Doing any sort of business is about reducing risk and increasing your return. When it comes to managing properties, things can fall between the cracks and strategies go by the wayside. You can do simple things to streamline every process so you can enjoy more rewards with less of a hassle.
First, Food For Thought
New landlords assume falsely that security deposits are adequate protection against having to pay big bucks for tenant-caused damages. The truth is, it will barely cover minor damages. And, major damages to property can cost landlords tens of thousands of dollars. It is also worth noting that you cannot use a security deposit in place of unpaid rent in some states.
Another factor to consider is that while the security deposit might cover normal wear and tear, they can appeal that decision if a tenant disagrees. Courts tend to take the side of the renter if there is even a little question about damage.
Even though security deposits offer marginal protection, they are important. The trick is to know how to manage them in such a way that it does not make you want to pull your hair out or stop taking them altogether.
Landlords can take steps towards making properties tenant-proof. Reducing the chances of property damage works out better for both the renter and the landlord.
- Vinyl Plank Flooring vs. Carpet — Carpet was once the most popular flooring. But, it stains and wears out rather quickly. Vinyl plank flooring lasts far longer and typically does not require replacing between tenants.
- Glossy Paint — Paint is one of those things that have changed over the years, too. It is not unusual to have to repaint between renters. When using glossy paint, the risk is less because it is far easier to simply wipe down.
- Door Stoppers — One of the cheapest remedies can save a landlord the most money. Door stoppers save walls by preventing holes in drywall.
Normal Wear and Tear
The entire point of a security deposit is to cover minor property damage. Wear and tear happen, and it comes with the territory. But, it is always the best policy to explain to a possible tenant what you consider wear and tear.
Different states have different definitions, but remember that the law tends to lean towards the tenant. It is important to research so you can lay out in a lease agreement what you consider wear and tear versus excessive damage. It will make your position clear and help reduce confusion.
Performing a detailed move-in inspection is likely already on your checklist. But, do you do the walk-through with your tenant? If you do it together, you both can make notes of the property’s condition. Recording it using audio, video, or both will help if a former renter challenges a security deposit return.
A move-out inspection is just as crucial as the move-in inspection. It is best if you perform it with the tenant. Retrace your steps and compare notes with the former occupant. It makes it easier to cross-reference and make a decision about the security deposit. Transparency goes a long way to making the process less stressful.
Applicant Red Flags
Interviewing potential tenants does a number of things. You can see how they interact and what they say. A huge warning sign is if they start to complain about security deposits. It likely means one of two things — the candidate does not have the money for the deposit or fears they will lose the money. Both are glaring red flags that should not go ignored.
If you can inspect where the potential tenant lived prior, you can get a better idea of who you are dealing with. It goes a long way towards drawing up the lease and deciding if they are more a liability than a respectful renter.
Security Deposit Alternatives
Alternatives to security deposits exist to help fill vacancies faster. LeaseGuarantee is one such option helping tenants put out less cash upfront while providing the landlord with more protection against evictions and property damage. Landlords of all sizes, even one property, can benefit from this type of service.
Landlords can ask their tenants to purchase LeaseGuarantee instead of handing over a security deposit. They offer rental income protection up to $10k to cover legal fees, rental losses, and damages. It covers way more than a security deposit and reduces your overall stress and concern.
Sometimes little things make all the difference. Security deposits are sometimes more of a hassle than not. However, they are important to hold tenants accountable and help cover any property damage.
You want to maximize your return and minimize your risk. You can do this through straightforward renovations, a property management service, or both. The important part is streamlining the security deposit process to make it easier for you and more transparent for your tenant.