How Much Security Deposit Should You Charge on a Rental Home or Unit?
Before you hand over the keys to a new tenant, there are several items that landlords or rental property owners need to complete. Certainly, running a credit and background check is a must. In addition, there are several payments you will typically collect, such as a(n):
Monthly rent (oftentimes the first and last month’s amount)
Pet deposit (if applicable)
Security deposits can give you some financial “collateral” in the event that the tenant(s) breaks various items that must be repaired or replaced and/or if they skip out on the lease without paying all of the rent that is due to you. Conversely, if a tenant moves out and leaves your property in good shape, they will likely receive some or all of their security deposit back.
So, how much should you charge tenants for their security deposit?
There are actually a couple of factors that can help you to narrow down the right amount. One of these is state law. Many states have a limit on how much a landlord or investment property owner may charge for a security deposit from a tenant.
One “rule” of thumb is to charge at or around the same amount as one month’s rent. This means that higher-priced properties will usually command a higher security deposit, and vice versa.
It is important to keep in mind that charging too much could deter potential tenants from renting your property(ies). So, while a larger amount of “safety net” would be nice, it could also lead to longer vacancy periods.
If you would rather leave the rent and security deposit collection to someone else – along with finding and screening tenants, responding to emergencies, and keeping up with property maintenance – an experienced property manager could be the answer.