Can I invest security deposits in California?

Question

Hey there guys,

Hate seeing good money sitting and doing nothing, granted that is the purpose of a 'deposit'. Are we allowed to invest tenants security deposits? We have enough liquid cash personally to cover any losses.

Thanks in advanced!

Dominic Bouchard · Answer

@Robert Lee Normally you should have your tenant money in different accounts. There is probably three main reason for that.

If you keep deposits in the same account:

• You can't track the money
• There could be accidental spending
• Interest accrual

In the end, it all depend on your state/city laws. In California: http://www.yourlegalcorner.com/articles.asp?id=102...

Here's an excerpt:

There would be different laws for each State (and each city). Highly recommended to consult your State's laws or your lawyer for that.

Hope that helps!

Robert Lee · Answer

Thank you everyone! seems like it can be done, but may not be worth the headache.  will consult with legal!

Thanks again!

Randall Brown · Answer

I read once that - in California - you do not have a fiduciary responsibility to your tenant, therefore you can use the funds as you please.

No legal advice given.

Rick S. · Answer

@Robert Lee I don't know of any specific laws for CA that require a separate bank account or interest to be paid on the deposit, however I would not recommend investing it.  I would recommend keeping it in a separate account for tracking and not mixing it with your personal funds.

CA deposit rules:

https://www.thebalance.com/california-security-dep...