Owning a rental property can be a great way to earn additional income. However, you’ll need to abide by the book in order to avoid conflicts and keep the peace.
As a landlord, you will need to collect and handle rental deposits when tenants come or go. It can be an area of contention when tenants move out. Make sure you and the tenant are on the same page, and you shouldn’t have anything to worry about. This post will help you understand the proper procedures for handling rental deposits!
Before anyone moves in, make sure to do a full inspection of the property. Look for damaged walls, loose skirting boards, chips to the counter and floors. If carpets haven’t been replaced, make note of the wear and stains. If at all possible, do the walk-through with the tenant so you can both take notes on any defects. Make sure everything is in writing and take photos and video as needed. Have both parties sign off, making sure the tenant understands their obligation to keep the property in the same condition in which they receive it. Taking these extra steps can save you a lot of hassle in the long run.
Every property is different, but you should always require at least one month’s rent as a deposit. The deposit should cover any damage beyond normal wear and tear. You can also think of the deposit as an insurance policy should your tenant decide to skip town and break their lease.
Additional situations may require additional deposits. Many landlords will require an additional deposit for a pet or waterbed. Anything that could accidentally cause additional damage to the property should be covered with a deposit.
Returning the deposit is when things can get tricky. Many people move into a new place, counting on their entire deposit to be returned in full. This is when it really pays to have everything in writing. The tenant needs to understand that you’ll most likely need to clean and make repairs (no matter how minor) in order to have the house in good condition for the next tenant.
Carefully review your initial inspection and calculate the costs needed to restore the home to this state. Anything owed back to the tenant will need to be returned as soon as possible and in no longer than 10 days.
Handle With Care
It is a good practice to keep deposits from commingling with other income and it is advisable to keep these in a separate account. Keep in mind, the money needs to be accessible for returns or repairs when needed. If you own many properties, a property management company like us can be beneficial in helping to manage your funds. They can also handle some of the headaches, repairs, tenants, and vacancy issues that come along with owning rental properties!
To make sure everything runs smoothly, always make all policies regarding the deposits known to tenants. Be as transparent and communicative as possible to avoid any conflicts. Always strive to make sure you and the tenant are on the same page! And remember to treat them the way you would like to be treated!