Rent deposits & down payments

Hi Folks,

I thought I read somewhere that one could use the renters’ deposits as some factor in the transaction? was it as part of the down payment?

I believe I have found a great cash - flowing property - (> $400/mo) I have to have it inspected etc. etc. but I have no cash (for the down nor closing.) I asked a realtor about the rents, and he said that I can’t use them for the down.

I can come up with a good faith payment and the inspections etc., but not 5-10k down.

I’m about the throw a hissy fit. I keep finding good opportunities, but I can’t get them in my portfolio. arrgh.

You absolutely, positively CANNOT use a tenant’s deposit for anything…in fact, in most states, you have to maintain it in a separate ‘escrow-type’ account. Some states require that you pay interest on the deposit when you return it.

As for rents…everything is negotiable. If you are closing in the middle of the month, make sure your contract calls for the seller to credit you pro-rated rent at closing. If you close on the last day of the month, make sure the tenants know that there is a “new sheriff in town” and that the rents are to be paid to you. Make sure that any pre-paid rents are also credited to you at close…some folks pay a week or more early when they get paid!

As for the down-payment/closing costs…these monies will have to come from somewhere…perhaps you need a partner.



Thank you for clarifying that. 8)


That was lesson one I had to learn the hard way!!!


put it into an escrow like Keith said and forget about it!! Just Remember it later! LOL

You don’t have to remember it…the tenant will make darn sure you haven’t forgotten!


LOL you guys are a hoot. Thanks. So much bogus info out there.