Landlords will always consider that funds may be needed for any damages or repairs that will happen in the course of someone’s stay in their properties. You can’t guarantee that nothing bad will happen when you let other people rent out your units and that is why you should have an emergency fund where you can take out the payment for such events. This is where security deposits and move-in fees matter.

What are security deposits and move-in fees?

Security deposits are a very common component when renting out properties. It is an amount that covers possible damage beyond the common wear and tears or lost property, usually the same cost as the monthly rent, and is given before moving in. It may or may not be refundable, depending on the terms set by the landlord.

Move-in fees are relatively new. Some landlords use this instead of security deposits. It is also given to the landlords before moving in but unlike the security deposit, it is non-refundable. This will pay for getting the property ready for occupancy and that is why a tenant can’t get it back. There is also no specific amount on how much a move-in fee is.

Which is better?

Both of them have pros and cons. Here is a summary:

SECURITY DEPOSIT

Pros:

You are at ease knowing that if there is damage, property loss, or unpaid rent, you have the funds to pay for it. You do not have to worry about a broken window or a stolen microwave.

Potential tenants will expect that you would ask for a security deposit. It is a standard thing in renting out homes. Before they contact you, they already have an idea of what you might charge them.

Tenants will most likely take care of your property as some security deposits will be returned to them at the end of their lease if not used. This will motivate them to not have to obligate you to use it for damages they caused.

Cons:

Every state has a different law regarding security deposits. You have to make sure that your policy will be in line with the law in your area to avoid any legal problems in the future. It is your responsibility as a landlord to familiarize yourself with legal matters.

Some tenants may not like the idea of a security deposit as it is an additional expense on their part. Not everyone can shell out a large amount of money immediately especially those in the low-income bracket. And even for medium- to high-income tenants, they will also worry about the time value of their money if left idle with you during their stay.

Security deposits that will be refunded after a lease has ended will be given after the move-out inspection. There might be arguments between tenants and landlords regarding possible deductions. This can be stressful for both parties.

MOVE-IN FEES

Pros:

There are less rules to follow than with security deposits because move-in fees are non-refundable. The landlord decides on what to do with it. There are no specific regulations.

A move-in fee may cost much lesser than a security deposit. Some tenants will most likely be attracted to the idea of this rather than paying for an amount that is worth a month’s rent.

When a tenant’s lease ends, there is no need for any discussions regarding refunds or damages with the landlord.

Cons:

As a landlord, you will receive a smaller amount compared to a security deposit, which may not be enough to pay for any loss or damage to the property.

Some landlords will add a move-in fee on top of a security deposit but this may put off some renters who will have to pay for it. Additional expenses are never appealing.

Because it is non-refundable, tenants may not be as careful with the property because they won’t get anything back after they give it to you. They are more likely to not worry if they cause damages.

Related article: Your Tenant’s Repair and Maintenance Responsibility

So which should you choose?

It is your call on what you choose to use as a landlord. Weigh the pros and cons of both of them and find out what works best for you. Before you create your listings at Padleads.com and before applicants contact you, you should have a clear decision on what you will charge them.