Determining appropriate deposit refund

13 Replies

Hello all!! Super grateful for the time and insight you people put into helping the fellow enthusiasts and for that I thank you and appreciate you.

So my fiancé and I are gearing up to take the dive into real estate investing. We spend a good amount of time trying to get our minds Murphy’s law ready, to the best of our ability. We like to think of problems that may come up and find the best solution. May sound torturous but it’s opened my mind to a lot.

Sooo, this may sound rudimentary to a pro but I was wondering how you guys determine or if there is a formula to use when it comes time to give a tenant their deposit back. At what point do you take it all, give back partial or give back the entire amount.

🙏🏻 thanks

Welcome to BP. The security deposit is returned minus expenses to return the unit back to the condition that the unit was given to them in. 

There is no formula or anything magical about it. 

Security deposit - repairs = the amount returned.  If the repairs are greater then the security deposit then the landlord would send the former tenant a bill for the remainder.  

Things you can’t charge for is normal wear and tear. But sometimes normal for one person isn’t really normal. 

Most people think they leave the unit in perfect condition and just want to demand their full refund.  Just follow the laws for your state and you’ll be fine.  

 

90% of the time you are going to return the whole deposit plus interest if your state requires you to pay interest on it.

Normal wear and tear typically can not cause you to with hold from the deposit.

The only time you are likely going to be in a position to keep the entire deposit is if the unit is totally trashed, in which case that deposit wont hardly cover the repairs.

Occasionally you might be witholding $50-$100 for some random minor repairs.

Originally posted by @Russell Brazil :

90% of the time you are going to return the whole deposit plus interest if your state requires you to pay interest on it.

Normal wear and tear typically can not cause you to with hold from the deposit.

The only time you are likely going to be in a position to keep the entire deposit is if the unit is totally trashed, in which case that deposit wont hardly cover the repairs.

Occasionally you might be witholding $50-$100 for some random minor repairs.

I think that’s a large assumption.  I’d say based on asset class of the property and how well a job someone does at being the PM will dictate the actual amount.

     My average turnover cost is typically me sending them a bill for more then the deposit amount.  But now I’ve gotten rid of the previous owners tenants I should be more in the half the deposit amount   Just because of my asset class. 

@Anthony Porembski , take detailed photos of the unit before the move in and do a detailed move-out inspection with photos.  Account Closed gave you the absolute best 'formula'--it's simple, but sometimes not easy.  The detailed documentation from your photos and inspection reports will be your best defence if you ever end up challenged in court for the security deposit refund deductions.

Make sure to follow your state's laws about the timeliness of sending the refund.  In PA if the refund letter/check is not sent out within 30 days, the ex-tenant may sue (and win) in court for 3x the security.  Be aware.

@Anthony Porembski The biggest deposit deduction we find is when tenants leave big items behind when they move out. Make sure to clearly outline in your lease what the removal charges will be for them leaving big items behind like: mattresses, couches, tables, chairs, etc.

Most of what a tenant does to a unit falls under “general wear and tear”

@Anthony Porembski Once the tenant has vacated you should perform a move out checklist. All items of disrepair that are not caused by normal wear and tear should be itemized with a repair/replacement cost. This amount should be deducted from the security deposit in addition to past due rent of utilities owed if any. This check list need to be given to the tenant. If there is a credit owed to them then pay that amount. If they owe you then request that amount.