What is 'Key Money'

Key money is a payment made to a building owner, manager, or landlord by a potential tenant in an attempt to secure a desired tenancy. Key money can be considered a type of deposit on a housing unit such as an apartment unit.

Key money also refers to a security deposit paid by a lessor or a lessee for a leased property.

BREAKING DOWN 'Key Money'

Key money is paid by a prospective tenant to a property owner or manager in the hopes of securing a rental contract for a particular property. In certain circumstances, key money can be considered a bribe to ensure that a property coming up for rent is secured by the payer of the key money, and as such, the transaction is conducted in an unofficial manner.

For example, if Bob wanted to rent an apartment in a popular building, he might meet the landlord for coffee to discuss upcoming vacancies in the building. If a vacancy were becoming available in the near future, Bob might pay the landlord in order to secure the soon to be vacant apartment for himself. This payment would be considered key money.

RELATED TERMS
  1. Landlord

    A landlord is someone who owns real estate which they rent or ...
  2. Tenancy at Will

    Tenancy at will is a property tenure — without a lease or written ...
  3. Property Manager

    A property manager is the person in charge of the day-to-day ...
  4. Ground Lease

    A ground lease is an agreement that allows a tenant to develop ...
  5. Vacancy Rate

    The vacancy rate is the percentage of all available units in ...
  6. Security Deposit

    A monetary deposit given to a lender, seller or landlord as proof ...
Related Articles
  1. Investing

    Tips for prospective landlords

    Investing in rental property can generate serious income, but there's more to it than collecting rent. Check out all the pros and cons before you invest in the rental property.
  2. Managing Wealth

    Top 5 Ways to Protect Yourself Against Problem Renters

    Renting seems like the perfect way to mitigate the costs of an extra home that won’t sell; the intended course of action when a property was purchased for an unbelievable price, or many of the ...
  3. Financial Advisor

    3 Things to Consider When Renting By the Room

    Although renting by the room can increase returns on rental property, it does come with a few caveats.
  4. Managing Wealth

    Millennials Guide: How To Read a Lease

    Everything you need to know before you rent a home.
  5. Managing Wealth

    11 Mistakes Inexperienced Landlords Make

    Avoid these pitfalls if you considering purchasing a rental property.
  6. Investing

    Is Property Management Worth it? Ask Yourself These 8 Questions

    If you own rental properties, ask yourself these questions when deciding who should manage them.
  7. Investing

    Top 6 Tips for Turning Your Home Into a Rental Property

    Learn what you need to do to turn your property into a rental property.
RELATED FAQS
  1. Do landlords set up escrow accounts for their tenants' security deposits?

    Learn when and why landlords place rental property security deposits in separate escrow accounts to make sure the money is ... Read Answer >>
Hot Definitions
  1. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  2. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  3. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  4. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  5. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
  6. Cash Conversion Cycle - CCC

    Cash conversion cycle (CCC) is a metric that expresses the length of time, in days, that it takes for a company to convert ...
Trading Center