Laws will dictate what you can use the deposit for, and how quickly you need to return it to your tenants. However, the amount of security deposit that you charge is up to you. If you’re wondering what the amount should be, the answer is – we don’t know yet. You won’t know until the application has been completed and reviewed.
Evaluating Your Rental Application
If you are processing your own application, you are hopefully using a minimum set of requirements that you have established. These requirements must be met by each applicant who wants to rent your property. They might include a credit score, rental history, and even criminal history. One requirement might be that the tenant earn at least three times the amount of the monthly rent. To stay within the law, you must evaluate each application based on these same requirements. As you’re screening your applications, put a number next to each requirement to reflect whether or not it has been met.
Rental Deposits and Amounts
Once all are the numbers are listed and the application has been evaluated, add up the numbers and determine if the applicant is qualified. If he or she is qualified, a fair and typical security deposit is usually the equivalent of one month’s rent. If your applicant does not meet all the requirements, you may want to decline the application or charge a higher security deposit amount. Banks and lenders do this all the time.
Establishing these requirements for applications and security deposit amounts will allow you to stop managing on a case by case basis. You’ll have a prewritten set of guidelines that you can follow for every application. And, you’ll be sure you’re staying within the law.
If you have any questions about your security deposit policies, please don’t hesitate to contact us at 4th Avenue Property Management and the Rob Jenkins Team.