The two typical upfront costs for new tenants are security deposits and move-in fees, but they serve different purposes. Understanding the difference will help you stay compliant, protect your property, and manage turnover costs more efficiently.
This guide explains everything you need to know about security deposits and move-in fees, plus tips on how to strategically implement them for your rental property business.
Key takeaways
- Security deposits are refundable and regulated by some state laws, often capped at one to two months’ rent.
- A move-in fee is a non-refundable payment that landlords often charge to offset the application cost and prepare the rental unit, such as minor repairs or cleaning, before a new tenant moves in.
- Landlord security deposits must often be held in separate accounts, with some states requiring interest payments to tenants.
- Move-in fees have minimal regulation and no special holding requirements.
- Tenants can expect to receive their security deposit refund if the property is well-maintained. Whereas move-in fees are a standard cost of moving in.
What is a security deposit?
A security deposit is a refundable payment collected before move-in, held during the lease, and returned (minus any valid deductions) after the tenant moves out.
Key characteristics of security deposits
- Refundable: Returned to the tenant, minus any deductions for damages beyond normal wear and tear or unpaid rent.
- Held in separate accounts: Sometimes legally required to be kept in a separate account.
- Amount limits: Typically capped at one to two months’ rent. In a recent survey, 87% of renters reported paying security deposits ranging from $500 to $999.
- Return timeframe: Must be returned within a legally specified period, usually between 14 to 60 days, depending on the state.
Security deposits primarily serve as financial protection for landlords against:
- Property damage: Beyond normal wear and tear.
- Unpaid rent or utilities: Covering any outstanding balances.
- Lease violations: Resulting in financial loss.
- Excessive cleaning costs: Beyond standard turnover cleaning.
Improper security deposit management is a leading cause of landlord-tenant disputes and can lead to significant penalties. For example, Invitation Homes, the country’s largest single-family rental landlord, recently paid $48 million in an FTC settlement for withholding deposits and hidden fees.
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What is a move-in fee?
A move-in fee is a non-refundable charge collected from tenants at the start of a lease. This fee covers various upfront costs and is less regulated than security deposits.
Key characteristics of move-in fees:
- Non-refundable: Tenants do not receive this fee back when they move out.
- Less regulated: Generally not subject to the same legal restrictions as security deposits.
- Variable amounts: Often ranges from 20% to 50% of one month’s rent ($562.50 to $912.50 based on the average U.S. rent of $1,875 reported in April 2025).
- Covers operational costs: Used for the application process, initial utility fees, and turnover expenses.
Common types of move-in fees include:
- Application fee: Covers the cost of processing rental applications and screening tenants ($40 to $100 on average).
- First month’s rent: Standard initial payment upon lease signing.
- Pet fees: Additional charges for tenants with pets, typically $100 to $300 per pet, but can be $500 or more, depending on the animal and building.
- Utility connection: Costs associated with setting up utilities. These are typically less than $100.
- Storage fees: Charges for on-site storage facilities, small units typically cost $50 to $100/month, while larger ones may range from $100 to $200+, depending on size, location, and features.
- Holding fee: Secures the rental unit before move-in. On average, this cost can be $100 to $400.
It’s important that you understand the difference between a security deposit vs. rental deposit, move-in fees, pet fees, and other charges to ensure you stay compliant with local regulations.
Move-in fee vs. security deposit: Key differences
Here are the main differences between a move-in fee and a security deposit:
| Feature | Security Deposit | Move-In Fee |
|---|---|---|
| Refundable | Yes | No |
| Primary Purpose | Protection against damage and unpaid rent | Covering turnover/administrative costs |
| Regulation Level | Highly regulated | Minimal regulation in most areas |
| Holding Requirements | Often held in a separate account; some states require interest payments | No special requirements |
| Return Timeframe | Legal deadlines (typically 14–60 days) | No return |
| Amount Restrictions | Many states limit to 1–2 months' rent | Few restrictions, but they must be reasonable |
| Tenant Perception | Expect a return if the property is well-maintained | Understands it's a cost of moving in |
Security deposits: Pros and cons for landlords
Pros
- Greater financial protection: Helps cover damages or issues like repairs, unpaid rent, or lease violations.
- Incentivizes property care: Tenants are more likely to maintain the unit when their money is at stake.
- Legal framework: Clear regulations help guide security deposit accounting, deductions, and timelines for security deposit refunds.
- Flexibility for deductions: Allows recovery of costs for specific tenant-caused issues.
Cons
- Strict compliance requirements: Some states regulate how much a security deposit is, where it must be held, and when it must be returned.
