(This is the first post in a new series aptly named “Landlord Basics”. This series aims to help the new landlord / investor understand some basics of tenant relations and property management. You can view the rest of the series here.)
You’ve done your homework and purchased a property or two that can provide you with positive cash flow. The broken has been fixed, the old has been renewed, and it’s time to place some tenants! After screening your tenants and drawing your lease, you’ll want to collect rent and security deposit prior to move in. But what exactly is a security deposit, and why is it important?
A security deposit is money given to you by a tenant (usually prior to move in) that acts as an insurance policy of sorts. This money can be used to pay for damages caused to the unit by the tenant during the term of their tenancy, and is a vital portion of the tenancy arrangement. Such items could include broken windows, holes in walls and carpets, and failure to completely clean the unit at the termination of tenancy. Keep in mind that security deposits should not be used to cover normal “wear and tear” items such as repainting, as this is pretty standard tenant turn over.