You Want it Early?
Not getting security or damage deposits and rent before new tenants move in is one of the most common problems I hear about, and it’s one of the most common pitfalls that new and even experienced landlords run into.
You’ve finally narrowed down your list of prospective tenants to the one that best fits your criteria.
All that’s left now is to get the appropriate security, and damage deposits along with first months (or last month’s depending on where you live and local rules) rent from them to move forward. Now depending on the applicable residential tenancy laws in your area, this can entail first month’s rent and a security deposit or possibly first and last month’s variation. Which ever the case, here is where the problems start.
You meet with the tenant to get the security deposit or first and last month’s rent for the property and they tell you they don’t have it all yet. The most common reasons?
Their previous landlord hasn’t returned their deposit to them yet or perhaps they are just waiting for their next check. Sorry, this is a definite warning sign in my eyes.
When it comes to security deposits, there is more than one security deposit in the world.
It’s not your problem to they don’t have their full deposit back from their previous property. Most importantly if it isn’t in your hands before the tenant moves in, they NEVER EVER should get in your property.
Same with first and last month’s rent where applicable. These payments are absolutely required to be in your possession before they take possession of your property. Failure to do this can be an expensive lesson.
If you’ve never heard this before it needs to be said, LOUDLY! No one should ever get into your property until all the appropriate rent, deposits and payments are made up front and in cash. If you don’t receive the initial payments in cash, you shouldn’t release the keys!
This Tip About Getting Deposits Early Could Save You $1,000
If your local laws allow security or damage deposits, be careful how you write the receipt. Again this can vary from region to region, so you may want to check with the local landlord and tenant representation to confirm if this applies to you.
If the receipt says security deposit and they decide not to rent from you, you typically have to return the entire deposit. If however, you write it out as “deposit against first month’s rent”, it is no longer a security deposit and you have leverage, in this case their cash, if they back out.
There are always extenuating circumstances and ultimately the call is up to you. However, if a tenant commits to you, you turn away other potential renters and are left with a vacant property when they change their mind, you shouldn’t have to cover the entire costs of re-advertising, recontacting potential renters and even paying for new credit checks.
Often, you can keep the entire deposit, or only return a portion to offset your costs, if the laws in your local region allow this and it’s not referred to as a security deposit. So know your local rights!
Understand Local Rules Regarding Getting Deposits Early
Real Estate is a business, it’s ok to be nice, but you have to protect yourself and ensure you don’t get taken advantage of. Hope this saves you some future headaches!