who should keep the security deposit$$

Question

I am an out of town investor. As such, I depend on a property manager (PM) to sign up new tenants, collect rents etc. Some security deposit $$ are in my bank,with a dedicated account and some have been kept with the property manager. I want to consolidate the funds, and wonder where I should keep the money.

Possible solutions I am looking at:

1.  Bring it all to my bank, within a dedicated account and give my PM access to account, in case we have to return money

2. Transfer the deposits I have to the property manager, so I can delegate the task of managing the deposits.

My PM thinks its a better idea that he keeps the $$, but he cant say why. I want to hear what this community thinks.

Amy Aziz · Answer

@Greg Meyer Do you trust your PM to manage the security deposits without being reckless?

Dick Rosen · Answer

As a PM I always keep SD in a separate Trust account because it's still the Tenants money. When the tenant leaves for whatever reason I am the one being held accountable for that money to the tenant not the Landlord. And like someone else said, if you don't trust your PM holding the SD you need a new PM.

Steve Morris · Answer

"Transfer the deposits I have to the property manager, so I can delegate the task of managing the deposits."

If you don't trust the prop mgr get a new one.  I would leave it with them since it is tenant money, NOT yours, and upon move out they need to give the tenant a full acctng for anything beyond normal wear-and-tear.

However, I'd get a full accounting on a regular basis.  If you keep it, then you'll need to pay the prop mgr for reimb to the tenant.

The only time it might be diff is if you're selling the property.  At close, SOP (at least in OR) is you get a debit for tenant deposits and buyer gets a credit.  You would keep the actual deposits after closing since you already gave the buyer a credit.

Greg Meyer · Answer

You are right; if he goes bankrupt it would be a huge concern.I always keep security deposit separate; I am not sure of what the law require here in VA.Thanks

Bjorn Ahlblad · Answer

@Greg Meyer when I had a PM I always got the money and put it into my REI account (in Wa you do not have to keep it separate). I would never let the PM keep it; what if they go out of business or just decide to not pay it back?

Greg Meyer · Answer

I keep the records of everything including how much we have in security deposit. So, I trust that he would not abuse. However, isn't it a better idea to keep it in an account we both have access to?

who should keep the security deposit$$

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