Is my security deposit too high?

[Morgan Ward]

Hi I own a duplex in Baltimore city and I'm wondering if my security deposit is too high? I feel like I haven't been getting enough hits on the listing in the past month. I've sent a couple applications but no one has filled them out. The security deposit is 2 months rent not 1. I've listed it on Zillow and a couple other places. It's my first rental and I'm living in the other unit, I guess I'm just wondering if 2 months deposit is too high for the area?

[Russell Brazil]

Think about it in terms of any business competing with any other business.

99% of landlords in the entire region of DC/Baltimore require 1 months rent. You are requiring 2 months. So where are the consumers going to go to get the product theyre purchasing (housing). Theyre going to go where the cost is 50% less.

[Caleb Brown]

I think your price would have a bigger impact. Is it at market rent or too high? Do you have professional photos? Those will make a difference. Have you staged the home to make it feel homey? What platforms have you listed it for rent? You could share a link so we can critique.

[Russell Brazil]

Think about it in terms of any business competing with any other business.

99% of landlords in the entire region of DC/Baltimore require 1 months rent. You are requiring 2 months. So where are the consumers going to go to get the product theyre purchasing (housing). Theyre going to go where the cost is 50% less.

[Jamal L.]

Yes, It is more than what most landlords are requesting. As an alternative you could as for a co-signer on the lease with acceptable credit or only except individuals that meet a certain credit score threshold.  This way you get the security you are looking for and meet the market rate most tenants can pay. 

[Joshua Davidson]

2 months rent is the maximum allowed by Maryland state law. To me, that’s excessive. 1 month should be plenty, and if you are having issues where it’s not, then you need to increase your rental standards and make them more stringent. 

[Ozzy Sirimsi]

Also what is the location???

Big part of Baltimore renters dont have 3 months in hand to move in.

[Theresa Harris]

It probably is.  Most people when they are moving, don't have a lot of money for the move, down payment and first month's rent.  Having to essentially pay 3 months' worth of rent is a lot.

[Robert Dalton]

Yeah, I would say it is.  In many states 1 month is the max you can charge.  From a comment above, I see 2 months is the limit there, but that does seem like it would chase away renters unless you are in a place where the renters would be wealthy.

[Mohammed Rahman]

Hi @Morgan Ward - rental listings typically only charge 1 month of security deposit. You should also verify with your city/state if it's legal to take more than that. In NYS/NYC, landlords can only charge 1 month for security deposit for residential leases. 

If it's legal to charge 2 months, then look at what the market is telling you. Not getting any hits on your rental means something needs to change, and most of the time it's pricing. 

Whether that's reducing your monthly rate, or charging lower security. Listen to the market. 

[Tim Jacob]

The state of Maryland has a 2 month maximum amount.  I would charge 1 month and add on more for pets depending on type of pet a flooring.  If you are worried about them being able to pay I just wouldn't take them.  I understand if you are in a lower asset class that might not be a possibility for you.  

[Melanie Thomas]

Hi Morgan! As a landlord, it's important to find a balance when setting the security deposit for your rental property. While it's common for landlords to request a security deposit equivalent to one month's rent, requesting two months' rent is not uncommon in some areas or for certain property types. However, it's possible that the higher deposit amount could be affecting the interest in your listing.

To assess if your security deposit is too high for the area, consider a few factors:

1. Local Rental Market: Research the average security deposit requirements for similar properties in your specific neighborhood or area of Baltimore City. This can give you an idea of the prevailing standards and help you determine if your deposit amount is significantly higher.
2. Competitiveness: Evaluate the demand for rental properties in your area. If there is a high demand, tenants might be more willing to accept a higher security deposit. However, if the market is slower and you're not receiving many applications, it could indicate that the deposit amount is dissuading potential tenants.
3. Affordability: Consider the overall affordability of your rental unit in relation to the area. If the rent is already relatively high compared to similar properties, a higher security deposit might add an additional financial burden for potential tenants, reducing their interest.
4. Local Regulations: Familiarize yourself with any local laws or regulations that govern security deposit limits in Baltimore City. Some areas have specific laws that limit the maximum amount landlords can request.

Based on your concerns about the lack of interest in your listing, it might be worth reconsidering the security deposit amount. You could reduce it to one month's rent or explore a compromise by setting it at one and a half months' rent. This adjustment may make your listing more attractive to potential tenants and increase the number of applications you receive.

Remember, it's always a good idea to consult with local experts, such as experienced landlords or property managers in your area, to gain more insights into the rental market dynamics and ensure you are setting competitive and fair terms for your rental property. Good luck & happy investing!