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Landlords - You're Gambling With Your Money

landlord tips

In today’s tight times it is becoming increasing difficult for tenants to come up with the first month’s rent and security deposit to move into a rental. Some landlords also require last month's rent for move in.

Some landlords are agreeing to take the move in money in installments, after the tenant is in. Some do it because they feel comfortable with doing it. I have known others that have felt bad for the tenant.

I DON’T DO THIS, UNDER ANY CIRCUMSTANCES!

To me, this is a recipe for disaster! It immediately sets both parties, the landlord and the tenant, up for failure at the start of the lease! I feel that it's not fair to either one!

If a perspective tenant cannot come up with the funds needed BEFORE they move in, then how are many of them going to be able to come up with the money AFTER they’re in? Some will never get caught up!

I made this mistake a couple of times over 12 years ago, when I first became a landlord. Each incident turned into a catastrophe! I don't care to try it again. I don't care to start a business relationship from the get-go in a upside down position!

I see owners do this so often. 95% of the time these tenants are being evicted a few months later for non-payment of rent.

Let me Sandy Shores Melbourne FL Realtor that for you

Posted by Sandy Shores - Melbourne FL Real Estate ,Realtor®, M & M Real Estate Inc. on 10/23/2008 08:28 AM

Comments (30)

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Originally posted at: Melbourne Real Estate News, Brevard County FL Real Estate by Sandy Shores REALTOR® : Landlords - You're Gambling With Your Money

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30 Comments on Landlords - You're Gambling With Your Money

OCT

2008

I'm a real estate attorney. Couldn't agree more. Your acquiescing to slow pays by accepting less than what's owed. Nice post.

Hi Larry, If they can't come up with it before they're in, then that's typically an indication of the kind of problems you'll have once they are a tenant.

You are so right. At Credit Restoration Consultants we make sure to be paid up front before taking a case. I always tell the client,"please do not get insulted, however most of our clients do not pay their bills, so why would they pay us after we help them get a better credit score. That said, we have to put the money in a trust account until the file is complete. Could you imagine how we would get burned if we went ahead and worked on a file, fixed their credit and then billed them. We would NEVER get paid......

Thanks for the topic!

Happy Thursday!!

Lori

Hmm, not sure if I agree. Many people have steady regular income but do not have a large lump payment worth two or thre rents up front. I know I have been in that position when I had to move. My landlord, thankfully, let me do installments and I have been living in the same place as a faithful tenant for three years now. If he had not given me that break, I don't know who would have.

Yes, many (such as yourself) would faithfully make the payments, but a large % of those would not, thus making such a practice financially disastorous for a landlord. In other words, even if only 25% of tenants in this situation would defalut, the landlord would be taking risks that are way too high in proportion to the reward.

I and my husband own over 20 rental units in the St. Louis MO market. We have worked with tenants who have both had the full first month's rent plus deposit as well as those who made the deposit in installment payments.

Some who payed the full deposit were worse at paying the rent than the ones who were allowed to make installments.

I do not believe that a blanket assumption can be made regarding full/partial deposits.

As my 93yr old real estate mentor told me: There's some who pay when due, there's some who pay when overdue, and then there's some that never do!

Hi Lori, We all mean well, but it sets both parties up for failure. Payment up front is a necessity. Thanks for sharing!

Hi Rebecca, I think that it's great that someone gave you a break! So fortunate for you, that you have an exceptional landlord! For me, I don't care to do it and have seen many that have paid the price for trying it.

Robert, For me owning rental real estate is a business proposition. I don't care to be on the losing end when it comes to whether or not the tenant can pay the rent. Times are tight already. If they can't pay the rent, I still have to pay the mortgage payment!

Hi Diana, Congratulations on your 20 rental units. We currently own 17 here in Brevard County. I do agree with your mentors comments that different people have different paying habits, that will never change. I don't take the move in money in instalments and I don't care to. I don't like to start the relationship off on the wrong foot. If the tenant doesn't pay me, I still have a mortgage payment that I am responsible for paying...that comes out of my pocket. Thanks for your point of view and many more years of successful landlording.

Very interesting discussion Sandy. I like your insight and sharing.

Thanks Fred for always having a voice on my blog. I love that fact that you're here! Hope you're doing well!

Sandy,

You are so right. If you start off being too easy, then you should not feel bad when rent does not get paid.

Ann

OCT

2008

Hi Ann, How are you? I like to start off on the night foot going in. I can't blame them for not paying, later, if I don't expect it from them in the first place! Have a nice weekend!

Every person I know that agreed to accept the security deposit later, lived to regret it. I also have mixed feelings about renting where it's first month's rent up-front and they collecting a security deposit equal to the monthly tab. Every small time landlord I've talked to said the renter would never tender the last month's rent because they felt the landlord already had it. Then what do you do? You do get paid the last month's rent but you just lost your security deposit. I think it's best to really qualify the tenants, and this includes pulling a credit report, and then collect something in the area of half the month's rent as deposit.

I agree totally, if the tenant doesn't have the security deposit & monthly rent, what would make someone think that they are suddenly going to come into money or be more responsible once their in your property? Better that the unit goes vacant an extra month than invite a disaster into it.

Jerry, I have heard the same stories over and over also. I am also of the agreement that your security deposit should not equal your first month's rent. Good point! I prefer to make it a larger number, than a smaller number. If the rent is $800, then security is typically $1000 or $1100, depending on the tenant. In 12 years, out of 100's of tenants, I have had one that tenant that was with me for 8 years, and chose to use their security deposit as last month's rent, because they knew I would keep their whole deposit. All tenants must be qualified, I agree. Thanks for the feedback and take care!

Hi AJ and Jodee, In my opinion if they have a problem with move in money before move in, they aren't going to be able to get it after they move. Moving is expensive, they must pay utility hookups, etc. Thanks for the input.

Sandy,

You are so right. If you do not start off on a good business foot, how can you expect the renters to know you mean business...?

Ann

OCT

2008

Hi Ann, Excellent point - thanks! I think that for some people if you give an inch, they'll take a mile. As a landlord, with some you must always be firm! Hope you are well!

I totally agree. Typically the security deposit never is enough to pay for the monetary loss and physical damage from a tenancy gone bad. Why start it off on the wrong foot? Better no tenant than a bad tenant.

Hi Rob, I agree, better no tenant than a bad tenant. For me, starting out on the wrong foot is always a recipe for disaster! Thanks for the feedback!

Your right. I've done the whole down payment installment thing and it rarely works out. Thanks for sounding the alarm.

Hi Justin, It hasn't worked for me either. However, others here have said they have had no problem with it. I don't care to do it again, and I won't. Thanks for sharing!

Sandy,

You have excellent insight and a good business "brain". Thanks for sharing.

Ann

Thanks for sharing, it sounds like casino are popping up everywhere....we all roll the dice..

OCT

2008

Hi Ann, How are you today? Thanks for the nice compliment. I try not to make the same mistakes over again in the landlording business. Take care!

Hi Jack, I suppose that you're right...casinos are popping up all over.

NOV

2008

Sandy,

You seem to have the landlording down to a science. Thank you for sharing your expertise.

Ann

NOV

2008

Hi Ann, Thanks for the nice compliment. I just know the mistakes I have made in the business, so I know what works for me and what doesn't. I try not to make the same mistake more than once (doesn't always work, but I try).

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Sandy Shores - Melbourne FL Real Estate ,Realtor®, M & M Real Estate Inc.

Melbourne, FL

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