If you missed part I check it out here. Now that you know how much of a security deposit to collect and when to collect it from your tenant let’s take a look at two more key elements of the process surrounding security deposits and your rental property…

Where Do You Keep the Security Deposits

Remember that this is a deposit that is collected with the purpose of being returned to the tenant if they fulfill their end of your rental agreement (lease). With that being the case you need to keep their deposit on hand always. Look into your states laws regards where security deposits are held. Some states require you to hold them in interest bearing bank accounts with the tenant accuring interest on their money when it is paid back to them when their tenancy is over. Don’t freak out, with how low bank account interest rates are this money usually ends up being minimal. If you fail to comply with the law though you could end up paying a fine to the tenant that ends up being as much as 2-3 times their monthly rent amount. Read up on your state laws.

When Is the Security Deposit Returned?

Assuming your tenant has fulfilled their end of the lease agreement, stipulated in said agreement will also state that the tenant is due back their deposit minus any legitimate deductions which is a topic we will discuss next. First thing you need to know is the timeline by which you need to return the deposit. Each state has their own laws in regards to the specific amount of days the landlord has to return the deposit. Some are 15 and some are 30, but no state requires you to give it back to the tenant the day they move out. Do not let your tenant pressure you into doing it this way. Cite the state law which also includes them giving you a forwarding address to send the deposit.

The last thing to discuss regarding security deposits is when you can keep a portion of the deposit and the steps to follow in order to do so in accordance with local laws. That comes tomorrow on Part III.