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Tips for Property Managers and Landlords on Security Deposits

By virtue, security deposits don’t really have to look very risky and complicated. Here are some tips for property managers and landlords alike to help them avoid these kinds of situations:

Tips for Security Deposits

  1. Be familiarized in your own state laws. There should be governing state laws that would dictate one’s limitation in the collecting and paying procedures for security deposits. Even the depositing time into the bank is heavily required by the law at some states. Do not be satisfied in simply understanding them, try to master every clause and supplement they have since some of them stress the importance of non-discriminatory and equal treatment limitations, particularly in residential property applications. In addition, also try to become familiarized where deposits should be kept and how quick it must be, how are interest payments conducted, and if it has to be supplemented with reports.

  1. Never fall into the temptation of charging less than your entitlement. This unethical practice may seem to be attractive to more potential tenants at first. However, its consequences would definitely be gravely felt in the long run. The best practice would always to stick to what is prescribed so that qualified tenants would be properly trimmed and nourished, leaving behind those financially unstable or those that moved out without notice. In addition, it can serve as your protection from the risk of defaulted rents.

  1. Security deposits should not be treated as additional rental fees. A win-win situation between you and your tenants would depend on the treatment of security deposits. After all, you don’t want to be badmouthed to others simply because you don’t justly return the security deposits they initially pay for.

  1. Invest in providing pre and post-videos for the vicinity.As noted by some experts in real estate, the hottest issues between a landlord and tenant would always be the move out inspection and proper deductions in security deposits. The best way to limit all arguments regarding the matter is to document it all in a video prior to moving in and after moving out. Copies of such videos should be provided to the tenant later on, and to a legal counsellor when necessary. When this simple step is put into practice, all issues would be easily resolved.

  1. Place security deposits in trust accounts – Always make room for trust accounts in your local bank for security deposits. They should never get tangled up with your other accounts, especially in your personal money, as the possibility of accounting confusion might lead you to spend it eventually. Aside from that, you can also keep it protected in the event of forfeiture due to legal issues and/or bankruptcy.

  1. Property management never was real estate sales – There are lots of differences, particularly the applicable rules between the two. Never treat security deposits as if they were pre-sales money or down payment. Even if you have claims that you’re a licensed broker, it still doesn’t mean that you should act like any expert in legally handling escrow money such as those. Always aim to have training in handling such matters.

  1. Conduct self-audit regularly-  Anyone who can cleanly come out from a self-audit measure deserves to handle security deposits. After all, one indirect effect of mishandling it would be distrust, frustration, and bad publicity

  1. Keep property owners within the “loop” – Take time to know your property owners and if they understand your policies and procedures for their security deposits. Again, you can bring this up in the form of a video since it could become a repetitive statement that you might not want to be missed out with some important details.

Hopefully these expert tips will help you avoid any future problems with security deposits! Be sure to reference our “9 Amazing Tax Deductions for Landlords.”