It's Spring and leases are renewing all over.

Don't forget to increase your Deposit when you increase rents!

Now that all of our tenants are caught up to our 2x the rent requirement, it's much easier to raise rents a little and add to the deposits as well.

I do it every year - we collect 2x the rent at move-in and keep it 2x the rent for the entire lease. Even if it lasts years.

W,

Congrats on getting 2x the rent! That's an amazing amount!

How well does that fly with your "new economy" of renters?

As you knwo I don't collect ANY "Deposit". I collect the same amount as their Non-Refundable Rent Discount Program Fee.

Some LLs are doing RHYNO - a small amount paid as an "insurance policy" against damages and unpaid rent.

Or "signing fees".

I never bumped the deposits. Now that my 20 year tenant is ready to leave I realized that his deposit will not cover the hole in the wall and the broken stair rail.

My new lease states that the SD will be upped when the rent is.

I'm always shocked, Jason, by the more tenant-friendly VA compare to NC - my son owns in VA, we of course own in NC. So much easier in NC.

Brad, more and more tenants these days seem to expect to pay "First, Last and Deposit." I just changed it to First and Deposit of 2x the Rent (state maximum.) Same amount of money, but more is refundable to the tenant which they like, and last month's rent is just ridiculous anyway: what if they live there five years? What if Rent goes up? Also why should they not have to pay their last month's rent at end of lease?

We ask for the Deposit at lease signing (remember we market 60 days out or so, while still occupied) and First Month's Rent is paid before they get the keys to move in usually about 45 days later.

We have been known to do payment plans on the Deposit. Half (equal to one month's rent) at Lease Signing, and Half sometime later, which we customize. Sometimes we do Half and then 1/4 and 1/4 payments over time. Just depends on circumstances.

Later on, someday at Lease End, they have two month's rent in the pot to care about and figure out how to get back. And it's easy: leave the place owing nothing, undamaged, CLEAN and READY TO OCCUPY by next person, according to our provided checklist. Deposit Returned ASAP.

I am unaware of any restrictions in my state for deposit.

The hurdle would be getting people to agree to something that is so foreign to them.

Joel, got it. I made the change for new leases. I now need to get the current tenants on board.

I do not really think it will be that tough of a challenge. But I need to present it in a way that makes them see they should be getting it all back.

Zero, our reasons for starting to raise deposits several years ago were pretty pragmatic: repair prices went up by lot. Materials, contractors, etc. Right along with rent. We were falling into the realm of why bother to collect at all if it won't help should we need it? Like insurance, you hope you never do.

To new people moving in, I just kept it factual. It is what it is. Deposit is 2x rent.

To some long-term tenants, I raised their rents perhaps a tad less at the time than I could have - made sure they knew it - and raised their deposits.

With LONG-term tenants whose deposit wasn't even close anymore, I set up payment plans. Yep, if they wanted to stay, their new rent was X and the deposit is XX so you owe Y per month until that is collected.

Thank you Joel,

In California we can only collect (1) month rent for security deposit so this makes sense.

If tenants are routinely skipping out and leaving you with trash, you absolutely have the wrong tenants. You need to re-do your screening process.

WMH, I was thinking the same thing.

In my book, Build Real Estate Wealth (which will be included in the package when you buy a recording of this year's Mr. Landlord National Convention at which I will be speaking) I spend a GREAT DEAL of time on tenant selection/screening. Your ability to develop skills in this area is a great determinate of how good of a time you have in the rental property business. You can be good at everything else regarding owning the property, but if you're not good at choosing your tenants, you'll be selling your property to another investor who will straighten out the problems, and you will have sold at a "don't-wanter" price.

Here is a draft of what I plan to send to all tenants. At the bottom of each one I will have their current SD and a schedule of what they will need to do to bring the new SD up to date.

I welcome any changes or clarifications:

This is a notice that zero Rentals is starting to implement a new security deposit procedure. We will be increasing the security deposit to match the rents, if not already at that point. This will be the new norm for when we have rent increases in the future as well.

A schedule has been worked out for each individual tenant below.

