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5 Tips About Security Deposits

Posted by Ken Meyer on Tue, Nov 06, 2018

Landlord handing over the keys to the apartment and security deposit paperworkHandling security deposits is an important part of your job as a landlord--but how should you deal with them? What are they for, really? There are several key things to keep in mind when you're dealing with security deposits.

Tip #1: Make your standards fair.

You don't necessarily have to have the same security deposit for every tenant in your building, though that can be helpful in avoiding claims of discrimination, but you do need to have a clear system for determining security deposits--and it should be the same for each tenant regardless of race or other outside factors.

Tip #2: Make sure you're holding it properly.

Funds from tenants' security deposits must be held in a trust account, not arbitrarily kept in your primary account or another location. Make sure that this money isn't accessed unless necessary under the terms of the lease, including damage caused to the property by the tenant that is discovered after they move out.

Tip #3: Be open to negotiation.

When you find the perfect tenant, it's okay to be willing to negotiate (a little) on the security deposit, especially if the tenant comes with good references.

Tip #4: Return security deposits on time.

Check your state laws to learn when you must return your tenants' security deposit. Failure to return their money on time means that you may end up paying fees of your own!

Tip #5: Charge what you're worth.

Sure, charging less for your security deposit may lead to more applicants for your property, but it may also mean that you don't have adequate funds to cover damages to the property when your tenants leave. Take the time to research security deposits in your area, then charge a reasonable amount (while showing a willingness to be flexible).

If you're ready to acquire your first rental property or you want to add to your properties, contact us. We'll work with you to get the financing you need for your rental venture.


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