Double Trouble: Why Larger Security Deposits Aren't the Answer for Risky Tenants

If a tenant does not meet your credit or background requirements, is it reasonable to accept a larger security deposit as protection against problems?

Usually, no!

That may be the last money you ever see from them. I’m speaking from experience.

My first property, many years ago, was a disaster. I think I made every mistake possible in real estate – all on that single property.

The property was in bad condition and in a rough neighborhood.

I was desperate for tenants, so I accepted tenants with poor credit or other problems in their history.

Often, I would make them pay 2 months’ worth of rent as a security deposit.

It was usually the last money I ever saw.

One prospective tenant had repeated arrests for drug possession (which is usually the default charge for dealing, because it’s easier to prove.)

She begged for a chance. I gave her one but thought I was being smart. I made her pay 2-month security deposits and sign a strict ‘no-drug policy’ form. No dealing. No possession. Or, immediate eviction. LOL, I was so naïve!

I received calls the day after she moved in. Other tenants complained that she was selling drugs out of the building. Grrr!

She refused to leave – until a large gentleman came to collect money that she owed for her ‘business operations.’ LOL

She left in the middle of the night, leaving her safe bolted to the middle of the bedroom floor.

I learned so many lessons from that disastrous purchase.

One lesson is that double security deposits usually are not a good solution for a bad tenant.

Stick to your guidelines.

If you are going to make exceptions for credit, get a co-signer who meets your criteria.

Happy Investing!