First Last and Security?

Question

I'm considering going from First & SD to First, Last & SD after speaking with a fellow buy hold investor. He said he has had no trouble and people generally do what it takes to get the rental. In my market it is pretty uncommon, and I just tried out the strategy and it did not pan out. The tenant could not afford the rate, and they went with someone else's unit. I had ours priced agressively, and the tenant wasn't my top pick, so I'm not upset at all.

Just curious what yall' do in your markets? I know First, Last and SD will reduce risk pretty drastically.

What do you think?

Just curious what yall' do in your markets?  I know First, Last and SD will reduce risk pretty drastically.

What do you think?

Chris Adams · Answer

I get 1st last and 1 month sec dep.

I do not bend this rule. If they can't afford the 3 months I have on occasions allowed them to make the sec dep in a few payments.

I will also get additional sec dep when credit looks marginal, or there are pets.

Pam R. · Answer

In my markets, I get first and security deposit. I'm with Colleen - I don't know if I could get it rented if I asked for last month's rent too. It's just too much money. But I also have never felt the need to do that, as I've never had a tenant not pay their last month's rent. Knock on wood.

Shawn M. · Answer

Double check with a real estate attorney or broker that you can legally accept first, last, and security. Some jurisdictions prohibit landlords from holding more than the equivalent of month's rent for security deposit.

John Rooster · Answer

I have never even tried, I am sure it would be a hard sell in my market. I am guessing in my market asking for first, last and security would eliminate 70% of prospective tenants. I am further guessing that first, last, security is only common in markets with long eviction timelines.

Dustan Marshall · Answer

if your market will support it, I think it is a great idea.  My market will not. But I can certainly see how it is another level of security for you

Pam R. · Answer

@Sam Leon - I never thought about it that way. That's a pretty good strategy. That makes me think about it differently.

I've never had anyone "walk out" on me yet, but I've had 2 people break the lease. Both had been there for over 2 years. The first people were looking for a house, and I just told them they could move anytime between April and July without a lease violation. That's what they did. The 2nd people got a cat, violating the terms of the lease. We amicably "broke up" - I gave them 45 days to find a home where cats were welcome.

Both left their places spotless and received their full security deposit back.

I would likely not be so reasonable if they broke the lease in November, and would be wishing I had the two months rent like you do.

@Mark Updegraff - you said you lost the first potential tenant because of the cost. Are you going to try it with your next candidate?

Sam Leon · Answer

Pam, for me it is not about getting the tenant to not pay their last month's rent.

It is more a requirement to align with the early termination addendum.   In my addendum it says if you break the lease early the penalty is 2  month's rent.

If all you have is security deposit and a tenant breaks a lease at  month #4 on a 1 year lease, and takes off, your only recourse is  security deposit minus damages.

But in my case I have last month + security deposit which is two  month's and if damages is minimal, then I will be keeping those.  So  it's kind of a deterrent against lease breaks.

But yes you have to be in a neighborhood that sees this as a norm and not so much an exception.

Sam Leon · Answer

You have to do what your local market dictates.

I generally do first, last and security.  But my rentals so far are in areas that make this possible.  If I cross a few blocks, then the neighborhood turns into "$99 MOVES YOU IN TODAY!" and I would have no hope of getting it rented in those areas.

Look at your competitors and see.

I have a 3/2 SFR renting for $1800 thirty feet from the New River.  Blackstone (Invitation Homes) has an identical home size wise further in-land asking $2400, with security only, and the for rent sign has been out for four months.  They don't seem to be in a hurry.  I am waiting to see if anyone pays $2400.

Chris K. · Answer

I do first, and security then break up the last over the first 4 months

Kyle J. · Answer

I think it would be nice to be able to get that, but whether or not it will work depends on your market and clientele. It will likely be tough for applicants in lower end markets to come up with that much money upfront.

I think it would only work in areas where it's highly competitive and you have lots of applicants competing for few houses, and/or that's what all the rentals require in your area (therefore the applicants expect it).

Otherwise, most applicants will just move on to the next house like in your experience.

First Last and Security?

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