As a landlord, collecting rent is one of our top priorities (along with finding good tenants and managing the property). If there was a way we could guarantee that our tenants would pay their rent on time – we’d be all over it. But, since that’s not possible, we take additional steps to reduce the risk of a tenant not paying the rent.
A few examples of additional steps landlords take include:
- Tenant screening
- Set renter requirements (like minimum income and credit score requirements)
- Collecting rent online
- Securing first and last month’s rent at lease signing
Any additional steps we can utilize as landlords that are both reasonable and legal – we put into action.
So, in this post, I’m going to share my thoughts on if landlords should collect the first and last month’s rent from tenants.
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What does it mean to collect the first and last month’s rent?
To collect the first and last month’s rent means that in addition to the landlord collecting the security deposit and first month’s rent – the landlord will also collect another month’s worth of rent that will cover your last month at the property.
For example, let’s say a tenant signs a 12-month lease in January and has to pay their security deposit, plus the first and last month’s rent.
The tenant will have effectively paid:
- The security deposit in case they damage the property
- The rent for January (their first month)
- The rent for December (their last month)
Now, all the tenant needs to pay for is February thru November and they’re good to go.
Should landlords collect the first and last month’s rent?
Short answer: In my opinion, landlords shouldn’t collect the first and last month’s rent.
Long answer: It depends on the type of property the landlord has, the tenants a landlord rents to, and the tenant’s ability to afford a security deposit plus the first and last month’s rent.
I wouldn’t recommend for landlords to randomly require some tenants to pay the first and last month’s rent.
This could get you in trouble with any laws about discrimination in your area. And in situations that could lead to legal problems – it’s best to consult a real estate attorney for 30 minutes to make sure you’re not doing something illegal.
However, I would recommend a landlord create tenant screening requirements that give lower “quality” tenants (those who didn’t meet your “high quality” guidelines) the opportunity to live in your rental property in exchange for also paying for last month’s rent in advance (I’m not a lawyer so make sure this doesn’t break any local laws by consulting with a real estate attorney).
Having a second set of guidelines for tenant screening may allow you to find a great tenant that just so happens to have a past and mistakes that makes them less than ideal.
This doesn’t mean you should give everyone, regardless of their income, credit score, references, etc., the opportunity to stay at your rental property. You should still have minimum tenant requirements that, if not met, won’t allow you to rent the property to them.
In my own rental property business, I have a tenant who has been excellent overall. If I had screened her with strict requirements (specifically strict credit requirements) – she wouldn’t have passed those requirements at all. And I wouldn’t have one of the best tenants I’ve ever had.
At the same time, it’s possible that she could have turned out to be a horrible tenant that destroyed the property. I suppose I got lucky as well that it worked out. But, being a landlord comes with quite a bit of risk-taking and “gut feelings”.
And my “gut feeling” tells me that, in this economy, requiring all renters to pay the first and last month’s rent is going to make finding tenants difficult. There are plenty of good people with average jobs that have no problem paying their bills but don’t have enough money left over to save for an additional month’s rent.
Unless you list your rental property for rent online around tax-refund time (tax-refund time is the worst time to list a property for rent, in my opinion).
Frequently Asked Questions:
Do landlords give back the first and last month’s rent?
No. The first and last month’s rent is not like a security deposit. It’s upfront money you give the landlord to cover the rent for your first and last month at the rental property.
Why do landlords charge the first and last month’s rent?
To both cover your rent for the first month (after signing the lease) and to reduce the risk of a tenant not paying their last month’s rent.
Is the first and last month’s rent normal?
This depends on your local real estate market, credit score, monthly income, and more.
In my local real estate market, collecting the first and last month’s rent is not normal. I don’t remember ever having to pay the first and last month’s rent (but I also had a high credit score and a high income, relative to the places I was renting).
Is last month’s rent a security deposit?
No. The last month’s rent is not a security deposit. The security deposit covers any property damages that happen while you live in the property. Last month’s rent only covers the last month you live in the rental property.
