One of the things your lease agreement needs to address is the amount of the security deposit that will be collected and held. Today, we’re talking about security deposit rates, and the importance of setting the right one.
Over the years, we have found that rates can vary depending on the market we’re in. Currently, we’re in a good market, so there should be no issues charging the highest amount of deposit that you can. There are a few things to think about.
Property Management Utah: Security Deposit Size
If you charge a security deposit that’s too small, you may not have enough money to cover potential damages at the end of a tenancy. If you charge a security deposit that’s too high, you may lose good tenants who cannot afford a large deposit before moving in.
Property Management Salt Lake City: Charging the Right Amount
At TierOne, we charge a 100-plus percentage when it comes to security deposits. That means 120 percent or 150 percent, depending on the property. For example, on a property that rents for $1,000, we would charge a security deposit of between $1,200 and $1,500. Often, tenants will think that their security deposit can be used to pay the last month’s rent. No matter how much you tell them that’s not the case, they will still try to use that money for rent. So, when you charge a deposit that’s a little more than one month’s rent, you’ll have some extra funds to cover any potential damages.
This system might require you to charge more, but in this market, it’s still pretty fair. If tenants cannot come up with that amount for a deposit right up front, they probably don’t have a good shot at making the rent payment on time every month. So, it shouldn’t be an issue.