The Case for a Two Month Security Deposit

Just because something is the standard doesn’t always mean it is the best option.  I’m starting to think this holds true when it comes to rents & deposits in the real estate industry.

First, Last and Security

This has been the standard for a tenant to get into a property since I can remember.  Yes, there are some variations, especially with large apartment complexes having move-in specials and what not, but in the end first, last and one month security is the default.

Is it time for a change?

I know a handful of investors that have taken a different route in recent years.  They prefer a larger security in order to protect their investment better.  Best part is – the cost for a tenant to procure the property is the same.  The funds are just structured differently.

First and Two Months Security

This is the requirement they have gone with for their rentals.  It hasn’t hurt demand for their properties and it has given them that extra financial security.

In today’s day and age I think it is smart.  You know that saying “they don’t build them like they use too.”  I think that holds true for tenants as well.

Back in the day a larger amount of tenants treated a rental as their home, thus treated it better.   From my point of view that tenant is now a smaller minority.

People seem to worry less about their credit or staying in one place and saving a downpayment to eventually buy their own home.  The wants and desires have shifted and with it I think the way a tenants looks at their rental and the way they treat it has too.

Don’t get me wrong, I have had tenants that were heaven sent, but the norm is finding my properties a little more beat up than you’d expect.

Less Worry about Running Out of Funds

With two months security you can cover a lot of repairs and maintenance needed after a tenant leaves.  One month’s rent can be eaten up quickly.

Plus, you still get to collect income the last month of the tenant’s occupancy as opposed to having just place held that money from when they moved in.

In the end it is the same funds in your pocket, but you can’t tell me it doesn’t feel different getting it at the end rather than having no income come in that last month and possible the next month until you get it filled with a new tenant.

Will they even pay last month?

I had this thought too.  If they know you have two months security won’t they decide to not pay the last month and tell you to take it from the security deposit?

Yes, they could try to do this.  However, rent is separate from deposits so they are legally obligated to pay it and you can take action against them if needed.

Many tenants don’t want to get involved in that so they will pay the last month and wait for you to return whatever is left of their deposit if portions were needed for tenant caused repairs.

Maybe a new norm?

As I see more and more landlords shift to this format I wonder if years from now we will look back and see it as the new norm.  Time shall tell I suppose.


Need to know how to screen tenants?  Check out my five keys to tenant screening in ScaredyCatGuide to Investing in Rental Properties.

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