Security deposit account types

6 Replies

Hey yall! I just closed in 2 multi family properties this month totaling 18 units. I need to open account to put security deposits in. Does this account have to be a "trust account" or can it be any non interest bearing escrow account that is separate from my business checking account?

Thanks for your help!

This should be defined by your state laws. Some states say it just has to be in a separate account. Some say it must be an escrow account. Don't take advice from anyone who doesn't know Georgia laws (assuming properties are in Georgia)

Like @Andrew B. said, this depends on your state law.  I am not a lawyer and this is not legal advice.

I am told that in some states, you can put the security deposits in an interest-bearing account, but if you do that, the interest belongs to the tenants, not you.

Here in Missouri, until relatively recently, there was no legislation on this.  A couple of years ago, the law changed to say that security deposits had to be kept in a "trust".  Some landlords pointed out that to set up a trust, you usually need to hire an attorney, declare a trustee, and all that stuff - not that big a deal for a 100-unit apartment complex, but a bigger deal if you only own a couple of single-family houses.  There was an effort underway to amend the law to just say you had to keep it in a separate account, not necessarily a full trust, but I don't know if that went through.

What most Missouri landlords I know are doing is getting a separate regular savings account at the bank where their business checking account is, and putting all the security deposits in that.

This site (which is run by Cozy, a payments provider) talks a little more about the laws in Georgia.  You should talk to a lawyer or experienced local investors to know for sure, though. https://www.landlordology.com/...

I am not a lawyer and this is not legal advice.  I am not affiliated with any sites mentioned.

@Josh McCullough it's good to hear from a familiar name! I had no idea that you had moved up into multifamily. I'm interested in starting off there myself. We should touch base whenever you have the time!

Originally posted by @Tyler Hardy :

@Josh McCullough it's good to hear from a familiar name! I had no idea that you had moved up into multifamily. I'm interested in starting off there myself. We should touch base whenever you have the time!

@Tyler Hardy

Yeah, I found these 2 deals at just about the same time and bought both. An 8 unit apartment on West Taylor Street in Griffin, and a 10 unit mobile home park up in Elberton. Both value add, turn around deals so there's LOTS of work ahead!