- Administrative burden: Some states require separate accounts, interest payments, and a security deposit receipt.
- Dispute potential: Higher chance of disagreements around security deposit deductions (41% of renters report at least one move-out dispute over costs).
- Cash flow restrictions: Funds must be held in a bank or escrow account, and can’t be used for operations. Learn more about how to open an escrow account for security deposits.
- Penalties for non-compliance: Missing return deadlines could lead to fines up to 3x the deposit amount.
Move-in fees: Pros and cons for landlords
Pros
- Immediate income: Funds are yours to use right away, helping with turnover costs.
- Minimal regulation: Compared to deposits, admin fee vs. security deposit laws are less strict in most areas.
- Lower dispute risk: No arguments over deductions since fees are non-refundable.
- Predictable budgeting: Helps cover cleaning, admin, and maintenance fees upfront.
Cons
- Limited financial protection: No backup funds if tenants cause damage or skip rent.
- Tenant hesitation: Renters may prefer the refundable nature of last month’s rent vs. security deposit structures.
- Emerging regulations: Some municipalities are now reviewing and restricting excessive move-in charges. For example, Seattle caps move-in fees at 10% of one month’s rent and pet deposits at 25% of one month’s rent.
Legal considerations
When charging a security deposit or move-in fee, staying compliant with local laws isn’t just smart; it’s a must. Each is governed by very different rules, and misunderstanding them can lead to costly penalties.
Security deposit laws
Security deposits are heavily regulated and vary by state. Common legal requirements include:
- Caps on amounts: Most states limit deposits to one to two months’ rent.
- Separate holding accounts: Required in some states, often with rules on how to hold or disclose the account.
Interest payments: States like New York, Maryland, and Connecticut require landlords to pay interest on deposits. Learn more about state security deposit interest rate rules. - Return deadlines: Ranges from 14 to 60 days, depending on the state.
- Itemized deductions: Most states require a clear breakdown of security deposit deductions.
Example: In Florida, landlords must return deposits within 15 to 30 days. In California, security deposits are capped at one month’s rent. However, small landlords with up to two properties totaling four units can charge up to two months’ rent, and itemized deductions are due within 21 days.
Move-in fee regulations
Move-in fees are less regulated compared to deposits, but you should still keep these rules in mind:
- Must be clearly labeled as non-refundable in the lease.
- Cannot be excessive or misleading (e.g., disguised as a security deposit).
- Some cities, like Seattle, cap move-in fees at no more than 10% of one month’s rent and require them to be disclosed in the lease.
- Must comply with local consumer protection laws.
While it’s easier to manage move-in fees, issues can still arise if the fee isn’t properly disclosed or is misrepresented.
Transparency is key. Always distinguish a move-in fee from a security deposit, and review your state laws to avoid surprises.
Should you collect a security deposit or move-in fee?
Choosing between a security deposit and a move-in fee depends on your rental strategy, local market, and long-term goals. Here’s how to evaluate what’s right for your property:
Property considerations
- Property value and condition: Higher-value or recently renovated properties may warrant greater protection through security deposits.
- Furnishings: Furnished properties typically benefit from larger security deposits due to increased potential for damage.
- Turnover frequency: High-turnover properties might benefit from move-in fees to offset frequent cleaning and administrative costs.
Market conditions
- Local competition: What are comparable properties in your area charging? For example, if similar units charge a $300 move-in fee or one month’s rent as a deposit, matching that can keep you competitive and cover your costs.
- Tenant demand: In highly competitive rental markets, excessive upfront costs may deter qualified applicants.
- Local legal landscape: Some jurisdictions heavily favor tenants in security deposit disputes. For example, in Massachusetts, landlords must pay interest on deposits and can face triple the interest for failing to return them on time.
Business needs
- Cash flow needs: Move-in fees provide immediate income; deposits tie up funds.
- Administrative capacity: Security deposits require more detailed tracking and compliance.
- Risk tolerance: Security deposits provide greater protection against major damages.
- Property management approach: Self-managed properties may benefit from the protection of deposits; professional management companies often have systems for both.
The hybrid approach
You can also take a hybrid approach for a balance between immediate income and protection:
- Moderate security deposit (e.g., one month’s rent) to protect against significant damage.
- Reasonable move-in fee (e.g., $250-500) to cover turnover costs.
- Clear language in the lease that distinguishes between the two charges and their purposes.
Best practices for charging fees when tenants move in
Regardless of which approach you choose, follow these best practices:
Detailed records
- Use detailed move-in/move-out inspection forms with tenant signatures.
