You probably won't have a lot of vacant apartments to fill. After all, the vacancy rate in California was 3.9 percent in 2022. However, you might encounter some.
When you need to fill a vacant unit, you'll go through the motions:
- Place an ad
- Accept applications
- Choose a tenant
You'll also set a rental amount and collect a security deposit. These are both vital steps of rental leasing.
But do you know the best methods for handling your security deposits? Keep reading to learn.
Use Effective Screening Techniques
Collecting security deposits is a vital part of running a rental property business. These deposits help you mitigate risk when renting to others.
One way to reduce your risks is by improving your tenant screening techniques. The best way is to hire a leasing agent to handle it. Leasing agents use the best strategies to choose tenants.
When you have high-quality tenants, you face lower risks with leasing. Good tenants won't damage their rentals. As a result, you won't have to worry about charging a tenant for damage.
Charge the Right Amount
You determine how much to charge for security deposits. Charging one month's rent is the typical answer. However, you can charge more than this if you suspect increased risks.
For example, charge two month's rent when the risks seem higher than usual. Charge extra for tenants with pets. Create a system for your security deposit fees, and stick to it.
Perform Property Inspections
You can keep part of a tenant's security deposit for damaged property. One way to protect yourself when doing this is through property inspections.
Inspect the property with the tenant when leasing to them. Write a report and take pictures.
Documenting the unit's condition gives you evidence for when they move out. It helps you see how much to charge for the damage they caused.
Keep the Money in a Separate Account
Security deposits can be a significant amount of money. Because of this, keep the funds in a separate account. You'll have the funds to give to your tenants when you need them if you save this money.
Know the Law
Finally, know the law. For example, California law states you have 21 days to return security deposits after tenants vacate.
Learn what types of damages you can charge for before charging tenants. For example, you can't charge them for normal wear and tear. Doing so might be considered security deposit fraud.
You can charge for excessive damages, though. Find the initial property inspection report and videos. Then, compare them to the unit's current condition.
This tells you the damage the tenant caused. You can use this as evidence when deducting money from the tenant's security deposit refund.
Seek Expert Help With Your Rental Leasing
PMI Orange County is a leader in property management services. We operate in Irvine, CA, and can assist with every property management task.
Do you need help with your rental leasing or security deposit management? We're here to help. We have over 20 years of experience helping property owners just like you.
Reach out to find out how our services can help your rental property business.