Are you a landlord looking to protect your rental property and ensure a smooth tenancy? When you've entrusted your real estate investment to someone, the last thing you want to deal with is property damage.
Collecting security deposits when renting to new tenants is essential because you can't guarantee anything. For instance, a tenant who might seem pleasant initially can turn sour by the end of the tenancy.
When this happens, you risk the tenant mistreating the property or leaving it in a poor state when they leave. If you don't have a security deposit locked away, you will likely pay for the damages and repairs yourself.
If this is a situation you'd like to avoid, keep reading. Here's what you need to know about asking for security deposits as a Hammond landlord.
Why Are Security Deposits Important?
Security deposits are essential to ask for when a new tenant takes occupancy of your investment property. Typically, at the beginning of the occupancy, the tenant and landlord inspect the property together. During this inspection, both parties made notes about the condition of the property.
The security deposit is set aside in an interest-bearing account until the tenant ends their tenancy. When they do, the landlord and the tenant should perform another walk-through inspection of the property to see if anything has been damaged and needs repairs or replacement.
What Can You Use Security Deposits For?
Having a large sum of money paid to you as the landlord doesn't mean you can spend it on whatever you want. There are laws regarding the use of security deposits, and landlords need to stick to them to avoid being penalized. You can use security deposits in the following instances:
- To cover unpaid rent or late fees
- To repair property damage that the tenant or their guests caused
- To cover any cleaning costs after the tenant moves out if necessary
It is essential to keep track of all repairs and cleaning costs and get receipts for any work done. This will help you avoid any disputes with the tenant when it comes time to return their security deposit.
How Much Should Your Security Deposit Be?
So, how much should you ask your tenants when requesting a security deposit? Can you pick any amount you choose? The amount you charge will depend on a few factors:
- The monthly rent cost
- State laws
- Property amenities
Generally, state laws prevent landlords from charging too much for security deposits. Typical security deposit laws suggest you ask for the value of one or two months' rent.
Find The Value in Security Deposits
Security deposits are a vital tool for landlords to protect their rental properties. By collecting a security deposit, landlords can ensure they can cover any damages or repairs necessary at the end of a tenancy.
It is important to follow state laws when collecting security deposits and to keep track of all repairs and cleaning costs. By doing so, landlords can avoid disputes with tenants and ensure they are fairly compensated for damages.
If you need help managing your real estate investments, contact us at PMI NWI. We have expert property managers waiting to take reigns.