Is it common to require first and last month's rent for new tenants?

[Pete Schiebel]

Hello, newbie landlord question here: Is it common to require first month's rent, last month's rent, and a security deposit for new tenants? I'm aware that Florida doesn't have hard limits on what is required up front, but I'm curious what others do. I'd consider our building a Class B. I mention that because I realize that requiring that much up front my limit my tenant pool. 

[Theresa Harris]

I agree that it is a lot of money up front, but if the norm for the area is first and last month's rent, remember that the tenants who are moving in won't have paid last month's rent to their current landlord (if they are from the same area).  I guess part of it comes down to how often tenants don't pay last month's rent and say use the deposit (don't do that, bad idea).

[Wesley W.]

I absolutely collected first, last and security for my class-C rentals until NYS prohibited that practice back in 2019.

Many tenants cannot manage their money properly, so this mitigates the issue of not being paid last month's rent when they need to move and the new landlord is receiving those funds they have allocated for their housing during the last month of their stay.

This was also helpful to me to pre-screen who has their financial house in order and had saved for their moving costs as part of their planning.

If I still could, I most definitely would - without exception.

[Nathan Gesner]

There is no "standard" practice. Some will collect first, last, and a deposit equal to a month of rent. Others will collect first, last, and a smaller deposit. Some will collect first and a deposit equal to two months of rent.

I personally recommend first and a double deposit. The tenant is less likely to trash a place or violate the lease if you hold a large chunk of money. If they skip out on their last month of rent, you have plenty of deposit to cover it. 

[Pete Schiebel]

Thanks for the advice all. @Theresa Harris, that's a good point that tenants might not have had to pay their previous landlord for last months' rent. I hadn't considered that.

@Nathan Gesner what is the benefit of the double deposit rather than collecting last month's rent + a single deposit? Let's use $1000 as the monthly rent amount and the deposit amount. Whether I collect First/Last/Deposit or First/Deposit (x2), the tenant is putting $3000 into it to start, with $2000 to keep them in line. 

[Nathan Gesner]

Quote from @Pete Schiebel:

It's the same dollar amount for the tenant, but it's more leverage for the landlord. The last month's rent will be spent, then you have $1,000 on reserve to ensure they return the property in good condition. With a double deposit, you have $2,000 on reserve and they are more likely to want that money back.

[Pete Schiebel]

> With a double deposit, you have $2,000 on reserve and they are more likely to want that money back

Thanks @Nathan Gesner, that makes more sense to me.

[Alan Asriants]

That's a pretty common practice in my area. 

If your local law allows it, see what everyone else is doing and go by the norm. 

3 months rent is a substantial amount for some, but really helps ensure the financial quality of a tenant.

Sometimes I have immigrants who apply who work their tails off and can't afford the 3 months up front. Case by case I'll set up a payment plan. Maybe I do 2 months, and then have the 3rd month broken up over a period of time. 

[Jake Knight]

It may depend on your market. Ideally, you don't want it to be too financially difficult to find a renter. That said, we require 1-2 months of rent in our market (Indy) and it's based on their qualifications.

[Jake Knight]

Quote from @Jake Knight:

It may depend on your market. Ideally, you don't want it to be too financially difficult to find a renter. That said, we require 1-2 months of rent in our market (Indy) and it's based on their qualifications.

 Forgot to mention that we do lose renters sometimes due to this.  We're comfortable with that though as we want assurances that their financials are healthy.