Renting with no security deposit or dividing the security deposit into rent

[Alex Place]

I own a few rental properties and had a question that I wanted to run by you all. My wife and I own a small real estate investment company and while our goal is to make a living off this company, we don't want to do it on the backs of our tenants. We despise slum lords and land lords who are jacking up rent just because the market claims we can. If my mortgage is $1,000, we're not charging the market rent of $2,200. We might charge, $1,500 or $1,750. Our hopes are to help people who are less fortunate than us, raise the total wealth of the community, and attract interest ensuring the properties are rented out full time.

My question to you all is, are security deposits worth it if you have vetted the tenants properly? We all know that a large barrier getting renters in is the ridiculous practice of first months, last months, and security deposit upfront. We are highly considering eliminating our security deposits knowing that we are taking on a risk.

Thoughts?

[Nathan Gesner]

Quote from @Alex Place:

Yes, security deposits are worth it. That's the only leverage you have that they will honor the terms of the agreement and leave the property in decent condition. Even if they start off well, life happens and good tenants can turn bad.

Your philosophy on Landlord greed is naive. You know what happens when you rent a $2,000 property for $1,500? You get lower-qualified renters that treat your property like a $1,500 rental instead of a $2,000 rental. I work for nearly 150 different owners and a good percentage of them came to me after losing tens of thousands, sometimes hundreds of thousands, despite renting well below market. Like you, they didn't want to be seen as greedy Landlords and they thought the tenants would be grateful for the lower rent. I would love to travel into the future to see how long it takes you to change your mind.