Investor · Jacksonville, FL · Member since 2008 · 70 posts · 37 votes
I am buying a house from another investor where the elderly tenant couple has been there since 1970's. They are NOT going to be leaving. Here's the problem. They have NO security deposit on record at this time. The market rent is probably $900 but their current rent is $750. I was told these tenants are total ANGELS and keeps the property in pristine condition and never gave any hassle--this is why the current landlord has been so gentle with them.
I am buying this property because I want to keep these people in here "forever" and just collect reliable rent. I plan to raise the rent about $50/mo (for now) so that they can "ease" into things, knowing they have limited income.
Question: should I force them to pay a security deposit or how should I handle this as the NEW property manager?
Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
10y
No deposit in this case. When they move out you'll probably be doing a significant rehab, since they've been there since the 70's. They're not going to damage anything that you were going to replace anyway since there isn't anything new.
Let them be. I don't know if I'd even raise the rent.
Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
10y
No deposit in this case. When they move out you'll probably be doing a significant rehab, since they've been there since the 70's. They're not going to damage anything that you were going to replace anyway since there isn't anything new.
Let them be. I don't know if I'd even raise the rent.
Attorney · Attleboro, MA · Member since 2015 · 412 posts · 165 votes
10y
I would just make sure, like a sign statement from them and the Seller that there is NO security or other deposit. You never know what may come up later.
Otherwise I would not ask for one in this particular case
Investor · Jacksonville, FL · Member since 2008 · 70 posts · 37 votes
10y
@Tanya F.
Here's the beautiful thing about this house. It's already been rehabbed due to some fire that occurred 7 years ago. It has newer cabinets, ceramic tile everywhere except bedrooms, 7-yr old roof, updated AC. A VERY nicely kept up house and modernized! Therefore, if they leave and assuming they keep things up like they do now (because they LOVE the house), I should have very minimum work.
Professional · Glendale, CA · Member since 2013 · 105 posts · 47 votes
10y
Wow, my every instinct tells me you should ask for a deposit. You never know when a relative will show up to stay for a few weeks and cause issues. Is income an issue with them? You could always ask them to pay $50 or $100 a month to get at least $500 sec dep. Your excuse for asking for a sec dep could be your attorney advises you to do so or your Insurance company demands that you do it for a lower rate.
You are blessed to inherit such wonderful tenants. I understand your desire to keep and placate them. I have learned not to let emotion affect my decisions. The property could be rented out for a higher rate and there are other great tenants out there who you would get a security deposit from. Do you want to get top dollar for your investment?
From a business perspective, I say ask for a deposit because if you have/plan to purchase other properties...you need to treat all tenants equally. It could be discrimination to ask for a deposit from a tenant at one property and not ask for a depost from a tenant at another property. However, it you're not hurting for income it could be good karma to leave things as they are.
Let us know what you decide and how it worked out for you.
Professional · Glendale, CA · Member since 2013 · 105 posts · 47 votes
10y
Oops, missed the limited income. You are approaching this from a business perspective by slowly raising rent. Why not hold off on the rent raise for six, eight or ten months and let them pay $50 a month to be held as the security deposit. Then raise the rent. That way you get sec dep and eventually a rent raise. In any event, I commend you for caring about their plight.
Why not hold off on the rent raise for six, eight or ten months and let them pay $50 a month to be held as the security deposit. Then raise the rent. That way you get sec dep and eventually a rent raise.
I thought about that but here is my thinking. The security deposit is going to go back to them eventually. I might as well raise the rent now and keep all that money in my pocket. I know there is risk in them damaging stuff. But even if they do, I have to take it "out of their deposit" which, in this case, is out of my own pocket. But since they have been there for 40 years and their house is practically nicer than mine, I figured it's a safe bet they won't destroy it excessively.
Hinsdale, IL · Member since 2014 · 73 posts · 16 votes
10y
You know, I agree with the plan to skip the security deposit. The one risk that does come to mind is that there actual was a deposit originally and that some evidence of that would surface later and cause you to be out of pocket for the repayment. So to prevent this, I think you should get an agreement signed by you, the seller and the tenant laying out that there is no deposit.