The decision to have the security deposit increased has been brought on by a few departing residents who have left with damages beyond what the security deposit will cover.

The goal is, and has always been, to be able to return the security deposit in its entirety.

We have also decided that we will implement with all tenants the offer we now have in place for when a tenant moves on. That offer will include a bonus on top of the security deposit, if the residence is left completely cleaned out and ready for the next tenant to move in, thus requiring no outside assistance to make the property rent ready. Not only will the entire security deposit be refunded, but an additional $100 will be added to the final check sent to the forwarding address left by the departing tenant.

Feel free to contact us regarding this or any other questions that you might have.

Thank you for your consideration and for using zero Rentals for your housing needs.

NOTICE: Zero Rentals has implemented a new security deposit procedure. Security Deposits held in trust for you must at a minimum equal your rent. If there are future rent increase, the deposit must increase as well.

A schedule has been worked out for each tenant below.

The Deposit must increase to keep pace with the cost of materials and repairs should they be necessary. However, the goal is, and has always been, to be able to return your security deposit in its entirety.

Love that you are taking action to implement the strategy. Also appreciate the tweeking of the wording by WMH. Here's a little more tweeking you may wish to consider including:

GOOD NEWS: If the residence is left completely clean and ready for the next tenant to move in (by you completely following our "Ready to Occupy" checklist) you will receive the ENTIRE security deposit refunded to you, assuming all other lease obligations have been fulfilled.

What is the correct security amount? As an independent housing provider, why are the state, county or city bureaucracies deciding how much I should charge for security deposits and rents? The answer is because as housing providers we are not a cohesive organization. We are fragmented with little or no representation within the bureaucracies that write the laws. Does AARP or the Petroleum Industry allow laws to restrict their policies or businesses? These organizations fight day in and day out to protect their identities through money, lobbyists, and strength in numbers. Housing providers that include corporations and Mom and Pop landlords are fragmented groups and individuals when it comes to laws that affect their business bottom line. It’s time to start acting like a Goliath!

Before COVID, California laws allowed security deposits to equal two times the monthly rent. During COVID the State Legislature changed the security deposit to equal no more than one month of rent. At the same time Governor Newsom froze all rent and increases for almost two years. The Federal Government also provided free money to individuals affected by loss of employment during the COVID years. How much money did you lose during those years? How much money did tenants receive? Tenants received enough money to build up their bank accounts or invest in the Stock Market while housing providers suffered immense losses through non-payment of rents.

We need to organize now! I suggest we call ourselves the Consolidated Housing Provider Organization (CHPO) and inform bureaucrats that the laws they enacted are Unconstitutional and anti-business. America was founded on small businesses. Let’s take back our rights to prosper as and American business.

Thanks for the tweaks WMH and Jeffrey.

I have not pushed showing a place while still inhabited. I know that it can be done because I hear about it. I just need to get over the stigma that I have in place about it. I don't want people in my house while my stuff is there. Every time I have sold a place I have already bought the next one and moved into it.

This would be a good round table discussion for me. Just a little more push to get me over the edge.

Joel, I have not had much issue with tenants not getting SD back because the place wasn't cleaned as well as it was when they moved in. I would consider that to be the same situation.

In the past I had allowed a few tenants to move in and clean on their own for a discount on the SD. They always seemed to think that meant they didn't have to clean when they moved out. That or they would just never clean the place because that's the way it was when they moved in. Now the place needs to be completely move-in ready or I won't rent it out.

Instead of renting my properties, I am utilizing an installment contract for option. The option is a vehicle that no one uses that many people should.

I have followed Mr landlord for years and went to a number of option seminars by Jack Miller.

The option is a unilateral contract and when written correctly and if the option on the property is incorporated correctly the prospective purchasers / tenants can at some point when they don't underperform on the property or have the first right of refusal.

Using an option, this gives me the ability to increase the option price, the option interest rate on the unpaid balance, and or you name it!

It is not a part of rental law! That's the big message.

My subscription to Mr landlord was more than 20 years ago and I could tell then that he thought outside the box.

Rather than playing with landlord tenant law I have constructively used options as vehicles for the perspective renter/ future owner for their benefit and for money.