As a new landlord, you've heard of the term "security deposit" in the past. If you've ever rented a property on your own, you've likely even paid one.
But what is a security deposit? Why do you need a security deposit for rent, and when do you have to give a security deposit refund?
We're here with all of the answers that you need. Keep reading to learn more.
What Is a Security Deposit for Rent?
A security deposit for rent is the money that tenants put down before they start living in your rental unit. Some landlords will allow tenants to put their application fees into their security deposits, but this is a personal choice.
Security deposits protect both the renter and the landlord. For renters, these deposits cover any potential damage, whether it's accidental or on purpose. As long as the cost of the damage doesn't go above the amount of the security deposit, they won't have to pay extra money when they move out.
For the landlord, the deposit prevents you from having to pay for damage on your own.
At the end of someone's tenancy, they should get the security deposit back as long as the rental property is in good condition. We'll discuss exemptions to this later on.
How Much Should a Security Deposit Be?
This is tricky, and it's going to be a personal decision for you as the landlord. Deciding on the cost of your security deposit depends on several factors.
First, Texas has no statutory limits for security deposits. This means that Texas doesn't limit the amount that you charge. That said, check with local laws or consult your management company before you make your decision.
Most landlords choose to request a security deposit that's almost equal to rent. Some even allow it to go into the tenant's last month's rent, but this is risky.
If you have a tenant that doesn't quite meet your application standards (due to poor credit history or no rental history), consider requesting a larger security deposit.
When Do You Not Have to Return a Security Deposit?
if everything goes well, your tenant will receive their entire security deposit at the end of their tenancy. Keep this in mind and set that money aside, so it doesn't surprise you later.
If you choose not to return a security deposit and the tenant has left the unit in good condition, you can face legal troubles. Remember, tenants have rights.
Normal wear and tear is not a reason to take a tenant's deposit. You can deduct money from their deposit, however, if there is any kind of damage that requires fixing.
This doesn't include dirt (within reason), small paint chips, faded carpets, or anything else that is normal for the average person living in a home.
Make sure that if you're keeping any or all of the tenant's deposits that you create an itemized list to give them so they can't dispute it (or so that you're able to negotiate).
Don't Underestimate The Importance of Security Deposits
You should always have a security deposit for rent if you want to make sure that both you and your tenants are protected in the event of any damage. As long as you keep the deposit reasonable and return it when their tenancy is over, it's the right choice for tenants and landlords alike.
Are you looking for a professional property management company to help you out with issues related to security deposits and more? At Blue Ribbon Property Management, we help landlords in Texas make the most of their rental properties. Contact us so we can start working together today.
