Your rental property is a golden source of revolving income that can add a pretty penny to your earnings. Once you have found the perfect tenant to occupy your space, you will need to hack out the fine print details; including the security deposit. The security deposit helps to bridge the gap between certain and uncertain instances that may occur during the lease period. Excessive wear and tear, unpaid
rents, and damages can all add up in costs very quickly. Unmet obligations can take a pretty penny out of your pocket if there is nothing to cover the charges. So how much is a good price for a security deposit for your property? Here is a quick guide on how much to charge tenants for the security deposit.
Know Your Limits
There are some states that have do not have a limit on how much a landlord can charge for a security deposit. However, some states limit the total security deposit to no more than two times the monthly rent. Charging on the high end of two times the monthly rent or more will encourage tenants who move in to be responsible and respect the unit.
Who Should Be Charged What High risk tenants who have passed your tenant screening process, but have less than stunning rental or credit history, should be charged a higher security deposit. Someone who has a glowing rental and credit history poses less of a threat and it may be more profitable to offer a lower security deposit. Seniors also pose a lower risk to cause damage. Review the fair housing laws in your state to ensure this
doesn’t breach any laws. Use your discretion based on the tenant to help secure your investment.
Don’t Be the Bad Guy
Moving can be quite the daunting task. There is a ton of money spent on actual moving costs, setting up utilities, and other expenses procured during the process. You don’t want to be the one to add insult to injury by making your new tenant pay an unreasonable amount for the security. Keep these circumstances in mind when you assign a price for the security deposit. Showing empathy to your tenant’s situation can create a great rapport from the start of your rental relationship.
Don’t Be the Nice Guy
Although you want to be a considerate landlord, you don’t want to incur a loss. Being considerate of others does not mean that you should get the short end of the stick. The security deposit is a very crucial element of funds needed in every leasing agreement and should never be waived. Protect your investment at all costs.