Posts Tagged ‘security deposit’

Do we really want to go there?

Tuesday, April 13th, 2010

Author: Scott Goodman • Scenic West Property Management

I’ve noticed in recent weeks that landlords in Los Angeles, more specifically in Westwood, have begun to lure prospective tenants into signing leases by lowering move in costs.  Typically, move in costs consist of first month’s rent and security deposit.  One can only lower rent so much, so landlords have begun to lower the security deposit requirements.  On average, our property management company charges from 1 ½ to 2 times the monthly rent for security deposit.  I am now hearing from prospective tenants that they guy down the street wants 1x the monthly rent, some even less.  This is a race to the bottom that could end badly.  Some will argue that a large security deposit invites a tenant to skip on their last month of rent; others just shrug and claim that there usually isn’t that much damage.  As I have said before in previous postings, the security deposit protects you and your investment.  Don’t skimp on this “insurance”. Rather, try and work out a payment schedule to ease a tenant who is cash poor into paying a suitable amount of security deposit.  You won’t regret it.

Using a Roommate Addendum

Monday, January 11th, 2010

Author: Scott Goodman • Scenic West Property Management

The ever revolving door roommates is a source of aggravation for most landlords. Like a game of musical chairs, roommates are constantly moving in, moving out, or somewhere in between. As many of the properties we manage are close to UCLA, in Westwood, we rent our fair share to roommates. It is important to add a new tenant to an existing lease, or to remove one that has moved out. But given the frequency with which this can happen, it could become a full-time job. This is where the roommate addendum comes in. By using the addendum, there is no need for a new lease agreement every time there is a change in roommate tenancy in a specific unit.  A roommate addendum should state that the new tenant is obligated to all the terms of the current lease agreement, and that the outgoing tenant is released from all lease obligations. Landlords should also provide all legal forms, such as a copy of the lease, to the new tenant.

The other issue that is sometimes unclear to landlords, is the question of the security deposit. The simplest answer is that the security deposit is linked to the unit under lease, and not to any one tenant. When there is a switch in roommates, the reimbursement of the security deposit (or portion thereof) to the outgoing tenant should be settled by the tenants amongst themselves. A landlord is not obligated to refund the security deposit until the lease is terminated. This should also be clearly spelled out in the roommate addendum.

Lastly, always screen an incoming tenant as you would any new tenant. Stick to your standards and rental procedures to avoid future problems and ensure the successful occupancy of your units.

Keep your tenants happy, but not at any cost.

Monday, January 4th, 2010

Author: Scott Goodman • Scenic West Property Management

I recently came upon an article from Multi Family Executive, a trade publication for income properties, which left me scratching my head.  The article set out to give advice on ways to maximize tenant retention, listing the usual things you would expect:  Keep those repairs up to date, offer incentives like new appliances, new paint or new carpet and of course negotiate a new rent for those tenants who are determined to take advantage of a (from a landlord’s perspective) difficult market.  All these tenant retention strategies make economic sense when stacked against the loss of income resulting from a vacant unit.  

However, there was one item listed in this article which I strongly disagree with.  The article suggested returning the security deposit to long-term tenants who have a good payment track record. It is never a good idea to give back your tenant’s security deposit until the tenant has moved completely out and you have made all the necessary deductions – which you will then itemize in a security deposit refund letter.  You might look like the good guy by giving back the security deposit, but there is not enough room here to list all the problems inherent with this gesture.  The security deposit protects your investment. They may have been an ideal tenant for 30 years, but what if the moving company they hired to move them out damaged your elevator to the tune of $1000.  What are you to do then? Withholding the security deposit until you have done a move out inspection and have deducted all necessary expenses will save you from future hassles.