5 Reasons You Should Always Collect a Security Deposit

As a rental property owner, you might be tempted to allow a tenant who does not pay a security deposit first. You might feel like you need to cut this corner to get a unit occupied. However, you're better off insisting on first and last month's rent as a security deposit. 

The security deposit money is not rent. This distinction is important because you can use it to cover numerous sources of financial loss after a resident moves out of your property.

Let's take a look at how a property management team uses a security deposit if the need arises.

Protection from Unpaid Rent

You don't like to think about a tenant failing to pay you at the end of their lease, but it can happen. This circumstance gives you the right to keep a security deposit.

Pay for Excessive Cleaning Costs

When a good tenant vacates a unit, the new renter's cleaning fee will suffice to cover your expense. However, a badly soiled unit requires extra attention. 

That means more labor and supplies to make it habitable again. You might even need to pay for the disposal of abandoned rubbish.

A unit left in poor condition beyond the normal bit of dirt enables you to draw upon the security deposit to pay for deep cleaning. This financial resource helps you ensure that the unit is acceptable to the next tenant without forcing you to take a loss.

Financial Consequences for Damage Caused by Renter

Physical damage can be even more costly than a dirty unit. You might have to install new floors, replace doors and cabinets, patch drywall, and paint. Damage could even include smashed toilets and broken plumbing.

Once again, you can fund repairs with the security deposit. Without it, you would just have to watch your profit drain away while getting the unit presentable again.

Limit Financial Disruption from Lease Termination

A tenant who breaks a lease cuts off your cash flow unexpectedly. While it may be easy for a person to break a lease and part ways, it takes time and money for you as a landlord to clean the property, prep the property, market the property, and select a new, reliable renter.

The deposit money from the deserting renter eases the pain of that loss while you put the time and effort into filling your vacancy.

Security Deposit Best Practices

Although most renters know a security deposit is just part of the rental drill, it can be uncomfortable for newer landlords to ask for more money on top of the first and last month’s rent.

Once you can do so, here are some best practices for ensuring your security deposit collection process runs smoothly and keeps your finances protected.

• Collect the deposit as soon as the lease is signed.
• Keep the deposit money separate from the rent.
• If you need to keep deposit money, itemize the costs to prove your need.
• Ensure all security deposit processes are included in your rental contract.
  
  

Security Deposit Collection with Classic Property Management

As you can see, a security deposit is essential for success with property management in Dallas. Sooner or later, you'll really miss that money if you don't have it.

Classic Property Management relieves you of the administrative chore of tracking deposits and collecting rent. We keep your finances compliant with local rental laws and promote the smooth operation of your properties. To learn more about our property management team and services, contact us today.