Congratulations! You've finally bought and renovated your first property and you're ready to start bringing in tenants! You're excited about this new venture, but there's one thing that still confuses you: security deposits.
What is the security deposit definition anyway? What are security deposits for, and can you keep all of that money?
As a landlord, it's up to you to learn about these things so that you can stay on top of what's happening with your rentals.
Let's talk about it. Read on for a brief guide on security deposits.
What Are Security Deposits For?
Security deposits protect both the landlord and the tenants. While this may seem like an unnecessary expense, it's essential!
When a new tenant is about to move into your rental property, you'll collect a security deposit alongside whatever other fees that you have for the apartment (first month's rent, last month's rent, pet deposits, and so on). Instead of this money being part of your income, you have to set this money aside.
At the end of the tenant's tenancy, they will expect to receive their security deposit in full unless there are extenuating circumstances (more on that later). Legally, it's your responsibility to return the deposit.
It's a good idea to keep the tenant's security deposit in a safe place so you don't have to go out of your way to find the money later.
How Much Can You Charge for a Security Deposit?
In the state of Virginia, a security deposit can cost no more than two months' rent. This means that if the tenant is paying $1,000 per month for your property, the security deposit cannot exceed $2,000.
It's prudent to charge less, but this is up to you. Many landlords choose to charge the equivalent of one month's rent or slightly above or below. If you choose to ask for a larger deposit, this may make your property less desirable to fantastic tenants who have other options.
All About Returning (or Not Returning) Security Deposits
This is perhaps the most important thing to know about security deposits. As we mentioned, you must return a security deposit when a tenant moves out unless there are extenuating circumstances.
If the tenant has not paid rent or if there is damage to the property, you can retain enough of the security deposit to cover that cost. You must tell the tenant why you're retaining some or all of the deposit, and it's in your best interest to have photo evidence.
Keep in mind that you cannot keep a deposit for ordinary wear and tear. Normal wear and tear is the responsibility of the landlord, not the tenant.
Some landlords choose to allow the tenant to use the deposit as their last month of rent. This is not a good idea just in case there is damage to cover, but it's up to you.
Collecting Security Deposits Is Easy
Collecting security deposits helps both you and your tenants. Protect yourself against potential damage by collecting a small fee at the beginning of each tenancy.
If you're struggling with deposits, property managers can help! A good property management company will help you collect deposits, negotiate with tenants, and more.
Contact us at Homeriver Group so we can start working together today!