If you are planning on renting out some property that you own, then you want to be sure that you know how to handle certain transactions properly. This will help to ensure that you are successful and are less likely to run into legal problems in the future. Here are four tips to help you understand how to handle security deposits:
- Know the Laws: First off, you want to know what the laws require in your state for how much you should be charging at the very minimum. You will also want to know how soon security deposits need to be returned to your tenants after they have moved out. The best way to know the laws that revolve around this issue in your state is to hire a property manager who can provide details on these laws based on their expertise and knowledge in the field.
- Don't Charge Less Than What's Allowed: Many people will try and charge less for their security deposit because they want to get their property filled more quickly. However, not only is this not good legally if you are charging less than your state's minimum requirement, but it also guarantees that those who have lower incomes are more likely to try and rent your space. Most of the time, those who cannot afford a high security deposit will also not be able to afford rent and thus will be less likely to pay on time.
- Keep the Security Deposits Separate from Rent: When you deposit security deposits in the bank, you want to do it separately from where you deposit rent checks. This is important because security deposits need to stay safe and untouched. If you deposit them in a trust fund, for example, then this money will not be able to be touched if you were to file bankruptcy or have other problems financially. By protecting this money, you guarantee that your tenants are able to get their security deposits back without stirring up any legal trouble.
- Write Down the Condition of Your Property: Before property is rented out, you should be documenting the condition that your property is currently in. This will help ensure that taking some of the security deposit for repairs on the property after the tenant has moved out will be justified. If your tenant decides to push a claim on you, having documentation will ensure that you are protected.
By utilizing these four tips, you can be sure that you are more likely going to have a great experience renting out your property. Don't forget to consider the hiring of a property manager who can better help you manage these funds and payments that will be exchanged when you rent out property.