If you're a landlord, collecting security deposits from tenants is part of the process. The laws regarding how these deposits are handled depend on which state you're in.
Before you draft a new tenancy agreement, it's important to understand how to store your security deposits safely.
Read on to learn more about what landlords should know about this important part of the rental process.
Determine the Amount
Before you offer someone the opportunity to rent your property, you'll need to determine how much to charge for the security deposit. If the tenant has pets, for example, you may decide to charge more to help cover possible damage after they move out.
Keep in mind that there are caps on security deposits in most states. This means you can't charge beyond a specific, pre-set amount based on local laws.
Do some market research before you put your property on the market and find out what other landlords are charging. It's an easy way to help you determine how much to charge based on other, similar properties near you.
Storing Security Deposits
In many states, landlords must store their tenants' security deposits in an escrow account that's separate from their "normal" account. This means that all deposits should go into an account entirely separate from the one you use for income and operating costs.
Practicing excellent accounting is the best way to ensure that all of the security deposits you collect remain available to the tenants when they move out, pending any serious damages. This also prevents you from accidentally spending the deposits since they won't be combined with the rest of your funds.
Keep Good Records
Part of good property management is making sure that you're keeping great records of all financial transactions. Be sure to record the date, amount, and name associated with each security deposit you receive.
If there is damage to your property when a tenant moves out, you may take the cost of repairs out of the security deposit. Make sure you have a set list of general costs already in place, so it's easier to calculate what to deduct. This information should always be clear in your tenancy agreement before someone signs a new lease.
In some cases, you can also keep the tenant's security deposit if they had past due rent that was unpaid. Another reason why you might be allowed to keep the deposit is if the tenant left the property so dirty or in such bad condition that you need to pay for cleaning services like carpet cleaning or deep cleaning.
Use Property Management to Help You Track Deposits
Whether you're an experienced or a new landlord, understanding how to handle security deposits is a key part of property rental. Keep these tips in mind to ensure that you're collecting, storing, and returning these deposits the right way.
If you own property in the Charleston, SC area, the team at Adams Properties can help you with all of your lease and security deposit needs, so contact us today.
