I am a newbie investor and would appreciate
your answers to a question I have ...
I have 3 rental properties and have a total security deposit of approx. $6K from these 3 properties.
Let us assume - not all my tenants will leave at the same time and I can manage to refund each one their deposit (if need be from another source).
My question -
What's the best way to store this money or for a lack of better word - how to make this money work for me?
I know I should have a trust account and keep it but just curious how can I make money out of this money? Or am I getting it all wrong and the best way to keep this is in checking trust account (which almost gives next to nothing interest).
Please pour in your thoughts and bell this newbie!
Thanks for your pointers!
Check your State Law. But in New York you're only allow to collect annual administrative expense of 1% of the deposit. All other interest earned belongs to tenant. Don't forget it not you're money to do what you want with it. It belongs to your tenants.
Not a good idea.
1) It's not your money. You should not do anything to jeopardize it.
2) You may be breaking the law, depending on your municipality.
3) Even if you aren't breaking the law, if you get in a court battle with a tenant, a judge may want to see you have those funds set aside.
Don't do it.
Some states require it to be in a trust. Others require you to provide details to the tenant as to the bank account it's held in. Most importantly, you need to follow your state and municipality laws.
Secondly, you don't want to use the deposits. It puts you in a bad position if you need to show those funds set aside. Be sure your records indicate they are set aside in your account or in a separate account.