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Tenant only has half the deposit amount
I just closed on my first rental this past Wednesday. The rental is an out of state property located in Kansas City, MO.
I have property management and they have a prospective tenant. The problem is that the tenant does not have the full deposit amount of $600. They only have half and they want to pay the other half later.
In my mind that seemed like a red flag so I told the property manager to hold off and keep showing the house unless the prospective tenant has the full deposit amount plus first months rent.
Did I do the right thing?
Do not let them in without full payment upfront. Soon there will be more renters looking to move, so you should not be desperate and take somebody that short on the move in money.
That's exactly what I recommend. I would go a step farther and really evaluate if you want a property management company that is advocating for you to take less security deposit. Your security deposit is the only thing that protects you and gives the tenant skin in the game.
Congrats on your first house!
I think you made the smart choice...if the tenant has a problem coming up with the entire deposit, most likely they will have a problem coming up with your rent every month.
Best of luck!
Ray
Like others have said, that's the best step. If the renter doesn't have the deposit then that means, more than likely, they do not have much reserves. If they lose their job, you could be facing a lengthy eviction process. Save yourself the headache and time and find the right tenant.
That is what I was thinking. I don't want to set up a negative precedent by letting something like that go. I told the property manager to hold off and keep showing the house.
I'm not desperate to get a tenant. I'd rather wait a while if necessary so I can get a good tenant who will pay on time instead of renting to a marginal tenant that I'll have to evict later.
Congrats @Jonathan M. and welcome to KC. Ditto to the other comments. I have accepted half a deposit to "take a property off the market", but under no circumstances should you accept a tenant and let them move in without full deposit plus a full first months' rent. Period. This is very standard practice.
Jonathan,
At the $600/month price point it's very common for tenants to not have the full $600 security deposit. There is no right or wrong on this, but if this is a requirement to lease your place you might have the unit sit longer. I choose to take the tenant because I realize most of these tenants are living paycheck to paycheck. I make sure they are making enough income (we require 3 times the monthly rent in gross pay) to cover the monthly rent. I also, make sure a deal is in place to get the security deposit by the start of the second month so we will accept half of the security deposit up front and the other half the following month.
NO!
I am sitting here putting myself in your position. When someone can only come up with half of the $600 deposit right off the bat, for me personally that would defiantly put up red flags in my opinion.
Just a note. I just bought a property where the leases are almost up. In the original leases, the previous mangement company accpeted less than full deposit. When I bought the property almost a year later, they were still having to finish collecting the deposit, and on top of that they allowed one of the tenants to pay late (like 15 days) regularly and had even verbally agred to allow pets in on unit, in violation of lease (needed to be in writing). I made him correct all of this before I went to close. I didn't care what deals he made, he had to have the full rents and deposits paid to me. So, No, don't do it. I can see the troubles that mindset brings in the longrun. Be firm and trust a good tenant will come by. The fact that they are asking you to accept less means they rushed from somewhere else or are pending eviction and in either case tha means poor planning/money management on their part and you don't need that headache.
Just to clarify, they want to pay half the deposit now and the second half right before move in date along with the first month rent.
Still that set off a red flag in my mind. If they have trouble coming with that amount of money, how do I know they won't have trouble paying the rent on time?
Thanks everyone for your responses.
I'd write it up that if they can't come up with the rest then you get to keep the deposit. That's part of what a deposit is for.
@Jonathan M. 4 Words my man: SKIN IN THE GAME!
In my opinion skin in the game is key because you've got to give your tenants an incentive to be good and take care of your property. I also feel like EMD keeps only serious buyers around and the last thing you want to deal with in your rental property business is a tenant that's not serious.
The fact that your PM would even consider a tenant with half of a security deposit tells me that they may just be looking for a quick buck and fees. Stay vigilant! LOL. Something tells me that if they can't save over time for a security deposit then they will struggle to pay for the rent.
Tenant Selection is key! You've got to protect your bottom line and your property and that was a darn good move saying no to the tenant. Their talk of "paying before move in day" is cheap to me.
Good luck Jonathan!~ John
Full deposit and one full months rent in cash or money order to move in. Money and keys change hands at lease signing.
If I hold a unit, which I will only do for a week or 10 days, full deposit to hold. That's non-refundable.
If they don't have the security deposit now then odds are at some point in the next few months there will be a time when they don't have all the rent. I toss these apps in the trash.
@Jonathan M. based on what you just said, I would take them. At move-in they will have full deposit and first month's rent. I'm good with that since they are giving you funds that would offset your losses if they back out last minute or don't have all the funds at last minute. I don't think it's that bad of a deal. Most people are living pay check to pay check. Think of it this way, they are not likely to move again since it seems so hard to save up for a deposit.
I would say, take a minute now and write down your rental criteria. Absolutely don't change that for an applicant that doesn't quite meet the standard. If you decide to change, then make the change and re-advertise.
If you make a change for an applicant you are self selecting an applicant that skates on the thin edge of following the rules. "I don't quite meet what's needed but I'll expect them to bend the rules for me as I'm such a great catch." You want the tenant that passed up your ad the first time because they didn't have the full deposit, not the one that reads it and says "that doesn't apply to me". Just some food for thought.
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Real Estate Agent Colorado (#IR044146)
- Reliant Real Estate, Inc.
Every time I have done this it has ended badly. on the other hand, In my experience, Crime is a factor in these areas and you need to weigh dealing with late and missed rent payments vs. vacancy and risking loss of copper wire and plumbing. Every property I have purchased required plumbing and wire replaced and was sold by a landlord who just gave up.
Red flag, red flag! That exact thing has bit me way more than once. I hate saying that, because my best friend is looking for a new place right now and doesn't have the full deposit and I do know that he obsessively pays on time and in full every month and has never been delinquent, but I think he is in the minority of those who don't have the full deposit. At least in his case though the deposit is like $1500. If someone can't cover $600, that is a red flag.
As long as they are paying the full deposit and first month rent before you give them the keys they have met your criteria. If I liked the other aspects of their application I would be fine with this. In fact, I don't usually get the full amount due until the lease signing which is when I give the tenant the keys.
If you are not collecting funds until the time you are distributing keys give consideration to the form of those funds. Do not accept personal checks and be leery of money orders (they are quite easy to fake). When I do my own lease ups I usually insist on cash (much harder to fake). I do allow USPS money orders as an alternative but have never had anyone use that form of payment.
congrats
I agree with everyone else -----> full deposit
You absolutely did do the right thing. Congratulations on making a good decision on your first rental. Too often people get anxious to get a tenant and start bending their own rules. The number one thing is to establish your rules and policies and don't deviate from them. Once you start becoming "flexible" is when you start having problems. Especially when tenants see that. That's when they start getting "flexible" too, like when they pay their rent. Stick to your guns!
Mike
