How much security deposit for rental

There are few aspects of rental management that appear more straightforward than collecting a tenant security deposit. Taking the tenant security deposit for granted is one of the biggest mistakes a landlord can make. Each state has its own laws regulating how to handle a tenant security deposit. Here we will discuss some of the key things to keep in mind, from how much the landlord may demand to what situations a security deposit typically covers.

A security deposit is intended to reimburse the landlord in the event of damages or other losses such as non-payment of rent. The first order of business is to determine how much money to collect for a tenant security deposit.

This amount is actually dictated by state law and varies widely across the country. The Balance has put together a handy guide to security deposit limits state-by-state, but you will need to check with your own counsel because laws in this area change frequently. In around 20 states or so, there are no limits to the size of the security deposit a landlord can charge. Some states split the deposit into different tiers. In this article: How to determine a security deposit amount?

When should I collect the security deposit? How should I hold the security deposit? What do I do if the security deposit accrues interest? When must the security deposit be returned? When can the security deposit be kept? How should security deposit disputes be handled? Want more landlord tips and articles? Sign up for our monthly newsletter: Email address. We respect your privacy.

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Returning Deposits. Keeping Deposits. Usually, the amount you'll charge for a security deposit is tied to the amount you charge in rent. Typically, this amount is equal to a certain number of months' worth of rent, such as one or two months.

Notably, state laws, if applicable, typically limit the security deposit to a certain number of months' rent as well. The higher the monthly rent is, the more you can charge in a security deposit. For example, while you might charge one month's rent for a one-bedroom apartment, for a three-bedroom apartment, it may be worth trying to collect two months of rent. Many landlords try to keep their security deposit amounts on par with what other landlords in the area are charging.

If you are charging significantly more than your competitors, you may find it hard to rent out your unit. For example, if the prospective tenant is choosing between your unit and another similar rental unit, the tenant may end up going with the unit that comes with the least amount of upfront cost.

Depending on your tenant's unique circumstances, you may want to charge additional deposits on top of the security deposit. Many landlords also charge deposits for pets and for any tenant improvements to the unit, often known as move-in fees.

Setting these fees is a lot like setting your security deposit fee. Check your state's laws on the issue. Some states allow for pet deposits while others allow for pet fees or pet rent. While these three names may sound similar, they're all slightly different, so make sure you know what's allowed in your state.

In California, for example, pet deposits of any kind are not allowed, and landlords can only collect security deposits. Also, check out the competition. Now that you have a better idea of what you can charge in terms of deposit money, the next thing to talk about is when it's acceptable to keep a security deposit.

Typically, there are five occasions when it is acceptable to keep the entire security deposit, or at least a portion of it:. Damage to the property is probably the most common reason why landlords end up keeping a tenant's security deposit. Keep in mind, however, that "damage" is not the same as normal wear and tear. While things like faded paint or worn carpet would not be an acceptable reason for keeping the security deposit, larger issues like holes in the walls or scratches on the floor may give you cause.

If the rental unit requires substantial cleaning after the tenant moves out, that may be cause for keeping the deposit as well. Again, in this scenario, the necessary cleaning must go above and beyond what you would normally do in order to get the unit ready for your replacement tenant.

If the tenant does not pay rent, you should be well within your rights to keep the security deposit as compensation.

However, you may want to make this clear in your lease agreement so there is no confusion.