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COLLECTING MOVE-IN COSTS - 4 OPTIONS
Landlords have different ways they structure the money collected from residents at the time of move-in. The different methods are highlighted in a current discussion on our Q&A Forum:
Method 1 - Many landlords prorate the first month's rent and collect the full deposit. The next rent due date would be the first of the next month with the full rent due. This way, all your rents are due on the first, and it is pretty easy to keep up with and check for on-time payments once a month from all residents (and whether someone is late) since all rents are due on the first.
Method 2 - Another landlord suggests that no matter what day residents are planning to move-in, he will collect a FULL MONTH'S rent, plus a full security deposit. Then on the 1st of the next month, the new resident will pay the prorated rent for the second month, making any adjustment there. So when residents first move into the rental the landlord gets as much money up front as possible.
Method 3 - Some landlords collect the prorated rent, next month's rent, and the security deposit all upfront as a requirement for move-in.
Method 4 - The following fourth option is one of many cash flow strategies that I teach at Landlord Conventions and trainings, and one landlord (of many) has put the method into practice and successfully added the their monthly and annual cash flow.
You collect the prorated amount along with first month's rent and deposit. Let's say the resident moves-in in middle of the month. If rent was say $1,000 and the deposit was $1,000, $500 prorate rent, $1,000 for next month's rent, and $1,000 for the deposit. That would be a total collected of $2,500.
If the resident does not have all of that, you offer the option to work with them, provided they are fully qualified in all other ways. Let's explain how exactly to do this and how you will go from zero to hero as a landlord.
Tell them you have a special program where if the rent can go up 10% you can decrease the deposit by one half. So your new monthly rent is $1,100 and the deposit is $500. The new move in cost to the resident who moves-in mid month is $550 prorated rent, $1,100 for first month's rent, and only $500 for the deposit. The total amount to be collected is now only $2,150. You are betting they will be there longer than a few five months (which they should if they were fully qualified to begin with). You structure this option by substituting refundable money with non-refundable rent money.
See the complete discussion on prorated rents where these four methods for collecting move-in costs are discussed along with at least one other method not discussed above.
Agree or Disagree? Share your thoughts in the discussion or reply to this email. We welcome your feedback or any landlording tip you would like to share with your fellow landlords and Update readers.
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