So my prospective tenant can't afford the security deposit??

Question

Hey guys it's been a while... I'm renting out an apartment. I listed it on craigslist and got "the usual". Some good applicants, some bad applicants. Some dreamers with no income, unable to verify income, past evictions etc Like I said, pretty much "the usual".

Long story short, out of all the people, I picked out a tenant. Good credit (~730 range). Income is double the rent amount. The other person on the lease is also employed, and the third person on the lease is also employed. Financials look good overall. I call him, offer him the apartment, he's happy, I'm happy and we talk about signing the lease. So far so good, right? Everything is going smooth. We talk a few hours later after he consults with his significant other and BAM, now the prospective tenant asks me IF he can pay the deposit on lease signing, and pay me the first months rent on the day of the move in (2 week window between the two dates). Red flag! At least to me. His reasoning for the question is that he's renting another place that he's paying for and I assume that he doesn't have enough to cover the deposit and the first month, as he didn't receive the deposit from the other place back yet. I tell him I will get back to him, and here I am asking you for your opinion. What would you do?

My reasoning? Red flag. I'm ready to back out and go to my next pick. The rent is $1,600 a month. The deposit is $1,600 a month. $3,200 total to move in. I feel like I'm being tested here. If i budge now, a few months down the road I'm gonna be asked to accept partial rent, then its gonna be late, then he won't pay, after that I'm gonna be going through a costly eviction. What if the tenant loses his job? He won't have the money to pay. I expect people to have a little savings and be ready to job loss. Emergency fund, you know? Oh, and he asked me if he's approved already. I told him he is... but I'll get back to him. No paperwork has been signed yet.

So from your experience, what would you do? Am I going crazy here over nothing, or what?

Thank you in advance!

Thomas S. · Answer

No problem with the situation except you are renting to 3 people and you need to do a full screening on each tenant over the age of 18. Chances are one or two will leave mid lease so I would defiantly only offer this group a M2M lease to insure you remain in control of the property.

Remember you do not ever turn over the key until you have all the cash in hand, Cash or money order otherwise no key on the 1st of the month.

Don Petrasek · Answer

With the majority of my new tenants I get the security deposit as soon as they accept my offer to rent them the house and refer to it as a holding deposit.  They then have until a certain date to pay 1st months rent or I keep the holding deposit as compensation for taking the house off the market. If they come up with rent, it turns into the security deposit (and they get the keys)  havent kept a deposit yet.  And I do give people the option of waiting until they have both deposit & 1st month rent to get keys - but then they are taking the chance that I'll rent it to someone else who comes up with cash faster.  That's what you might do with your prospects-tell them you're happy to rent them the property but it stays available until you have all $ from someone.  I've done this a few times too and it's amazing at how quickly things change & they can suddenly come up with the cash.

Michael Boyer · Answer

Along with all the other criteria you use, there is probably no better screening criteria than having the actual rent and deposit.

Money talks. Not having enough could signal financial management issues (though many tenants today are financially fragile).

Three working adults unable to come up with the move-in cash is even more of a red flag (as you note: will they be able to make the rent in other tight months or do they have other priorities).

They may not even get all their deposit back or get it when they wish (delaying you further).

I would explain your position and set a time for the lease signing and to receive rent and first month's deposit (cashier's check for the keys),  and explain if they cannot make it, you will have to go to your next ready, willing and able to pay applicant.

You will have fulfilled your word in offering the place. Of course, you can always call him back if it is still open when he has the funds for place in a couple of weeks.

If they come up with the cash on time, good. Then you have solid tenants (agree with screening all occupants, too) that meet your criteria and who know you are not push over. If not, you just saved yourself a lot of headache from late rent or missing rent in the future.

Best of luck.

Jon Q. · Answer

Your answer is obvious. If they can't afford the deposit, then they don't meet your qualifications.

As others have mentioned, you should collect a deposit and first months rent and certified funds prior to giving anyone the keys to the property.

Ryan Murdock · Answer

@Jeff B. Sorry for any confusion. Yes, I definitely collect all money BEFORE signing a lease. For us that is usually at the time of move in - we do very few advanced lease signings.

We take the inital deposit prior to fully processing an application. Once approved, we schedule a time to meet with the tenant to collect any remaining balance, sign the lease, and hand over the keys - that is usually on the day they intend to move in. I understand the process varies with each outfit but that's what works best for us.

Jeff B. · Answer

Hmm; I get first + security when signing the lease - - EVERY TIME.

IMO, if the prospect can't afford to pay  the security upfront, then YOU can't afford this prospect.

Any good tenant KNOWS that security will be necessary at move-in.

James Green · Answer

Just to add, since you are renting to 3 single adults (...unless you are married, I consider you single. I don't know what significant other means...) make sure you have some type of clause that total rent is due no matter who is or isn't living there. Let's say the friend moves out mid lease, you still want your $1600, not $1066.67 (2/3 rent).

Deanna McCormick · Answer

Normal is to expect deposit in full at time of approval within 24 to 28 hours by money order or cashiers check..and he signs the lease at that time..

Rent is Due on the 1st.. Move in Date,, he doesn't owe you more money until then, That date you also give him the keys,, Unless you have it in your lease agreement as first , last , and security deposit..

But be careful some State landlord laws prohibit this kind of security deposit..So know what your laws permit..

Ryan Murdock · Answer

I can count on one hand the number of times a tenant has paid me sec dep and rent 2 weeks in advance. That's out of thousands of units leased. Usually a deposit to hold the place etc while we process their info and the rent due at the time they receive the keys which is generally the move-in date.

So my prospective tenant can't afford the security deposit??

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