How much to charge in a security deposit?

Question

I've been mulling this over for a while now and I'm not sure how much is the right amount to charge in a security deposit. So I wanted to get some opinions. My gut says something like "two months the rent" but that can be a lot for people. I currently rent and I don't remember how much the deposit was, but it wasn't much. I live in Texas and from what I've been able to research it could take up to 2 months to evict someone. So my concern would be that I'd be out to months rent and then if I happen to get one of the horror stories of a tenant trashing the house out of spite and anger I'd want to be able to repair any damages.

So my question is how much does everyone else charge? Do you have a formula based on the price? Is it the same for every property? Or do you have some trick to figuring it out? Thanks in advanced!

Paul S. · Answer

@Michael DeStefano I charge one month rent for both my NC, and my FL homes.

James Murray · Answer

I leased both apartments and SFR's in the Cincinnati area. In our area it is tough to get more than a month's rent for a deposit, especially in some low end markets, unless there are pets involved. It often seems to be the norm here to provide some sort of rent concession or move in special to further attract tenants, especially for apartments, such as: half-off first month, free cable/internet, gift cards, etc.

The one rule I have always stuck to is: you must get at least one month's rent for the deposit, any less and the tenant doesn't have enough skin in the game to prevent them from packing up and leaving in the middle of the night. If you are going to run a move in special, make sure you insist on a full deposit and take any sort of tenant benefit off of the first months rent.

A move in special in my opinion might be a good option if you are trying to quickly lease up an entire apartment or multi-family building, but I think it is unnecessary for leasing SFR's unless they are in a poor school district or an undesirable area.

Hope this is useful. Good luck!

John Thedford · Answer

I had brought this up in another thread. I got burned by a tenant and it almost cost me several hundred dollars. My new policy is 1.5 time the monthly rent. Having the larger deposit gives you a cushion if the tenant tells you to keep the security deposit.

Che Chiu Wong · Answer

Yes, consistent with most of us here.  If possible, charge as much as you can.  This is how you minimize your likelihood of large losses.

Kimberly H. · Answer

We collect the higher end of what is customary in our rental market.

Account Closed · Answer

@Michael DeStefano

Enough top cover any damage and not so much that it's higher than market custom.

That said, if particular tenant is not well-qualified, always request a co-signer and charge a higher deposit.

Your deposit amount is dictated by the cost of contractors in your area (average cost to repair tenant damage) and market convention... generally 1 to 2 months rent.

Lorraine Pennington · Answer

Hey @Michael DeStefano

Google "Chapter 92 of the Texas Property Code"and the first up is the actual law for your state so you can confirm if it is the same as CA. Skip through to find the security paragraph. It would be good for you to review the whole thing anyways since your a landlord there. Worth double checking as you never know ... Texans like to walk their own walk so it may actually be different. ;p

Mike Sattem · Answer

Hey @Michael DeStefano,

Everyone here is on point with what they are saying. One thing I have done to help market and get a larger deposit is to spread out the payment timeframe. i.e. collecting first and last upfront with a large deposit payable over another couple of weeks. This protects me by getting two months rent upfront, and allows my tenants to essentially transfer their deposit from their current property to me once they get it back. This allows me to charge a larger deposit since most renters cannot swing essentially three months of rent before they move out of their current property.

Adam Kent · Answer

I charge a min of $1000. Some of my rents are greater than $1000 so in these cases I charge one month rent. I also have a property that rents for less than $1000.  I use the amount I charge for a security deposit as part of my tenant screening process.

Michael DeStefano · Answer

@Kyle J.  I see. Is there a website that might tell me some of that info? Or could I just find what the state will let me charge on the state website?

How much to charge in a security deposit?

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