Best Practices for Security Deposits.

[Kyle Haney]

Hello BiggerPockets Community,

I am a fairly new investor and have been rehabbing an investment property in Mt. Vernon, Indiana that is a fourplex. I'm curious to see how other investors handle security deposits especially when you are raising the value of a property with existing tenants. Here are a few of my questions; 

1. It is has been recommended to me not to have the security deposit equal to the rent rate. This prevents the tenant from thinking that the security deposit also acts as the last months rent. Does anyone have best practices or rules in place that decides the amount of the security deposit for your investment?  

2. How do you handle a security deposits with a tenant that renews after the rent is increased or the value of the property is increased? Has anyone asked for an additional security deposit when a tenant renews based off of increase value in the property?

3. One of the tenants I inherited with this property from the previous owner had not fully paid their security deposit. This tenant has since moved out of the property and luckily I did not have any significant costs due to damages to the apartment. Are there any recommendations for the best way to handle this type of situation? 

4. The previous owner did not document the state of the apartments upon move in for the tenants I inherited when I bought the property. Therefore this made it difficult for me to say that any existing damages were due to the tenant or were there upon move in. The property was inspected and walked through prior to purchase and there were no significant issues found at the time. Does anyone have recommendations for handling poorly documented move-ins when purchasing a rental property?

Thanks in advance for your input and advice!