Security deposit is not enough
Charlotte, NC · Member since 2026 · 7 posts · 5 votes
Security deposit is not enough
Most Popular Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes@Andy Patel I'm sure you could find additional insurance for your property but it's not going to be cheap. Normal landlord policies don't include intentional or malicious damage like vandalism, spray paint, or disgruntled tenants breaking doors and drywall. I don't want to cast blame but it's part of the game. Screening tenants and doing inspections twice a year prevents most of this risk. Management needs to document the condition before tenants move in.
Paying for an additional policy eats into your CF as well. We all know how insurance companies nickel and dime policy holders. In my opinion it's not worth stressing about. Focus on the upfront screening techniques, lease agreement, and inspections. I walk our rentals twice per year, keep it random, and give 48-72hr notice.
My opinion; $10k for a single turnover is insane. We had a one about 6 months ago and it's cost us roughly $4k including carpet in bedrooms, new kitchen flooring, screen door repairs, touch up painting, sewer cleanout, and a cosmetic basement remodel/cleaning due to age. I don't know how big your rentals are but $10k is wild.
14 Replies
- Technology · Vancouver, BC · Member since 2026 · 258 posts · 64 votes2d
Hi @Andy Patel
Two $10,000 turnovers in one year is a real hit, and you're right that a bigger deposit only solves part of it. The bigger lever is catching the damage while the tenant still lives there.
I'd look at three things.
First, a walk-through every 90 days with photos of each room. Drywall holes and unapproved paint show up early, and a tenant who knows someone is coming by in a few weeks tends to ask before changing anything.
Second, an easy way to ask. If hanging a TV or painting an accent wall takes a quick written request and a yes, more tenants ask first instead of doing it and hoping nobody notices.
Third, dated move-in photos and a move-out checklist that matches them line for line. When the bill goes past the deposit, that record is what lets you go after the balance in small claims instead of absorbing it.
On the insurance question, I'd ask a local agent which products in North Carolina follow the tenant rather than the property, because what's allowed changes from state to state.
Here's to easier turnovers next year,
Lee - 2dJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
@Andy Patel I'm sure you could find additional insurance for your property but it's not going to be cheap. Normal landlord policies don't include intentional or malicious damage like vandalism, spray paint, or disgruntled tenants breaking doors and drywall. I don't want to cast blame but it's part of the game. Screening tenants and doing inspections twice a year prevents most of this risk. Management needs to document the condition before tenants move in.
Paying for an additional policy eats into your CF as well. We all know how insurance companies nickel and dime policy holders. In my opinion it's not worth stressing about. Focus on the upfront screening techniques, lease agreement, and inspections. I walk our rentals twice per year, keep it random, and give 48-72hr notice.
My opinion; $10k for a single turnover is insane. We had a one about 6 months ago and it's cost us roughly $4k including carpet in bedrooms, new kitchen flooring, screen door repairs, touch up painting, sewer cleanout, and a cosmetic basement remodel/cleaning due to age. I don't know how big your rentals are but $10k is wild.
- 2dJames JonesPro MemberInvestor · Collierville, TN 38017 · Member since 2017 · 1k+ posts · 740 votes
Andy, two $10,000 turnovers in one year will eat a year of cash flow if you let them, so I treat this as a management problem, not a deposit problem. A deposit was never going to cover a $10,000 rehab. My in-house team at Memphis Passive is in the houses regularly, and we document condition at move-in, during the tenancy, and at move-out with photos. That is what catches damage early, before it becomes a full rehab. Section 8 inspections help too — they force a look at the house during the lease. I also underwrite turnover cost into the deal before I buy: buy under $100K, ARV $180K-$265K, rent $1,395-$1,950 for a 3BR+ on Section 8, and if the rent does not cover vacancy, repairs, and turnover, I pass. Are your turnovers coming from long tenancies, or from short stays?
- Member since 2017 · 117 posts · 62 votes2d
Andy, a few things nobody has said yet that are specific to North Carolina.
You can hold more than one month. NC caps the deposit at two months' rent on any lease longer than month to month, so on a 12 month lease you could take up to $4,200 to $5,000. Plenty of landlords do that only for applicants who come in a little weaker, which keeps your best applicants from walking.
Check how much of that $10k is actually chargeable. Paint is the big one. Courts treat interior paint as something that wears out over a few years, so if a tenant was there three or four years, most of a full repaint is your cost no matter what the lease says. Holes, gouges and unapproved colors are theirs. Splitting the bill that way before you send it makes the part you do charge hold up.
Do the paperwork on the clock. NC gives you 30 days after they leave to send the itemized list (60 if a repair cost isn't final yet, with an interim list at 30). Miss that and you can lose the right to keep any of it.
For the balance over the deposit, small claims in NC goes up to $10,000, so a single bad turnover fits there. Dated move-in photos room by room are what win it.
On the insurance question: the deposit replacement products you'll find mostly replace the deposit, they don't stack on top of it. Ask exactly what they pay out on before you swap a real deposit for one.
And +1 on the walk-throughs others mentioned. A look twice a year with notice catches the drywall while it's a $150 patch, not part of a $10k turnover.
- Property Manager · Denver, CO · Member since 2026 · 23 posts · 10 votes2d
@Andy Patel Two of those in one year is rough, I'm sorry you're dealing with that!
On the insurance/bond question since that's the part still open, there are a couple of things that follow the tenant instead of the property:
- deposit alternative or surety bond programs. The tenant pays a fee instead of a cash deposit and you get coverage that's usually bigger than one month's rent, then the bond company goes after the tenant for whatever it pays out
- requiring renters insurance with liability coverage in the lease. That helps with accidental damage like a kitchen fire or an overflowing tub, but it won't cover wear or intentional damage so it's only part of the answer
Also, I believe NC lets you hold up to two months' rent as a deposit on a lease that's longer than month-to-month, so you may have room above the one month you're collecting now. I'm not a lawyer though, so check that before changing your lease.
