tenants security deposits

[Elvin Torres]

hi eveyone. in what kind of account do you place tenants security deposits?

[Allan C.]

Unless regulated by local laws, I put deposits into a high yield or investment account. You should view deposits as a cash generation fund, and not capturing 5%+ yield on deposits is just leaving money on the table. 

I'll use an example - let's say you have $100k of deposits that isn't sitting in a high yield account. You're missing out on $5-15k annual revenue. You don't need to segregate your deposits from operating funds (unless legally required) if you are disciplined enough to track it by spreadsheet.

You need to maintain some liquidity for tenant turnover, but you don't need 100% of your deposits available. Depending on size of portfolio and market conditions, you typically don't need more than 10-20% liquid. But that's a risk-reward situation you need to self assess.