What Are the Benefits of Collecting Security Deposits?


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Security deposits are a landlord's safety net. Don't believe it?

According to California's landlord/tenant laws, you can charge up to three times the monthly rent for a security deposit. But you may wonder: Why bother with deposits anyway, if the tenants get them back at the end of the lease?

The truth is that a security deposit is the common sense cushion for any real estate investor; it is your financial stopgap in many ways. Here are just a few of the benefits for landlords like you.

Security Deposits Can Make You Money

Think about how much money you spent on your venture into real estate investing. In San Diego, the average home costs close to 900 thousand dollars. If you're planning to rent that home out, why wouldn't you want to make some money on it beyond the monthly rent that's due?

Here's How to make your security deposits work for you every time:

  • Put the deposit into an interest-baring account
  • Keep it there until tenant is ready to move
  • Reimburse the deposit as much as necessary
  • Keep the interest for yourself

Some states require landlords to pay their tenants interest on their deposits. Fortunately, California is not one of them. Though the interest may be a small chunk of money, it's money you make on top of rent.

Cover Deep Cleaning Between Tenants

Let's face it: No rental is ever left in the same gleaming state in which it was leased. Homes for rent incur normal wear and tare, and they accumulate more dirt the longer they are occupied.

It's not just courteous to invest in deep cleaning between tenants, it's crucial. Though deep cleaning can cost you thousands of dollars, there are ways you can avoid paying a fortune out of pocket.

Your security deposit can cover at least partial deep cleaning costs. You may have to prove that the rental is an exceptional mess, but that's easy to do if you document your walk-through inspection immediately after the tenant leaves. You can also save money by hiring a property management and maintenance company to consistently maintain your rental instead of just hiring deep cleaning companies between tenants.

Cover water Damage Restorationn

In California, you can charge a security deposit specific to waterbeds. Floods caused by waterbeds can be particularly devastating because they can cover a large area of your home.  Of course, this extra security does not cover all types of water damage, but if your tenant does choose to use a waterbed, at least you can rest easily, knowing that your risk is covered.

Cover Abandoned Leases

The most obvious benefit of a security deposit is that it keeps you whole financially if your tenant skips out on their lease. If a tenant decides to break a lease or insists on living at the property without paying rent, that means at least a whole month's loss of income for you. When charging a security deposit equal to two months' rent, you have the right to keep that deposit if the lease is broken.

Making Renting Easier

Security deposits decrease your risk as a landlord by filling financial gaps and covering restoration costs between tenants. But imagine being able to save even more money with regular professional maintenance.

Learn more about how a property management company can help you, and how to make your real estate investment pay off. Contact us today for more information about our services.