Security Deposit.....How much???

Question

Hey All,

I was wondering about how much deposit to ask for?

Also, what is security deposit in " Certified Funds"???? What does certified funds mean?

Daniel

Account Closed · Answer

My security deposit is exactly the same as one month's rent.  No one around here can come up with any more than that.

I almost never have tenants try to use their deposit for their last month's rent, and the few that have tried have backed down immediately when I reminded them that they didnt pay first and last.

I don't think any of my tenants can remember what they paid for deposits, so it wouldn't make any difference if the deposit is the same as the rent or not.

One thing I have statrted to do is to charge a non-refundable pet fee instead of a deposit. I'm allowed to do that by my state law.  Then the fee converts to a refundable deposit after the first year.

Tenants take better care if they can get their deposit back. A fee is nothing more than pre-paid damage to the tenants. So I prefer to use a pet deposit.

But now, if my tenants move out before the year is up, I get a little extra for the nuisance of a quick turn-over.

But the real benefit is that the lying little cheats who claim to want a long term rental when they know full well that they intend to move after 3 months will go some place else to rent as soon as they hear that it will cost them an extra $300 for lying about their intentions.

Jeff Takle · Answer

Sorry, bad link: Here it is: https://www.rentingyourhome.com/forms/State%20Security%20Deposit%20Laws.pdf

Jeff Takle · Answer

Here's a link to state-by-state security deposit laws provided by the Institute for Real Estate Management. (sorry for posting from my site, but I don't know where on the web it sits otherwise) http://www.rentingyourhome.com/forms/State_Security_Deposit_Laws.pdf

That has your legal guidelines. Wheatie nailed it on making sec dep slightly less than one month, in my humble opinion.

I'll take check if we're not handing them keys. No keys ever get transferred until all funds have cleared or they provide a bank certified check.

Christian Malesic · Answer

It is just not the risk for us.

The morale of the story for all others reading is "know your state laws and make an educated decision that makes business sense to you."

Daniel Lujan · Answer

Thanks to all the replied. Very helpful info here. You guys are awesome..

Daniel

Brendan O'Brien · Answer

Unfortunately one month is our limit here in the Granite State.  Others are completely right about the "use the security deposit for my last month's rent" BS line.  The real danger is that you'll take that deal, then they trash the place.  Never let them use the security deposit as the last month's rent.

Frank Adams · Answer

NEVER make it equal to one month's rent, for the reasons Wheatie explained. I always made mine MORE than a month, usually a couple hundred more. That way if they try any "keep my deposit for the last month's rent" shenanigans I've got a bit of cushion.

Frank

Jason Hanson · Answer

Daniel,

I make it about $50.00 bucks more than one month's rent.

Only accept money orders or certified checks from the bank.

Christian Malesic · Answer

"Certified Funds" (in layman's terms) means that the bank has locked the funds so they can not be used for anything else.  This usually means, they are put it escrow by the bank or a certified check is provided.

Another way to accomplish the same thing is cash or money order.

The idea is to prevent a bounced check (known as Non-Sufficient Funds or NSF).

The importance is to keep a tenant from giving you a bad check and then moving in.  If this happens, you still need to go through the eviction process to get them out which takes 60 + days in most states.  A NSF can be a criminal offense, but using one for a sec dep or first month's rent still only gives you the eviction process to physically get the tenant out of the property.

Christian Malesic · Answer

State laws can be very specific in this area, as they are in PA.

According to our Landlord and Tenant Act of 1951, "No landlord may require a sum in excess of two months' rent to be deposited in escrow..."

Further, "During the second and subsequent years of the lease or during any renewal of the original lease the amount required to be deposited may not exceed one month's rent."

Thus, to ease operations and to prevent missing deadlines on the potential change of security deposits held, we make our sec dep equal to one month's rent.  There are always the issues of tenants trying to use it as a last month's payment as indicated by Wheatie above.  This is the biz we are in.  There is very little legally that can be done to prevent this, in our state.