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Posts: 2
Reply with quote  #1 
I have one rental house and I'm having to do quite a bit of work due to my last tenant. What I'm wondering about is this; what is the better policy? Do you charge first, last and a security deposit or first + a security equal to the monthly rent? I definitely will have a no pet policy from now on. Any recommendations would be welcome. Right now the deposit doesn't come close to covering our damage.
Michael D. Jacobs

Posts: 125
Reply with quote  #2 
It's best to have the security deposit equal to a months rent for several reasons, 

- It covers you for if they end up not paying you for their last month.

- It better buffer's you for instances like what you've just experienced.

- Any prospective tenant that can't afford to pay it is not someone you want to rent to anyway.  It shows that they don't keep extra cash on hand for emergencies.  It also goes without saying that you should never let a perspective haggle with you on the amount - when asked this by a prospective, I often joke with: "No I won't lower it, but you're welcome to pay me more "

-Tenant's that have paid a full month's worth of rent for the security deposit are much more inclined to want to get that money back and will treat your property with a lot more care than they would otherwise.

-and ALWAYS, ALWAYS, ALWAYS collect it along with the first months rent in cash, cashiers check, or money order.  Personal checks can be canceled and you could be burned if you don't follow this crucial step.

Some other tips to help you avoid having to go through your recent experience again are:

-Check credit.  Their score should be at least 600 (this comes from experience).  I'm seriously not kidding when I say that every single problem tenant I've rented to in the past had a score less then 600 (even 599), and my best tenants had scores that were 600 and up - go figure.

-Check income quantities, a solid rule of thumb if you want to avoid problems with them being able to pay the rent each month is that they should gross at least 3x whatever you're asking for rent.

-If you can, have a look inside of their car.  This is your quick, golden opportunity to see how they treat something that is theirs.  If they trash that (something that's theirs), then just think of what they will do to your property! (something that's not theirs).

Posts: 2
Reply with quote  #3 
Thank you for your insights. We actually require a 660 credit score but we didn't follow our own rule on this tenant. I never thought to look in their car. That is a great rule that I will incorporate into our interviews with perspective tenants from now on.
Michael D. Jacobs

Posts: 3,817
Reply with quote  #4 
One last item - you have to watch collecting fiirst, last, and deposit in states that limit deposits.  Some courts have ruled that collecting the last month's rent is the same as an additional deposit.  A deposit is to ensure performance under a lease and pre-paying the last month's rent is to ensure they pay for that month of rent (a requirement in your lease to be performed).  That money isn't for current rent, but you will hold (deposit) it until it is due.  Check your state law before you collect a last month of rent ro be sure it is permitted and does not violate your state's deposit laws.
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