Unsure of this question(Decision).......

Is it BAD or not to SAFE to not charge a DEPOSIT to tenants?

Is it suitable and SAFE to only charge only 1st month and LAST month rent to tenants?

I'd suggest collecting a deposit.

Welcome to landlording. Be sure you join your local landlord group. Lots of knowledge locally, I'm sure.

I definitely request a deposit. My rents start from 620-730, I ask for a straight $600 security. I remind them at least signing that security deposit may NOT be used as last month's rent. That security deposit covers the UNEXPECTED damage, waste at the end of the lease. During the tenancy, I bill tenants for any damage as it occurs. (Have only had to do that with one tenant so far. Tighter screening has yielded better tenants. I'm pretty easy going on dings, dents.

I increase rents by at least $5 each year (usually 10.) so, I've just decided to start everybody's security deposit the same, keeps it easier to keep track of. (Of course it's written in the lease, and at the top of my rent roll, but sometimes tenants ask. Because every one is the same, security deposit-wise, I can answer off the top of my head :-)

The problem with no deposit is that there is no incentive for the tenant to leave the property in good condition.

If they've paid a security deposit, they have motivation to get it back.

If they haven't paid a SD, you MIGHT take them to court and MIGHT get awarded damages and MIGHT manage to track them down and garnish their wages. That's not very motivating.

If you have the choice between collecting first month's rent and last month's rent, or first month's rent and a SD, I'd do the latter. Far easier to collect on unpaid rent, and the property damage can far exceed a month's worth of rent.

I live where Plenty's son lives. The largest rental management company in town stopped collecting deposits a few years ago, but now collects a move in fee. I followed suit recently. So far, so good.

I tell my tenants up front that I expect them to leave the place clean, just as they received it clean.

I rent to college students though, mostly. Many of them will apply for a job that requires security clearance. One of the questions asked by the Federal Investigative Service is whether the tenant paid all the rent and fees due.

In MA we are allowed to collect a first month's rent, a last month's rent, a SD equal to 1 month's rent as well as a key /lock fee. I find that whenever possible before you turn the keys over to a new tenant it is best to collect the maximum amount allowed in your area. For the last few years my area has had a strong rental market & I have not had to even consider collecting less than the maximum allowed.

Depending upon how the local rental market is doing you should be some what flexible in your move in policy. For instance if there were more units than tenants, I wouldn't hesitate to accept a collectible applicant who did not have all of the move in funds. I have been willing to drastically lower first month's rent (similar to $99.00 move in special), reduce the SD amount, forgo the lock / key fee or some combination of these. Of course to even consider this they would have to agree to a higher base rent than I had planned on charging.

Yes collect a deposit. (I charge the equivalent of a month's rent + $250.)

Then place the deposit in whatever type of account your state requires and leave it there until the tenant finally moves out and returns possession.

As you can see from the variety of answers... "IT DEPENDS!"

I know some land lords in my area (big boys, professional managers!) who collect no deposit or a reduced deposit (50% of a month's rent), but they offset that by taking the amount they didn't collect and dividing that up over 6 months and adding it to the rent. THEN, the rent does not go down, so basically if the tenant stays successfully for at least 6 months the LL gets all the money he would have collected anyway, there is no deposit to account for, and the gravy train of extra rent keeps rolling in month after month.

The downside as some have mentioned is lack of getting a deposit back incentive to keep the place nice and leave it clean at move out. But, if they are a good tenant, that won't matter. So the trick is you only do this for VERY SOLID tenants. People who value their reputation and/or credit report. Don't do it for a borderline goof-nugget looking for a desperate land lord to stiff.

The other things I've seen is places charging "move in fees"...same amount as a deposit but not refundable. Same concept as above, but no extra monthly gravy train. Just eliminates the security deposit hassle. Again, only for top-notch qualified tenants.

With no deposit, you have to be on the ball. Inspect the property regularly (inside and outside) and start the eviction process the day rent is late or you see damages because you have absolutely no protection against lost rent and repair costs.

I do not have a crystal ball to determine if a tenant will indeed be a good tenant during their tenancy prior to signing the lease. Perhaps Sid does, but I do not.

I rent to class A/A+ tenants (as they appear during screening) all day long . Some of them while not willfully damage the property, leave it in a state worse than acceptable wear and tear.

David...you make a reasonable point, but remember I'm not actually DOING this .... yet. The big boys are. The guys who have decades of experience and tons of market research on their side. And the opportunity is only for the best qualified tenants who may not have a lot of cash saved up.

Let's say you have 10 units to experiment with. You establish criteria that all approved applicants must have:

1) Clean credit.

2) Minimum 3x monthly rent as income, garnisheable, verified, and over a year on the job.

3) Good current and past land lord references validated to be legit land lords and via the 2-minute home inspection.

4) No "bumps" on their criminal check worse than a speeding ticket.

The units in question are normally $800 rent and $1200 deposit (I think you do 1.5 x rent as deposit, yes?)

Rather, you agree to no deposit but $1000/month rent.

After 1 year of this experiment and all rents collected, you have to evict 2 tenants at the start of month 13 which gives us a 20% failure rate. That seems obscenely high for otherwise well-qualified tenants, but for the sake of arguments let's pretend something horrible and out of their control happened.

Under the "old scenario" (1.5 x rent deposit and regular $800 rent), you have collected and have access to a total of $108,000 (rents plus deposits).

Under the "experimental" no deposit ($1000/month rent), you have collected $120,000 (all rent, all yours to keep no matter what).

You're net ahead $12,000 with the experiment just from rents alone, and if all the remaining 8 tenants move out in both scenarios, you have to return somewhere between $0 - $12,000 of deposits to the tenants who paid deposits...putting you even further behind in how much money is retained.

A modest deposit will help sort out the tire kickers from the your honest customers.

Everyone deserves a nice home, but not everyone can afford a nice home. Because of that, there are various class houses located in various class neighborhoods.