Deposit or move-in fee?

Question

Hello BP! For all the landlords out there, do you guys require a deposit or just charge a move in fee? And what amount do you charge? Thanks! Victor

Christopher Malone · Answer

I am not sure how Niles would like for security deposits to be handled you with have to check your Landlord Tenant ordinance. In Chicago you mustProvide a copy of the receipt with the amount, name of the person who received it, and have it signed by the tenant. Disclose where the deposit is being held on the lease.Place the deposit in a federally insured, interest bearing account in Illinois. (Deposit must be a separate check)Pay annual interest.Return the deposit within 45 days minus any repairs (must be detailed) that are not from wear and tear. I may have missed some steps as there are specific rules that must be followed. If you make a mistake you can be held liable for 3x the security deposit plus the tenants attorney fees.

Christopher Malone · Answer

@Victor So I have to agree with @John Warren. Taking a security deposit in Chicago can be devastating if the deposit is handled incorrectly. I personally only take move-in fees that are no more than half of one months' rent. If the move-in fee is higher than half of one months' rent, it can be considered a security deposit and you can be held liable for the rules of handling a security deposit.Good Luck!

Weston Harding · Answer

Hey BPers! Most my clients and including myself, own properties mainly in the Chicago and Cook County area. With that being said our team always encourages owners to take a move in fee instead of a security deposit for multiple reasons and #1 being the risk that is included with the collecting, holding and maintaining of a security deposit. If a client prefers to collect a security deposit, I then encourage them to consult a licensed attorney to make sure they cover every detail to limit all possible risks. A benefit of collecting a move in fee is you can keep the funds to turn over the unit when the tenant leaves but if you try to take funds from a security deposit there are certain restrictions within that and show proof of damage/repairs. Whatever you decide to do, you must always collect the same amount for all your properties. I typically see anywhere from $250-$500/ person or per unit, or a 1-month security deposit. Best of Luck on your rentals!

Account Closed · Answer

@Jon Mulholland, I'll respond as follows, and please don't construe this as legal advise, as I can't provide that based on the limited information I have: 1. Assuming this is in Chicago, you can look this information up. I don't deal with Chicago Security Deposits enough to be familiar with this, but here's a link to some good information as to whether or not your exempt: https://www.cityofchicago.org/content/dam/city/depts/dcd/general/housing/RTLOEnglish.pdf2. I don't think so, I recently got a $1,000 Move in Fee on a $1600 rent, however, my property was newly rehabbed. 3. Biggerpockets offers them to you free as a pro member, in case you are. Also, heres a BP podcast on this topic I listed to recently which was helpful: BiggerPockets Podcast 275: Buying 300 Homes While Working a Full-Time Job with Attorney Rob Oliver

Thomas S. · Answer

You should take the time now to study ALL your state landlord tenant regulations. It is your responsibility to know and understand ALL your regulations before you start your business. Take the time to read through your state codes and them come back to get clarification from Chicago specific investors.

John Warren · Answer

@Victor So it all depends where the property is located. If you own within the city limits, I would say do a move in fee. If you own in a suburb, you can safely do a security deposit. All of my properties are in the near southwest suburbs of Berwyn and Lyons. I am minutes from Chicago city limits, but I am not subject to the land lord tenant ordinance like a Chicago owner! If you handle security deposits incorrectly in Chicago the consequences can be terrible.

Brie Schmidt · Answer

@John Warren and @Victor So - if the total fees charged are more than 1/2 month's rent the city treats it as a SD and you must follow SD rules.So if you charge a $750 move in fee on a $1400 / mo apartment in court it will be considered as a SD even if you call it a move in fee.Move out fees are not a thing.

Ann Folan · Answer

We have rentals in Chicago and do a move-in fee instead of a security deposit as well. We charge under 1/2 the monthly rent and we have gotten no push back from renters so far. As @Weston Harding mentioned above, gives you the funds for turn over cleaning and minor repairs and a lot less paperwork and risk for Chicago landlords!

Manvel A. · Answer

We charge a move in fee, we make sure it is slightly less than half if the rent so it cannot be considered as an SD.

Jon Mulholland · Answer

Hi all, three questions to follow up on this:I live in 3 unit and rent the other two. I will be moving out soon and renting the third. My understanding is that this will now put me on the Chicago Landlord Tenant Ordinance.1. If I have an existing lease with a security deposit when I move out, do I need to change and make sure all the security deposit rules are in place? Since I have lived in and only owned this building, my attorney told me I didn't have to follow the city ordinance, just state rules, but this will change when I move. 2. For new tenants going forward after I move out, if the rent is $1700, would asking $800 for a move in fee be too high? I want to get close to half one months rent, but also dont want to scare off renters.3. Does anyone have any move-in fee forms they can share?Thanks!