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Tenant
Deposits - What You and
Every Landlord Should Know About It
Whenever
you are
looking for a new tenant, the question of tenant deposits will
naturally pop up. How will security deposits from tenants
protect
your property from losses? Should you demand a security deposit in the
first place? If yes, how much should you ask for? Have these questions
and more answered right now.
What are Security /
Tenant Deposits?
In addition
to rent payments, your tenants will usually
have to
fork out an extra sum of money when inking the rental agreement with
you. This sum of money is known as the security deposit.
This
security deposit is used as a back up to ensure that your tenants play
nice according to the rules stated by your rental agreement.
This includes paying the rent on time, maintaining the
property in
good condition and following the terms and conditions of the lease
agreement.
Should
You Demand a Security Deposit from Your Tenants?
Some
landlords prefer not to ask for a security deposit because they believe
doing so it will make their properties harder to rent out. They are
willing rent out their property as long as the tenant agrees to pay up
the first month's rents.
However, we highly
recommend
that you ask your new tenants pay you a security deposit. If someone is
truly interested and serious in making your tenant, they will not mind
forking out money for a deposit as long as the amount is reasonable. In
fact, this actually makes an excellent step for weeding out problem
tenants.
How
Much Tenant Deposits Should You Ask for?
Asking
for the right amount of tenant deposits is crucial. Demand too much and
you risk scaring off potential excellent tenants who will find you
unfair. Ask for too little and you might end up paying for painful
losses from your own pocket.
We will
usually ask for security deposits that is equal to one month of rent
payments. If our new tenant has excellent credit scores and his
background check turns up clean, we may consider lowering the deposit
amount to 75% of the monthly rent to
attract him.
In
most countries, the law restricts landlords
from setting the deposit amount higher than 1 to 2 months of rent so
be sure to double check before you decide on the sum.
If you have a tenant is who elderly, handicapped or registered
with government subsidized housing programs such as Section 8,
the
maximum deposit is usually one month's rent.
In some
states of USA, you will also have to pay your tenants an interest on
the security deposit if you own multiple rental properties. This
interest usually ranges from 1% to 3% so it will be an extra factor for
you to think about.
How
do You Handle the Return of Tenant Deposits?
When your
rental agreement ends, you will usually have to return your
tenant his security deposits within 14 to 30 days. If
everything does well, you will have to give your tenant a complete
refund of his deposits.
So what are the valid reasons for making claims on your tenant's
security deposits?
If he left your property with any unpaid rents or utility bills, you
can deduct the amount owing from his deposit.
You
can charge him for repairs and maintenance
due to abuse and carefulness on his part, but you cannot bill him for
any charges due to daily wear and tear. If your property was in a mess
and needed major clean-ups, you can also charge him for the cleaning
bills.
When you are deducting any money
from his deposits due to property repairs and maintenance, you will
have to give him a item by item
account explaining for every deduction.
If you are claiming money from your tenant's security deposit, Click here for our
security deposit deduction notice.
Read
what our visitors have to share below OR Scroll down to
add your own comment
What are Your Crucial Tips for
Handling Tenant Deposits?
Security deposits are important for protecting landlords against losses but they must be handled correctly. How do you manage your tenant deposits effectively? What are the dangerous pitfalls that you will always watch out for? Share your valuable experience with everyone here - We will love to hear your tips, comments and real life stories:
What Our Visitors Have to Say on Dealing with Security Deposits
Click on the links below to read the valuable tips that our other visitors have to share:
Handling Interest from Tenant Deposits
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While most landlords know how much tenant deposits to ask and when to deduct money from them, they are often clueless when it comes to dealing with the ...
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dealing with tenants?
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