All Forum Posts by: Robert Shedden

Thank you everyone for your input. Some great points were brought up and I appreciate the civil discourse! Glad to see the haters on FaceBook don’t have BP accounts; I posted this in a RE forum there as well.

Just to follow up, we were contacted by a temporary housing firm AND a qualified tenant this afternoon and should get this unit leased tomorrow… after getting a CASHIERS CHECK of course! ;)

I am happy to report that we will return the full security deposit to the potential tenant who didn’t sign the lease. Ironically, he mentioned he was interested in real estate and had a BP account. Hopefully this thread can educate tenants and landlords alike.

Thanks again!

1 Vote

Originally posted by @Karissa Sampson:

@Robert Shedden Just to dig a little deeper on your post..

In the eyes of the law, I'm not sure that this guy is even considered to be your Tenant and you his Landlord at this point, as that relationship has not really been established other than verbal words exchanged. Just a thought. Sounds like you're planning to give the money back which I commend you for.

Getting someone under contract on a lease and security deposit in hand....its not over until its over.

He communicated with use over several days via text message so we do have evidence of a "verbal contract," but I could see the Landlord Tenant laws superseding that in this situation. Never that an opportunity to learn and grow pass you by!

Rob

1 Vote

Originally posted by @Joe Splitrock:

@Robert Shedden in the future, tell the tenant you will not hold a property for them until you receive two things:

1. Signed deposit to hold agreement. This agreement states that the deposit is non refundable if they fail to sign a lease.

2. Security deposit is collected as "deposit to hold". It only transfers to security deposit when the lease is signed. At the time of lease signing, first months rent is collected.

I give people 24 hours to sign the agreement and pay the deposit, then move on to the next applicant.

You took money with a verbal agreement. It is really questionable what that agreement was regarding return of deposit, should he fail to sign a lease. I don't think you have legal grounds to keep any of it.

Are you using your Cash App as a business or personal? There is risk here if he disputes charges and you are not properly using your Cash App that they could find you in violation of terms of service. Square charges transaction fees for business and sends 1099.

One other caution is be careful of scams. When someone asks for money back quickly after giving it to you, there is risk they may try to take the refund and cancel the original payment. I think there is a way to refund the original payment through the app. That is preferred over issuing them a new payment back.

It is often best just to give money back, to avoid any sort of ongoing battle or legal issues. Minus a written agreement that allows you to keep the money, it is unlikely you would win in court. Even if you did win, it would cost you more time and money than it is worth.

Thanks you for your thoughtful response! It is complicated either way because he did not sign the lease. But we will tweak out process for future potential tenants to be sure. This potential tenant was really excited to get into our fully renovated unit. We have held units in the past while waiting on security deposits. We allowed him to use CashApp because he was out of town working as an over the road trucker. I will chalk it up to "being too nice." If we would have required a cashiers check (as we typically do), maybe he would have realized he wasn't ready to sign the lease BEFORE handing over the check. But you bring up a great point about using CashApp for business vs. personal; the larger our portfolio grows, the more we have to lose. We will no longer allow CashApp payments. And I don't think this guy is a scammer because his criminal background check, credit report , and references all checked out. If he is a scammer, he's really good and should have tried for a lot bigger payout! Or he's really bad! We will wait until the funds completely clear before returning anything.

Rob

0 Votes

Originally posted by @Jon Kelly:

@Robert Shedden This isn't a get rich quick scheme. If you're in it for the long-term, do the right thing and return the security deposit. The potential tenant changed their mind within 24 hours. Yes, you pulled the listing but you're in no worse a position than you were yesterday. Re-list it and make the adjustments to your listing.

I typically add something like, "a non-refundable $300 deposit is required to hold the listing." If/when a tenant pays $300 then I will remove the listing. In your example if the tenant pays $1,500 for security deposit and then changes their mind, then you keep $300.

We've been at this for three years and are loving it... not trying to get rich quick. Every time we run into issues like this, we take some time to assess the best course of action and the best business decision. I don't know who said it, but "you either WIN, or you LEARN," applies in this situation. We will be making adjustments to our process so this won't happen again. I like the idea of a portion of the security deposit being non-refundable until the lease is fully executed.

Rob

1 Vote

Originally posted by @Nathan Gesner:

Originally posted by @Robert Shedden:

Are we under any obligation to return his security deposit in full? Do we return the deposit less the daily rate for each day it takes us to find a new tenant? Would you give him his full deposit back if you were in this position? We haven't made a decision yet and wanted the check in with the BP Community.

Most state laws generally require you to make a "good faith effort" to find a replacement tenant. You can hold the original renter liable for rent up until a new tenant is found and starts paying. The original tenant agreed to rent starting November 6th. If you found a new tenant that starts renting November 15th, you would charge the original tenant from November 6th through the 15th and then refund any remainder.

However, I think it's petty. If a renter changes their mind within 24 hours, I'll refund the entire deposit. In your case, they haven't signed the lease and they weren't scheduled to move in for a couple more days. Just give them the deposit back, put it back on the market, and move forward. You'll probably lose a week of rent, at the most.

We will definitely continue our good faith effort to find a tenant

I agree with your reasoning of holding the tenant liable until a replacement tenant is found. We will definitely continue our good faith effort to find a new tenant. And I know we cannot keep his entire deposit if we find a renter tomorrow. I'm think more along the lines of deducting a processing fee of nominal value. Even when you buy a new car, I believe there is some type of buyers remorse window. This is some gray area because we don't have a signed lease... hence my reason for starting this thread. Thanks for your input.

Rob

1 Vote

Cutious to get your thoughts @Benjamin Aaker and @Pete Woelfel…

0 Votes

We refinanced two quadplex’s and pulled out $174,000 of equity to purchase another quadplex on our 15th wedding anniversary. At the closing, we got the keys to the quadplex and a check for $82k to renovate the new units. First renovation completed on 10/27 increased rent from $700 to $1,300!

1 Vote

You should cover that in your lease, we definitely do! You didn't put the hair in the drain so why should you have to pay to unclog it?? You can can call a plumber and send them a bill. Or deduct from their security deposit.

Here's the section from our lease:

0 Votes

We list our units on turbotenant.com, apartments.com, FaceBook Marketplace, and Zillow. Our business model is to renovate the units and increase rent. Putting a sign in the yard will only attract the same tenants that we just gave notice to move out. We also manage our rentals for free on apartments.com. The great thing is if they apply on apartments.com and we don't accept their application, than can use it for other listings on apartments.com. I believe Zillow has the same policy...

Oh, you're in a great market by the way!

Rob

1 Vote

Originally posted by @Theresa Harris:

How did you word things? One option is to say the deposit is non-refundable if they do not move in and once they move in it becomes the security deposit. At this point, they haven't signed the lease. I'd question a few things and check if the money transfer was legit or if the funds will bounce and you will be out that amount.

We use apartments.com for all of 18 our rentals. The tenants pay them directly during the application process and we get a criminal background check and credit check. A few websites said to make sure that the application says the deposit is non-refundable prior to executing the lease. We will have to call them see what the tenant sees while applying. I've never applied to live in my own rental before! :D

Oh, and CashApp is legit. He sent the money and we deposited in our account. He subsequently sent a request for me to pay him back.

1 Vote

All Forum Posts by: Robert Shedden

Robert Shedden has started 7 posts and replied 83 times.

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