Did you know that over 36% of households in America rent their residences and that this figure is continuing to grow? More people flooding the renting market means more opportunities for landlords. It also means that it's more important to protect yourself against bad renters, as there will be statistically more in the market.
One of the best ways to do this is by collecting a security deposit. In this expanding market, there's no reason to think collecting a security deposit will scare renters away. Find out more about the importance of security deposits in this handy discussion.
Security Deposits Set a Standard
Security deposits start working for you even before renters apply. They screen tenants by setting a type of bar or standard they must meet before moving in. Generally speaking, if prospective renters can afford the security deposit, they'll be more likely to be able to make the monthly rent and less likely to damage the place (otherwise, they lose the money).
Covering Property Damage
The main reason landlords collect security deposits is to have a base cash reserve to dip into if they ever need to fix something their tenants broke. This can even extend to situations where you have to do extreme cleaning before the place is ready for new tenants.
Keep in mind that California has special rules for how much your security deposit is allowed to be. If the damages exceed this limit, you must negotiate with the tenants or take them to court if they're unwilling. You will then need to prove that they did the damage.
Hedging Against Unpaid Rent or Utilities
Tenants leaving in the dead of night is a worst-case scenario but not unheard of. New landlords often don't know what to do when encountering this, but having the security deposit handy can keep you afloat and even cover water and electricity if needed.
Helping With Legal Fees
In the rarest of cases, tenants may do property damage far exceeding the security deposit's scope. They may also host an event or cause an accident that results in a lawsuit. One of your options as the landlord is to use the security deposit to pay for legal consultation or even a retainer fee.
This is very tricky business, however, as you can only permanently withhold a deposit for this reason if you win your case. That's why one of the best landlord tips is to get landlord insurance in addition to the security deposit.
Security Deposits Are Vital
Security deposits are a source of financial help for landlords whose tenants cause some form of damage to the property. This can be in the form of physical damage, leaving without warning, or in the form of an expensive lawsuit. You also decrease the chance of getting tenants who cause these types of problems by collecting a security deposit as part of your screening process.
One of the reasons landlords forego deposit collection is because of the onerous admin and legal rules. If you need a partner to help you through this process, contact professional Income Property Advisors today for the best help in San Diego.