As a Charlotte landlord or property owner, you likely know there are many rules about security deposits, like how much you can ask for and what you can use it for. And even though it's not mandatory, not collecting a security deposit can put you at risk if a tenant leaves suddenly or damages your property.
When you do ask for a deposit, there are laws about how much it can be, how to manage it, and when you should give it back. Simply put, it can get confusing pretty quickly. That's why, in this quick guide, we're going to explain all the important things you need to know when managing rental security deposits for your rental properties.
Defining a Rental Security Deposit
A rental security deposit is an amount a tenant gives to their landlord.
This money acts as a promise that the tenant will respect the lease agreement. As the landlord, it gives you the confidence that the rent will be paid, the property will be well looked after, and no excessive damage will occur. If tenants follow all the lease rules, they get this deposit back when moving out.
How to Calculate a Rental Security Deposit
To figure out how much to request for a rental security deposit, remember these key factors:
- The monthly rent (often, the deposit is one or two times this amount)
- The type of property (large homes versus smaller units can vary)
- What similar properties charge (so you're not undercharging and attracting unqualified renters)
- The tenant's rental history and credit score
These elements can help gauge potential risk and set a fair rate for a deposit.
Rental Security Deposits: When to Use Them
Rental security deposits help landlords cover repair costs for damages caused by tenants beyond normal wear and tear. However, you can also use them to pay for cleaning expenses to return the property to its original state after a tenant moves out.
In instances of unpaid rent or utility bills, these deposits come in handy, too. You can keep the deposit if a tenant ends their lease prematurely; in this case, the security deposit might be used to offset lost rent before finding new tenants.
How to Collect Security Deposits
Every state has its own rules for handling rental security deposits.
In some places, landlords must put this money into an account that earns interest. The interest then belongs to the tenant. Other states have simpler rules, but landlords cannot mix this deposit with their money. Ultimately, these rules are in place to ensure the deposit is used correctly.
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