l ,sec say at 2K = 6K...and they pay it easily!
In outskirts (C areas), I can get f, l, 1/2 sec combination at 1200 = 1200+1200+600 = 3K they struggle to get it.....but that is part of the screening process.
Investor · Lancaster, PA · Member since 2016 · 48 posts · 28 votes
9y
I'm in Class C properties and I require first month's rent and security deposit at the lease signing. I always put this in the ad so it is clear what the expectation is. So for a $700 unit I would collect $1400 when we sign the lease and they get the keys when the lease starts. Last month rent would be nice but would probably shrink my tenant pool for Class C units.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
9y
@Shaun Palmer Here is the exact process we use for our own rentals here in CT as well as rentals we fill for our clients:
Upon being approved as an applicant the tenant needs to give the equivalent of 1 months rent as a deposit. This essentially holds the apartment for them until the start of their lease. We explain to them that we only stop showing the apartment after an approved applicant gives their deposit. This gives incentive for the approve applicant to move quick to make sure they don't lose the apartment to another qualified applicant.
When we collect the deposit from them, which sometimes could be 2-3 weeks before the lease date start, we have them sign a form saying that by giving the deposit the apartment is theirs as long as they sign a lease and give the balance of the required move in money on or before the lease date start. If they back out, that is fine but they will not get their initial deposit back
We send them the lease docs via email in advance to review and sign and the goal is to have all of the paperwork signed before move in day.
On move in day, they give us the balance of the move-in money (1st months rent and any additional security deposit) and we give them the keys and we are good to go.
Investor · Raleigh, NC · Member since 2016 · 36 posts · 12 votes
9y
Interesting thread, thanks all for the insights, and especially to Shaun Palmer for bringing this up. The specific examples, numbers ad processes you guys discussed make the content very valuable!
Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
9y
@Michael Noto I love that idea. Did you make your lease a fillable PDF with signature fields? I'm trying to "go paperless", and this would be a huge benefit for me to implement this.
Rental Property Investor / Construction Manager · Raleigh, NC · Member since 2015 · 201 posts · 103 votes
9y
Michael Noto
I really appreciate you outlining your process. It really helps me as I'm getting started. I am curious if you would be willing to share the form you have them sign when they provide the initial deposit stating that you will hold the property for them?
I think that is a great idea in addition to providing a receipt for them it really identifies and clarifies what the expectations are. Please share if don't mind.
Investor · Wasilla, AK · Member since 2016 · 277 posts · 139 votes
9y
Here's what I've been doing. After approving an application, I meet with the tenant to go over the lease. I nee at least the security deposit at that point as well as any pet deposit. If they give me first month rent and any pro-ration if they are moving in earlier, the keys will be waiting for them on the counter when they move in.
If they are tight on money, they can have the keys when they give me rent and any pet fees.
Almost every time, I get the deposit, 1st month, and pet fees at signing, and the keys are waiting for them. Example: Lease for $850, $200 pet deposit, move in on the first. I took $1900 from tenant, she got a common entrance key, and the unit key was waiting for her. Another time.... rent 1695, pet fee of 30, I got 3420, plus a pro-rated 56/day for moving in before the first. Actually, that time I gave $200 off the deposit as an incentive... which I really hated to do, but it was taking longer than usual to fill the unit.... so my total was about 3440.... with 4 days pro-rated.
I've never charged last month rent up front, but I have learned to never ever let the tenant talk me into using their deposit to cover last month....Very bad idea because they then have no incentive to leave the place nice.... and things are already tight for them at that point.
Investor · Phoenix, AZ · Member since 2016 · 3 posts · 0 votes
9y
There is really no wrong answer here. We do Multi Family exclusively, and our procedure is to go back to the value of the property divided by the number of units divided by 24 months. Take that figure divide it by 12 and that is what we charge per month. Example: 300,000.00÷9=
You should always be collecting what ever amount is legal in your state. First obviously, last is allowed otherwise you will end up not being paid for the last month. If they do not pay their last month there is very little you can do to get them to pay, eviction is useless as they are already leaving. Deposit defiantly otherwise you can not cover damage to the unit. Ideally you inspect every 2-3 month and charge them for repairs as the lease continues without using the security deposit till the end.
What ever you collect make sure you have it all in cash before you hand over a key. A check is worthless prior to giving a tenant the key.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
9y
I require first month rent + security deposit. I only accept cash for this first payment. Green stuff, not money orders or cashier's check. After that I try to get them to do deposits into my bank, but will accept any form of payment. (personal check, cash, money order, bank check, etc)
First and last months rent is not common around here.
Urbana, IL · Member since 2012 · 1k+ posts · 425 votes
9y
In my area all you can demand is the equivalent to 1 months payment. You can get a bit more when you add on a pet deposit but for the most part all I can get is the deposit equivalent to 1 months or rent. Because its lower than what some of the posters have mentioned we collect all the money when the lease is signed. I never assume a unit is filled until that moment when we've signed a lease and the money has exchanged hands. I would totally hold back on signing anything until the money owed is paid.
Investor · Springfield, MO · Member since 2016 · 39 posts · 11 votes
9y
I do not require last month's rent in my working class neighborhood, but I do require proof that the utilities are in the tenant's name before the keys are issued. Also, if they wish to move in before the first, I may give them 1 day free (last day of the month) for moving but if they need to move in for more than a day then rent is prorated and proof of utilities is required from date they open the door.
I will continue to take applications until I have all money in hand and will never hold a unit without money.
Investor · Grand Rapids, MI · Member since 2016 · 4 posts · 2 votes
9y
Shaun, lot of good information but there's one additional financial aspect to think about. If they are responsible for utilities, BEFORE you give them the keys make sure that you have all the documents showing that they have transferred all of the utilities in their name if utilities àre currently in your name you could get stuck with big utility bills