Tenant wants security deposit refund in cash

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Tenant wants security deposit refund in cash

Margaret Payne
Chicago, IL · Member since 2020 · 4 posts · 4 votes

I purchased my first house hack that was fully occupied at the beginning of April and provided a notice to vacate to one of the tenants to move out by May 31st.

He has let me know he found a place and would be out sooner, by this weekend. I’m happy he has found a place and the sooner move out date helps me as well get started on rehab and moving in.

The problem is he states he doesn’t have a bank account or a valid ID (due to COVID) and wanted me to bring cash. I said I could not do that and He agreed to accept a money order. I’m doing some googling and I’m not positive he’s going to be able to cash that any easier than a check.

Should I bring him cash? I made it clear I was not bringing cash because I didn’t feel safe creating that situation where he knows I’m showing up with cash, but I also want to make sure he can get his money to move on to his next place.

Does anyone have a good solution to this or a recommendation?

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Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
5y

Whoa...you're running a business - not a teller service. Whether the tenant has trouble cashing a check or not is none of your business.  Respect him enough to stay out of his personal business and let him solve his own problems.  You need to pay with a check to have a record of the payment; pay in cash - even with him signing a receipt - and that can be challenged all day long as it is not a standard operating practice in real estate.

Again, you're running a business and operating like one protects your investment, maximizes your return, and keeps crazy from getting crazier.

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  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    5y
    So, the real issue is that you aren't sure you will be giving him his entire deposit because if you were you wouldn't be worried about someone robbing you for money you intended to give them anyways.

    I personally would not be concerned about this, but for those who are they could do this in 2 steps. One visit to examine the property for damage and then go get cash for whatever refund they are entitled to.

    I would make them sign a receipt for the money so that it is clear that they received it.
    0Reply
  • Margaret Payne
    OP
    Chicago, IL · Member since 2020 · 4 posts · 4 votes
    5y

    @Kevin Sobilo

    Thanks for the reply.

    I don’t have any intention of keeping any of the deposit as he’s been there a long time and I have no way to verify the move in condition. I was thinking of it more from a safety issue but you make a pretty valid point that there’s no motivation to rob someone for money they are planning to give you.

    Sounds like I may be overthinking it

    3Reply
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    5y

    @Margaret Payne, you could also have someone go with you. That might make you feel more comfortable as well. 

    1Reply
  • Patricia Steiner
    Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
    5y

    Whoa...you're running a business - not a teller service. Whether the tenant has trouble cashing a check or not is none of your business.  Respect him enough to stay out of his personal business and let him solve his own problems.  You need to pay with a check to have a record of the payment; pay in cash - even with him signing a receipt - and that can be challenged all day long as it is not a standard operating practice in real estate.

    Again, you're running a business and operating like one protects your investment, maximizes your return, and keeps crazy from getting crazier.

    5Reply
  • Janell E.
    Rental Property Investor · Saginaw, MI · Member since 2019 · 34 posts · 25 votes
    4y

    @Patricia Steiner I needed to read this. Thank you!

    2Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    Use the basic “bad guy method”. I’m sorry, my accountant says I have to write a check for tax purposes and proof of payment. You can take that check to a check cashing location or likely my bank will cash it for a few dollars. Take it to Vegas, the casinos will cash it for free. 

    2Reply
  • Marina Wong
    Investor · greater Boston and greater Tampa areas · Member since 2013 · 100 posts · 25 votes
    4y

    I am in exactly the same situation and I do feel bad that my tenant needs to pay the bank to get the money. Moreover, she was recently robbed and I am not even sure she has any ID remaining. But I like the bad guy method. Actually I tell my kids all the time to use me against any peer pressure: If my mom finds out she would kill me. So yeah bad guys method should be used often.

    0Reply
  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    Give the guy cash if it's a small amount. Sounds like he's not in the best situation. Put yourself in his shoes. A small gesture can go a long way. Some people are heartless lol. 

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y
    Originally posted by @Marina Wong:

    I am in exactly the same situation and I do feel bad that my tenant needs to pay the bank to get the money. Moreover, she was recently robbed and I am not even sure she has any ID remaining. But I like the bad guy method. Actually I tell my kids all the time to use me against any peer pressure: If my mom finds out she would kill me. So yeah bad guys method should be used often.

     I would never give a tenant their deposit back in cash. Not only do you need it for record keeping, you have no proof short of a filmed video that you gave him/her the money. I go a step further and require a mailing address for the deposit refund check, and that is where the check is sent. 

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    1Reply
  • Marina Wong
    Investor · greater Boston and greater Tampa areas · Member since 2013 · 100 posts · 25 votes
    4y

    Just asked someone who might have first hand experience of not having a bank account and he said if you have a friend or family, you can always endorse the check over to them and they can pay you cash. I guess problem solved and I won't feel bad.

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    4y

    He can cash any bank money order at any number of seedy check-cashing places for a fee. You're not his financial advisor, to insist that he have a bank account. At the same time, you don't want to hand anyone cash.

    1Reply
  • Robert Edwards
    Specialist · Butte, MT · Member since 2021 · 27 posts · 17 votes
    4y

    My opinion is no. You want to keep a paper trail, and you can't do that with cash. They should be able to cash whatever check you give them at Walmart, or a place similar.

    0Reply
  • Cathy T.
    seacoast area, NH · Member since 2014 · 43 posts · 12 votes
    4y

    My concern is him saying he has no ID. What? How does that work?

    Another thought...he might not be the one who robs you when you show up with cash...but his buddy might be hiding nearby. His buddy robs you, and you still owe your former tenant his deposit. Nice.

    And yes, that sounds paranoid, but I have heard of similar things happening. People are crazy.

    1Reply
  • Adam Burkett
    Investor · Corpus Christi, TX · Member since 2020 · 11 posts · 3 votes
    4y

    How was he paying for rent? Was he paying you or the previous owner in cash?  Also, usually when rent a home a ID is required for verification on a background check.  I would say there are several red flags here and I would definitely be skeptical.  I always create a paper trail so I can document everything.  Then if the tenant comes back later and says you never gave him a deposit back, you have the documentation to prove it.  I understand wanting to help people out, but you are also running a business.  Good Luck!

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    No cash. Use your head. It's unprofessional and potentially dangerous.....

    Write him a check. It's not your problem that he has no bank account....And what does Covid have to do with no ID or Bank Account? Nothing. This sounds fishy. Write a check. Not a cashiers check, a real check so you have a paper trail.

    0Reply
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