No security deposit; higher rent

[Angelo R.]

If I wanted to increase cash flow and was willing to tolerate more risk, would it be wise to forego the security deposit and instead ask for higher rent?

Let’s say the market rate is $5,000 for my property and the security deposit is $5,000. Not many tenants could come up with $10,000 at move-in. What if I offered $0 security deposit and, say, $5,300 rent to compensate me for the additional risk? 

If a tenant would go for that, would that be too risky for a landlord?

[Nathan Schiess]

@Angelo R. We recently took over a property that was run by a management company that didn't charge security deposits. I have learned some valuable lessons dealing with the repercussions of their actions. 

I would say that @Dustin Beam is exactly right. We have had more issues with the tenants that never had to pay a deposit than we have ever had with tenants that did pay a security deposit. Not only does coming up with the money for a security deposit show some level of responsibility, it also gives the tenant some skin in the game. It makes them far less likely to cause damages because they want to get back their security deposit.