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes2d
Clearly the tenants were not adequately screened, and apparently you/your PM have not performed an adequate annual inspection and/or managed your tenants.
Insurance for this is not an answer. It all starts with screening; the standards and criteria used; the written terms and conditions of the rental agreement AND communicating these effectively to the prospective tenants; following through with tenant management holding them to the terms of the agreement during their tenancy and holding them accountable early and often until they get the message if they do stray.
For the drywall repair...Offer a boatload of command strips for pictures and other items. Already have pre hung shelves and TVs. Can get great Costco TVs these days for $300-$700 that work well enough. This is the route I've been going and it's cut out a lot of these items. At minimum have a universal wall mount already installed for the tenant.
- Real Estate Agent · Memphis · Member since 2026 · 632 posts · 362 votes1d
With two turnovers costing over $10K each, I'd look into tenant damage protection programs first, but pay close attention to coverage limits and exclusions. Standard renters insurance usually won't cover damage a tenant causes to the landlord's property, and some damage protection products exclude intentional damage or certain types of repairs. I'd also ask your insurance agent whether there's any landlord policy endorsement that could help with specific losses.
Beyond insurance, I'd keep a dedicated turnover reserve and review how much of those drywall and painting costs qualify as actual tenant damage versus normal wear and tear. Even with additional coverage, there may still be a significant gap, so having both financial protection and a reserve makes more sense than relying on the deposit alone.
- 1dAshish AcharyaBusiness MemberCPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
The silver lining on those turnovers is that drywall repair and painting to put a unit back the way it was count as repairs, so the full cost is deductible this year even when it runs past $10K. That changes if you upgrade while the walls are open, like new flooring or a better finish than what was there before. The upgrade portion gets capitalized and depreciated, so have your contractor invoice the repair work and any upgrades separately.
The part of the deposit you keep for damages becomes rental income the day you apply it, and the repair cost offsets it. If you’re on the cash basis, the 75% the tenant still owes isn’t a separate write-off, because you never reported it as income, but you’re already deducting what you spent on the repairs. If you later collect any of it through small claims or a collections agency, it’s income when it comes in. The same goes for any lease-tied insurance or surety product: premiums you pay are deductible, and any payout either counts as income or reduces the repair expense. Happy to connect!
INVESTOR FRIENDLY CPA®4.9242 Reviews - Virtual Assistant · Remote · Member since 2020 · 151 posts · 65 votes1d
Two $10k turns in one year is brutal, and the deposit was never going to cover it. A deposit is one month of rent. A bad turn is a rehab. So the fix is in the books, not the deposit amount.
First, keep the deposit as a liability, not income. It only becomes income the day you apply part of it to damages, with the itemized statement on North Carolina's 30-day clock. Second, code every dollar of a turn to that property, split three ways: tenant damage, normal wear, and upgrades. Paint after a three-year tenancy is mostly your cost. Holes and unapproved colors are theirs. If those aren't split in the books, you can't defend the charge or learn which properties keep eating you alive.
Third, fund a turnover reserve per door, a real monthly transfer into a separate account, not just a line in the budget. $75 to $100 a door a month won't cover a $10k turn by itself, but two turns in a year stops being a crisis and starts being a planned draw.
- Chicago, Cook County · Member since 2026 · 45 posts · 19 votes1d
Two $10k turns hurts, and
drywall and paint are the
part you can shrink.
- Pick one paint color and
sheen for every unit. Touch
ups blend, so you patch a
wall, not the whole room.
- Write that color and sheen
down. Keep a gallon on site.
- Take dated photos of every
wall at move in and move
out. Close ups of each hole.
- Get turn bids by line item.
Patches, rooms, trim. Lump
sums hide padding.
- Put a damage price list in
the lease. Per hole, per
wall. It makes charges
easier to back up.
Kyle
- Monroe, Orange County · Member since 2026 · 13 posts · 2 votes1d
Couple of things that help here:
1. Document the damage with dated photos against the move-in photos, plus receipts or contractor quotes for each item. That's what holds up if the tenant disputes it.
2. Send the itemized deduction list within your state's deadline. Miss it and many states make you forfeit the right to keep any of it, even for real damage.
3. For the amount over the deposit, send a written demand with the itemized list and a payment deadline. Some tenants pay just to avoid court.
4. If not, small claims is usually the right venue, and a judgment can go to collections. Whether it's worth chasing depends on the amount and whether you have a forwarding address.
For next time: check your state's cap on deposits. Some allow more for pets or a higher-risk applicant, and a pet deposit or pet rent covers a lot of the usual wear.
- 1dDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
At first glance, seems like a lot.
Questions:
What pics/video did you receive documenting the damages?
How much of this was tenant caused damages?
How much was perhaps deferred maintenance?
How much of the drywall & painting were caused by contractor having to cut holes to fix plumbing and/or electrical, HVAC issues?
What are you doing to "tenant-proof" the property, to minimize next turnover costs?
Logical Property Management4.9465 Reviews - 16hOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 732 posts · 272 votes
Quick take from the insurance side: some landlord policies do cover vandalism or malicious damage by a tenant, but many exclude it or need an endorsement, and normal wear and paint never qualify. Pull your policy and check that wording. A surety or deposit-alternative program is the main option that follows the tenant. Happy to provide more assistance by DM.
Royal Oath Insurance Group4.9211 Reviews
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