When To Sign Lease & Collect Rent

Question

Hi, my first rental is up for a new tenant(I have only had one since turning it into a rental). I listed the property and found a new tenant that has completed an application, screening, application fee, is qualified and is ready to commit. However, the lease doesn't start for 3 months. My current tenants gave me a large heads up and I was able to find someone within a week of them telling me.

My question: Do I have them sign the lease now and do a security deposit or do I wait until it's closer, week, etc, and do it then? It seems like I should have them do a deposit and sign the lease now, but maybe you legally can't?

Curtis Mears · Answer

@Alex Lelchuk

I get a large deposit, usually 20% of the total upfronts, and a signed note saying deposit is nonrefundable. The lease is signed right before they move in.

Lawrence Briggs · Answer

@Nathan G. great advice! I am closing on a SF 2bd/1ba rental in a few days. The property is vacant and move-in ready. The sellers, who have owned the property for several years as a rental, informed me yesterday that someone is interested in renting the property. The prospective tenant is the mother of the previous tenants. The previous tenants were good and only moved because they outgrew the home (needed a 3 bedroom). I am wondering your thoughts on this. In a way, it's nice to know that I could close on the property and have a tenant in it during the same timeframe, but I also want to test the rental applicant pool and market in general. I can afford both mortgages, so I'm not in a rush to find a tenant. I look forward to hearing your thoughts.

Lawrence Briggs · Answer

Thank you! The home is located in a military town. It is a very desirable location and good property with tons of land! I think you are correct @Nathan G. Because the owners purchased the house in cash 17 years ago, they were able to have the property rented below market and still cash flow. The property was previously rented to the daughter for about $600-ish, close to $650, but the market has rents at about $800. I will have a mortgage on the property. I put down 15%.

Alex L. · Answer

Interesting to wait. Our market is tight with options, single-family houses in this specific neighborhood vs apartments, condos, townhomes, etc. Thanks for the feedback.

Scott M. · Answer

Collect a non-refundable deposit now (I wouldn't, more on that later).  As you get closer the tenant should pay the remaining funds for move-in.  Sign the lease the day of move-in and if any other funds are owed get it in guaranteed form like a wire (before signing) or money order.  Nothing that can bounce.

Normally landlords are doing this in a few days to a few week window, maybe a month out not 3 months out.  I would never ever never sign anything with anyone that far out in advance, sign day of move in.

Be sure you documents say what happens to any funds collected, what is non refundable and what happens to it on day of move in (for example it becomes part of rent or SD).

When To Sign Lease & Collect Rent

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