For real estate investors who hold and rent income-producing property and manage them themselves, having a system for moving a new tenant into the property is critical to the success of that property. One of the most common disputes that arises between a tenant and a landlord has to do with how expectations were set before the tenant ever moved into the property.
Most landlords meet their prospective tenant at the property during the initial showing, as well as when the lease is signed and security deposit collected. However, I would venture to say that most landlords don’t take the time to truly set the tone and expectation regarding the condition of the property and the potential disbursements from the security deposit at the end of the lease.
Interestingly, if you Google something along the lines of “Disputing Security Deposit,” almost every page that comes up is from the perspective of a tenant. Most conflicts between a tenant and a landlord arise because the tenant feels the landlord unjustly withheld a portion (or all) of the security deposit when the tenant moved out of the property. While there are plenty of unscrupulous landlords who likely do take advantage of tenants, many landlords are justified in keeping the security deposit – but they simply didn’t set the expectation and appropriately document condition and costs up front.
In our business, we lease between 5-10 new properties every month. We’ve learned over the years that it’s best to have a system in place to make sure we don’t have the same disputes with our tenants at the end of the lease term. Here are 3 important practices we’ve put in place to help ensure we’ve documented carefully and educated our tenants well.
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3 Important Practices Landlords Should Use During the Move-in Inspection
Walk the Entire Property With the Tenant Carefully
While some property managers and landlords tend to whiz through this step, I think it’s one of the most important components to leasing a property. It’s important that you and your tenant are on the same page regarding the condition of the property upon move-in. Be as thorough as possible and document the condition of everything that could potentially experience wear and tear during the course of the lease.
I think it’s important to notate items such as lawn condition, fence condition, exterior items (gutters, roof, siding, sidewalks, mailbox, soffit and fascia), screens, front door, wall paint colors, light fixtures (model and color), mirrors, vanities, flooring type and condition, plumbing fixtures, smoke detectors, garage door openers, appliances (make and model), water heater (age and condition), HVAC (age and condition), etc. You get the gist. The idea is that you document everything. Make sure you do this with your tenant so that your tenant understands how well you documented the condition of the property before they moved in.
While this is somewhat self-explanatory, taking pictures as you walk the property with the tenant serves two purposes. For one, you are documenting the condition of everything in and around the house so that when the tenant moves out, you can make an easy comparison to condition of the property before move-in. If for some reason your tenant decides to dispute any of the deductions from their security deposit, you have pictures (proof) that document the condition of a particular item before it was used by the tenant.
Secondly, taking pictures in front of the tenant also reiterates the fact that you are carefully documenting the condition of the property. In many cases, this will cause the tenant to be more careful with the property and less likely to dispute a potential charge later because they know you are paying careful attention to all items in and around the property.
Include a Replacement Cost Worksheet With the Lease
This is something we’ve implemented recently that I believe will help alleviate almost all disputes arising from security deposit deductions. Our lease agreement now includes a list of items that typically get fixed or replaced after move-out, along with the associated cost for these items. Our tenants know from the outset that if we have to replace a hole in the wall, it will cost them $55 dollars. Or if we have to replace a towel bar, $22 dollars will be deducted from their security deposit. Our list contains over 70 common items that we can deduct from a security deposit along with a price tag so that nobody is surprised at the end of the lease term at how we arrive at the total deduction.
Getting sued by a tenant over a security deposit dispute is a major hassle for any investor. Save yourself the time and headaches by putting a good system in place up front for moving tenants into your property.
What about you? Do you have a particular practice for moving tenants into properties that has worked for you?
Leave your comments and suggestions below!