- Take date-stamped photos or videos of every room before tenant occupancy.
- Keep all cleaning and repair receipts.
- Document all communications regarding the property condition.
Comprehensive leases
- Explicitly define security deposits and/or move-in fees.
- Specify exactly what each charge covers.
- Outline the conditions for security deposit deductions.
- Include state-specific required disclosures.
Proper fund handling
- Hold security deposits in appropriate accounts per state law.
- Keep accurate records of all transactions.
- Never commingle security deposits with operating funds.
- Process returns promptly with detailed accounting.
Clear communication
- Explain charges clearly during the application process.
- Provide written receipts for all funds received.
- Communicate expectations for property condition upon move-out.
- Give advance notice before making deductions.
Legal compliance
- Make sure you review your state and local laws on security deposits and move-in fees.
- Consult with a real estate attorney when creating or updating policies.
- Join landlord associations for updates on regulatory changes.
How to handle security deposits vs move-in fees when tenants move out
When tenants move out, it’s important to understand the different rules that apply to security deposits and move-in fees.
Security deposits: What you can deduct
Unlike non-refundable move-in fees, security deposits must be returned to the tenant, minus any legitimate deductions. The most common gray area? Damages and cleaning fees for security deposit deductions.
You can’t deduct for normal wear and tear, such as:
- Faded paint or wallpaper
- Minor scuffs on the walls
- Light carpet wear or furniture dents
- Small nail holes from hanging pictures
You can deduct for actual damage, including:
- Large wall holes or broken fixtures
- Stained or burned carpet
- Pet-related damage
- Missing smoke detectors or appliance parts
- Excessive filth requiring deep cleaning
For context, standard cleaning for a 1-bedroom apartment averages $75, while a move-out clean runs closer to $110. For larger 3-bedroom units, prices start at $135 and can exceed $180 for deep cleaning.
Cleaning and the law
In most states, standard cleaning between tenants is your responsibility. You can only deduct cleaning costs from a security deposit if the unit is left in significantly worse condition than when it was delivered.
To justify any deductions:
- Use a move-in/move-out checklist
- Take date-stamped photos or video
- Keep receipts and cleaning invoices
- Provide a detailed itemized deduction list with the deposit refund
Move-in fees: A different rulebook
Since move-in fees are non-refundable and not tied to property condition, they cannot be used to cover post-move-out damages or cleaning, unless otherwise stated and legal in your state.
Some landlords try to charge a non-refundable cleaning fee up front to cover routine turnover. If you take this approach:
- It must be clearly labeled in the lease as non-refundable.
- You cannot also deduct cleaning from the security deposit for the same purpose.
- Be cautious, some jurisdictions view this as double-dipping and may prohibit it. For instance, in California, landlords are prohibited from charging tenants twice for the same cleaning services, once through a non-refundable fee and again by deducting from the security deposit.
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FAQs
Yes, in most areas, you can charge both, as long as each fee has a clear, distinct purpose. The security deposit is refundable and covers damage or unpaid rent; the move-in fee is non-refundable and covers application or pet costs. Ensure both fees are clearly stated in the lease and comply with local caps on upfront charges.
It depends on your state. Most states cap the security deposit at one to two months’ rent, but some have no limits at all. Charging more than the legal maximum can result in penalties, so it's important to review your state’s specific laws. This is especially true in cities with stricter tenant protections or where questions around damage deposit vs. security deposit commonly arise.
A security deposit protects you during the lease. It’s refundable and covers issues like property damage, unpaid rent, or lease violations. A holding deposit, on the other hand, is paid before lease signing to reserve a rental unit. Knowing the distinction between a holding deposit vs. a security deposit helps avoid confusion and keeps your leasing process transparent.
You can’t deduct for everyday wear like faded paint, small nail holes, or light carpet wear. You can only make deductions for excessive damage, unpaid rent, or other lease violations. It’s important to document everything with a detailed move-in and move-out inspection to support any legitimate deductions.
In some states and cities, yes. Places like Chicago, Los Angeles, San Francisco, and New York require you to pay interest on security deposit funds. The rate and rules vary, so check your local laws. Keeping deposits in a separate interest-bearing account is not just best practice; it may also be required in your area.
Advance rent is a prepayment for a future rental period, usually the last month, while a security deposit is refundable and covers damages or unpaid rent. Advance rent applies automatically, regardless of property condition. A security deposit is only used if the tenant violates the lease. Both should be clearly outlined in the lease to prevent confusion.
