How to collect 2m “security” in NY & stay an Ethical Landlord
The Housing Stability and Tenant Protection Act of 2019 changed how landlords protected their assets. Rent security amounts that landlords were allowed to collect went from (usually) 2 months to 1 month. The reasoning: Abuse. NYC agents and landlords were sometimes charging 3+ months for security! Now, all of NY only allows for 1 month’s rent as a security deposit. Other states, like CT, allow for 3 month’s rent payment to be collected at the same time. For example: in a $2000 apartment in NY a landlord or agent will receive $2000 as security and the first month’s rent $2000 for a total of $4000 at lease signing. For that same apartment in CT, a landlord or agent would normally collect $4000 as security and the first month’s rent $2000 for a total of $6000 at lease signing. It’s a BIG cushion for a landlord, especially when it’s so hard and expensive to bring a tenant to court for damages.
Many agents and landlords sidestep that law by making the tenant pay for the 1 monthly fee to be split by the listing agent and tenant’s agent. I find this a bit grimy and always leaves a bad taste in my tenants' mouths (and mine) and we usually avoid those rentals if possible. Why do they risk less traction? It makes the landlord “feel” as if they’re getting the same amount of money as before and is an incentive to rent with an agent instead of on their own so a WIN for agents. Right? Like a said, it always made me feel uncomfortable asking for my fee from my tenant client.
So how can everyone win? 1 FREE MONTH’S RENT. (Wait - don’t stop reading!) What does a free month’s rent with a 1-year lease do?
For agents: It attracts tenants quicker and it’s easier to “sell” it.
For Tenants: It gives tenants an incentive to sign and STAY for a full year. It also allows them to build funds up at the end of their lease to provide for another lease arrangement (security + 1st month’s rent) if they’re moving on.
For Landlords: Less vacancy - many units are rented before the current one even moves out which lowers the typical vacancy period from 45 days to approx 15 (how fast can you turn it over)? Not only does it bring in happy tenants QUICKLY, but it also acts as a secondary form of security. The free month is tacked on the END of the lease. The landlord is guaranteed the full year or the free month is forfeited. So many tenants ask for security to be used for that last month’s rent anyway (which isn’t supposed to be done). Now you are keeping the actual security deposit (to protect your investment) and you’re giving the tenants time to collect funds for their new lease signing (at a different address). If a landlord doesn’t want to forgo that last month’s rent - do a 13m lease. 1 month free on 13m lease with the 13th month free. I will say that the latter lease length doesn’t bring as much traction and you’re likely to have it vacant for an (extra) month anyways.
The lease signing and collection are the same but in the second scenario, with a free month’s rent, you are essentially collecting 2 month’s security.
Other incentives to gain potential tenant traction are “concierge services”. These are free for the landlord or agent but look like gold to a tenant. All it takes is a bit of data collection and a few phone calls or keystrokes.
1. Utility switchover - usually done online.
2. Address Change - usually done online.
3. A Generic Welcome packet.
• contact info for the landlord/police dept etc
• info about the hotspots, grocery stores
• train schedule, parking permit info
• fun local annual events (ie: farmers market, parades) and websites to find them on.