When you become a landlord, you become responsible for several things you may not have prepared for. The list of responsibilities, ranging from maintenance coordination to a tenant background check, may seem endless.
One thing that many landlords struggle with is determining how much to charge for their security deposit. This deposit often serves as collateral for renters renting your property.
Security deposits ensure that tenants don't damage your property. Landlords charge this money with the promise of refunding it after the tenant moves out. The condition for this refund is that the property must remain in good condition.
Finding the right amount for such a charge can be challenging. So, we'll walk you through the average amount of a deposit and how to use it. Read on to learn more!
Average Security Deposit Amount
On average, a security deposit is roughly equivalent to a month's rent. Most landlords request the security deposit and the first month's rent simultaneously.
However, several factors influence the amount you can charge for a security deposit. These factors include state laws, rent costs, property amenities, the size and type of the rental property, etc. We'll discuss some of these factors and how they affect you in the following sections.
State and Local Laws Affecting Security Deposits
Specific state and local governments issue laws pertaining to rental agreements. However, one common rule is that landlords must conduct rental property inspections before charging a security deposit.
The purpose of this inspection is to ascertain the condition of your property. You and the tenant will walk through the apartment and note any damage. As you go, you'll document these damages, either in writing or by photographs.
When the inspection ends, you and the tenant will sign an agreement about the extent of the damage. From there, you can devise a security deposit that reflects the property's condition.
When You Get to Keep Your Security Deposit
Sometimes, even with the most thorough tenant screening processes, you end up with evictions. Sometimes, evictions occur because of failure to follow lease enforcement.
In other situations, tenants may damage the property to such an extent that they must move out. When this happens, you may need to cover unexpected costs.
These costs include repairing new damages and covering rent costs until a new tenant moves in. Fortunately, you can use a portion of your security deposit to cover these costs.
When this happens, you'll write a security deposit return letter. This letter explains how much of the deposit you're returning and the rationale behind it.
Let a Property Management Company Manage Security Deposits
Managing a security deposit can be a challenge for any new landlord. Luckily, you can escape this issue by hiring a property management company.
We are a property management company that offers several services to landlords and tenants alike. This service extends to managing your security deposit.
We can help you with pricing, sales, and leasing. Contact us today to learn more about what we can do for you!