I can’t tell you how many times I have run across a landlord who has let tenants take over the care of his/her quarter-million dollar home with a $250 (or less) security deposit! It is simply ludicrous.
We charge our tenants first month’s rent, last month’s rent deposit, and a security deposit equal to approximately one month’s rent. “What? How can that be? No one has that kind of money lying around – especially renters!” you might say. And you would be correct.
At move-in our tenants are required to only bring funds equal to the security deposit and the first month’s rent. By collecting nearly two months’ rent up front (in the rent and security deposit) we are telling prospects we are only interested in dealing with fiscally responsible people. We only want to deal with tenants who have the resources to come up with that kind of money. (If they have to borrow it from family members, I don’t care — just as long as they have the resources to do so.) This way, if their car transmission blows up one month, they will still have the ability to pay rent.
Problems arise when the landlord lets the tenants move in with the bare minimum in cash. Anyone living that close to disaster will sooner or later make their problem yours!
We stage the last month’s rent deposit over 4 months (starting with the 2nd month) to ease the burden on the tenant. Otherwise you would be right – we would price ourselves out of the market. This system adds some additional administration since many of our tenants will forget about the added payment those first few months. But the added security of having a last month’s rent insures against quick move-outs.
With a last month’s rent deposit and a security deposit equal to approximately 80% of a month’s rent we now have sufficient security to hold the tenant’s feet to the fire. Good management start with good management practices!