With all the headaches of property management, security deposits may be up there at the top.
The idea behind them is simple. Tenants damage things. It’s inevitable, given enough time. Things break down, get scratched, get broken, and wear out.
In fact, 1 out of 4 renters don’t get their security deposits back, surveys have found.
Luckily, with some simple knowledge about the laws and some helpful tips on what to do, security deposits can be made easy. Let’s talk about that.
WHY USE SECURITY DEPOSITS?
There are so many reasons to get into the real estate industry. However, within it, there really is just so much that can go wrong. There are so many costs associated with renting out property units, mostly from maintenance and repairs.
When you’re already worried about your water heater, the exterior paint, the cracking driveway, and plenty more, you don’t want to have to pay out-of-pocket when your tenant destroys your new hardwood floors or leaves holes in the walls when they move out.
A security deposit is a way to offset this headache. If the tenant breaks something, take it out of their security deposit. It may not even cover the full costs, especially if the damage isn’t just cosmetic, but it will at least alleviate some of it.
HOW MUCH SHOULD I CHARGE?
For a general rule of thumb, security deposits should be equal to about one month’s rent. This can vary from property to property, but it is good to stay close to this range so tenants aren’t turned away by move-in costs that are too high.
According to Florida security deposit law, there is no limit on how much you can charge, however, most landlords won’t go above two month’s rent.
WHAT DO I DO WITH THEM?
This is the most important part to understand. For safe-keeping and taxes, it’s important to know what to do with the security deposits you collect, according to Florida landlord/tenant law. Once received, a written notice is required within 30 days to the tenant to inform them of the financial institution where the money is being kept. Do not spend their security deposit. Florida landlords have 3 options:
- Posting a surety bond
- Storing in an interest-yielding account (interest dividends must be paid to tenant annually)
- Storing in a non-interest account
This money is not income, and therefore is not taxable. Once the tenant moves out, it is your responsibility to assess the damage and costs associated, and subtract all costs from their security deposit, if any, and return the remainder to the tenant.
Security deposits don’t have to be tricky business for new landlords. Simply follow the laws and you won’t have any issues. However, if you want assistance, call in the experts to help you. Experienced property managers know what to do, and all that liability will be taken off your shoulders!