The average salary for landlords here in Washington is $84,129 per year. Becoming a landlord and earning that salary is definitely enticing to many people, but you need to understand basic concepts first, such as the security deposit.
For instance, how do security deposits work, and what should you charge? Knowing the market and local laws is key to being a fair and efficient landlord.
Here's what all landlords need to know.
What Is a Security Deposit?
A rental security deposit is an amount paid by a tenant upon signing a lease. It serves as a guarantee that the tenant will follow all terms and rules. In short, it's an applicant's way of saying they will care for the property, pay rent on time, and follow all conditions outlined in the lease agreement.
It also offers peace of mind to a landlord. For instance, if a tenant violates the lease by damaging the property, that money can help to cover the damages.
Not every landlord charges a security deposit, though most do as a general business practice. Plus, a refundable deposit serves as an incentive for tenants to care for the rental unit as they'll want the money back.
How Much Can Landlords Charge?
This is a common question that new landlords ask. First, it's crucial to look at landlord-tenant laws, as they limit the amount a landlord may charge for a security deposit. Keep in mind these may vary by state.
A non-refundable fee cannot legally be called a deposit. Therefore, it's important to clearly outline any non-refundable cleaning fees and other costs.
Generally, a rental security deposit is one month's rent. Again, the limit landlords can charge depends on state laws. Some states have no statutory limit, while others may be equal to one month's rent or more.
To determine the best amount for a deposit, you should consider the property's rental value, amenities, location, competition, and current market conditions. A property management company can assist you by providing a rental market analysis.
Rules for Landlords
Landlords must outline the terms and conditions that must be met for a tenant to receive their security deposit back. These terms need to be clearly outlined in the lease agreement. Remember that landlords can't withhold deposits for general wear and tear.
Landlords must also provide a document or inspection report which states the condition of a rental property or unit before the move-in date.
Security deposits are meant to be refundable, so they're not considered rental income. That said, any amount withheld (such as an amount to pay for damages) does count as rental income.
Sometimes, the security deposit may also be used as last month's rent. The IRS considers this advanced rental income.
Landlords must keep deposits in a separate account, away from personal funds. They have 14 days after a tenant moves out to return the deposit or give the former tenant a written explanation of why it was not returned. That's why keeping accurate records is so crucial.
Make the Most of Your Rental Property
There's much to consider regarding rental security deposits, including local laws. Landlords must comply with all laws, or they may face legal trouble.
That's why so many turn to Vancouver, WA property management. If you need assistance, Badger Canyon Property Management can help you make the most of your investment with landlord tips and services. Get a free consultation today to get started.