Some states law allow the landlords to have his own rules and regulations also it advice all the landlords to collect at least the first month’s rent while signing the lease. Also, it is good to collect a security deposit from the tenants because it will be used in case of any damages. However, collecting last month’s rent or the security deposit is certainly a topic of debate.
Most landlords collect a larger deposit instead of last month’s rent from the tenants. But, which one is actually good for the property owners. Well, for that you will have to understand the differences between charging the last month’s rent and collecting security deposit.
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The Difference between Security Deposit and Last Month’s Rent
What is a Security Deposit?
Security deposit is the amount that landlords asked the tenants to pay in advance for the duration of their tenancy. This is typically an amount equivalent to one month’s rent and is taken by the landlords to cover any damages beyond normal wear and tear in the property by the tenants.
When the tenants move out, the landlord check the property. If he finds that the damages are beyond normal wear and tear then he has the legal authority to keep the security deposit to cover the damage costs.
This needs to be collected by the landlord before the tenant moves in the property. Also be sure to include the amount of money and the date the security deposit was collected in the rent agreement.
What is Last Month’s Rent?
The landlords ask their tenant to pay a last month’s rent just to give themselves a form of insurance against tenant’s move out without giving proper notice. If you still didn’t get then think it in a simple way: – if a tenant signs one year lease and you are charging the last month’s rent from them in advance then they won’t have to make any payments during their twelfth month of tenancy.
Well, collecting the last month’s rent is also a great way to secure yourself also, this can attract higher-quality renters. Such barrier allows only those potential tenants that has appropriate case on hand to move in. Because, it’s not easy for everyone to pay such a substantial cost. So, you will be having significantly fewer applicants overall.
But, remember if the tenant has reason to legally terminate their rent agreement before the twelfth month, then it’s your obligation to return the last month’s rent. Instead of finding potential tenant, you will also have to face loss of one month’s rent.
What’s the Biggest Difference?
The main and biggest difference between security deposit and last month’s rent is that you don’t have to return the last month’s rent to your tenant. And security deposit is not your income, it’s your tenant’s property, which is only collected to keep you free from any financial headaches after a tenant moves out.
Both – security deposit and last month’s rent are excellent ways to test a tenant’s financial stability and sincerity about renting your Maryland rental property for the long term. Most landlords get confused what to charge well, you can charge for both, one or neither.
Many landlords in Maryland opt for collecting last month’s rent in advance. But, before asking last month’s rent you must know about its pros and cons. Only then you can decide whether you should ask for last month’s rent or collect security deposit.
Pros and Cons of Last Month’s Rent
Pros of last month’s rent is getting cash from upfront. When you get cash upfront you feel more comfortable about renting your property. This way you can cover the last month’s rent if the tenant will terminate the lease without giving proper notice.
The main con of last month’s rent is that it complicates things. If you have already collected the last month’s rent and the tenant stays for three years there are chances you will forget that you have already collected the rent and this leads to arguments.
If the owner changes then also it arises problem for both the tenant and the home owner. Landlord can sell the property to another landlord during the tenant’s stay and if the landlord forgets to tell new landlord about the last month’s rent then arguments ensue when the tenant gives notice to the landlord.
So, these are the main pros and cons of collecting last month’s rent. Last month’s rent is collected by the tenants to get permission to live in your property and the security deposit is the tenant’s property but it keeps you away from financial headaches. Consider the pros and cons before taking the decision whether you should ask for last month rent or not. But, the experts suggest you to collect security deposit because it’s your financial protection of any unexpected damages and non-payments.