Congratulations! The applicant for your rental property has
been screened and approved. As a landlord, there are many things to think about
to ensure your tenant is moved in successfully. One of which is how to collect
the first month’s rent and the security deposit. A few steps make this process easy for both
you and your new tenant. Let’s cover a few simple tips:
#1 Understand State
Laws Regarding Rent Payments and Security Deposits
Landlord-tenant laws are different from state to state.
Research the law for your specific state – which will provide rules for how to
handle rent payments, security deposits, and move-in fees.
Once you are familiar with the legal side of things,
establish lease terms. Your written lease agreement will be based on the laws
for your state, and will provide clarity for your tenant on what is expected. It will also share your responsibilities as a
landlord. For example, a very common lease term is around rent payments. Rent
payments are typically due on the same day of the month, on a recurring basis,
which will be identified in the lease. Grace periods for rent payments will be
based on the laws of your state – for many states the grace period is 5 days.
This means your tenant will have up to 5 days from the rent due date to pay
their rent without incurring a late fee.
When should you collect the first month’s rent? Most
landlords will collect rent after the lease is signed, but before the property
keys are given to the tenant. Your lease will specify this arrangement, making
it easy for both parties to know expectations.
What about the security deposit? Again, your lease terms
should stipulate that the first month’s rent and security deposit are required
prior to receiving keys to the apartment. Something to note, some state laws
require security deposits to be placed in a separate interest-bearing account. Additionally,
many state laws indicate that a security deposit cannot be more than one month’s
rent, otherwise, the landlord is required to pay interest to the tenant on the
security deposit amount. Laws also govern how and when to return security
deposits, and valid reasons for keeping part of the deposit.
When collecting the first month’s rent and deposit, make it
easy for your new tenant by setting up electronic payments.
Landlord software, such as Schedule
My Rent, enables landlords to invite new tenants to create an account, and
automatically pay rent monthly on the date rent is due. This makes it easy for
both landlord and tenant to know that rent is paid, with no need for paper
checks, PO boxes, and bank trips.
Can security deposits be paid the same way? Yes. With
Schedule My Rent, it’s easy for tenants to pay their security deposit, as well
as other payments, such as one-time utility payments, etc.
#2 Discuss Rent and
Security Deposit Amounts Before Signing
a Lease
It’s important to ensure your new tenant is aware of the
rent amounts and deposit requirements early in the process. Our landlords find
that by communicating the rent amount in property marketing sites, such as
Zillow, it’s easier to find tenants who can
afford the rent payments. However, it still makes sense to communicate the rent
and security deposit amounts again before you sign the lease agreement.
First month’s rent and security deposits are typically paid
before a tenant moves in. Following are a few steps as you work with your new
tenant:
- Discuss lease terms with your tenant – most
landlords have a standard boilerplate lease agreement, which is reviewed with
new tenants
- Sign the lease agreement which will outline the
rent and security deposit amount
- Collect the first month’s rent and the security
deposit (as separate payments)
- Provide your tenant with keys
Our landlords find the easiest way to collect rent is
electronically. Many of our landlords have tried accepting cash and paper
checks. Both work, but require more time and energy from both the landlord and
the tenant. With cash, landlords take time out of their busy schedule to meet
tenants to accept the cash payment in person. This carries a bit of uncertainty
with it – has the landlord accurately recorded the amount? With paper checks, the tenant must write the
check, mail the payment, and wait to determine if the check is received and
when it is cashed. For the landlord, paper checks typically involve a trip to
the PO box to pick up payment envelopes, a trip to the bank to deposit the
checks, and manual entry of the payments into a manual tracking tool.
Why not make it easy
to take rent payments? With electronic payments, tenants are able to
schedule a recurring bank transfer on the day rent is due. When using
rental
property software, like Schedule My Rent, the tenant receives a receipt of
payment via email, and can log-on to the system to see payment receipt. For the
landlord, payments are automatically received in their account, no need for
trips to the post office and bank. Schedule My Rent provides an industry-leading
dashboard, enabling landlords to easily see the status of all rent payments
across their full portfolio of properties.
Schedule My Rent easily enables tenants to:
- Pay directly from their bank account
- Receive rent reminder emails
- Set up automatic rent payments, and if desired,
approve payments
- Pay late fees
- Split payments between roommates
#4 What About Pro-Rated Rent Payments?
Prorated rent may be appropriate if a tenant moves into your apartment for a portion the month. For example, if the tenant moves into the apartment on September 15, approximately half of the rent payment is due. Prorated rent may also apply if your tenant leaves the apartment part way through a month, if agreed to in your lease terms.
When the tenant is approved for rental, agree to a move-in date. Once the date is agreed to, provide the tenant with the prorated amount due, and formalize the payment amount and schedule in your lease agreement. Arrange to receive the prorated amount due prior to move-in, as you would with a full rent payment.
By taking a few proactive steps, landlords can simplify the expectations for first rent payments and security deposits. When both tenants and landlords know what to expect, and how to best arrange payment, both parties feel confident in the process. With Schedule My Rent’s
landlord software, landlords and tenants save time and effort.
