Move-In Fee vs. Security Deposit - Which is Better for Landlords?

One of the most common practices in real estate is for a landlord to require a new tenant to provide a sum of money when they first move into an apartment and initiate a new lease.

This sum of money is most commonly structured in the form of a security deposit, which is where a tenant pays a predetermined sum of money to a landlord, who will then hold onto that money until the end of the renter’s tenancy.

Now an alternative to a security deposit is something called a “move-in” fee… and if you ask me, I believe move-in fees are a far superior way to structure this initial sum of money that tenants commonly pay to landlords, at the start of a new lease.

There are several reasons for this.

First, a security deposit is money that has to be held in escrow - it’s essentially the tenant's money unless there are damages in place once they move out.

For me, it’s super annoying to have money sitting in an account I can’t touch.

It’s much more logistical to charge them a lower move-in fee that’s nonrefundable.

This actually increases the income of the property and is much more practical.

The tenant is happier because their cost upfront is less than what’s common and you’re happier because you can actually spend the money - it’s a win-win all around!

The standard cost to charge for a move-in fee can vary drastically between markets and even landlords within those markets!

To give at least some kind of ballpark though, according to Apartments.com:

A good rule of thumb is that a move-in fee will roughly be 33 - 50% percent of the monthly rent amount…

Now, obviously, in order to make a move-in fee an attractive alternative to a security deposit,

you should find out what the standard charge is for a security deposit in your market, and then make sure that your move-in fee is substantially less than that.

As I understand it, the most common charge for a security deposit is the equivalent of one month’s rent but this can vary widely depending on the market, the individual landlord, and the quality of the tenant.

Reference: https://www.rent.com/blog/how-much-is...

If a potential tenant is considered, “higher risk” meaning they barely meet the standard income, credit, and/or background check requirements you want to see in an applicant…

Sometimes a landlord may offer the apartment on the condition that the applicant pays a larger security deposit. This way the landlord can offset their risk.

Oh and by the way, just in case you were unaware of what's common practice here, typically the landlord will require the security deposit and first month’s rent (and in some cases even the last month’s rent as well) before they'll provide keys to a tenant.

If you’re charging a move-in fee, you’ll also want to receive payment before you provide keys to a tenant.

Again, the most common amount to charge for a security deposit is equivalent to one month’s rent, but depending on the market and circumstances, some landlords may charge only half that

or on the flip side, they may charge more -I’ve heard about some landlords requiring security deposits as large as 3 months' worth of rent!

It all ultimately depends on the individual landlord, tenant, and market.

One last thought on this before we move on: a lot of states have a legal limit on the amount a landlord can charge for both a security deposit and a move-in fee.

So, you will definitely want to do some research to figure out what the rules and customs are for your area.

Once you find out what’s standard for security deposits in your market, all you have to do is make sure your move-in fee is significantly lower, and boom - you’re in the game!

Remember a good rule of thumb for this is to charge somewhere between 33 - 50% of the monthly rent amount.