You're finally ready to start renting out your first rental property and you're feeling great about it! You're also, however, feeling overwhelmed. There's so much that you don't know yet!
You'll learn everything through experience, but before you accept your first tenants, you need to know about security deposits. What are they? How much should they cost?
We're here to answer these questions and more. Keep reading to learn what you need to know.
What Is a Security Deposit?
A security deposit is a refundable money that a new tenant gives a landlord at or just before the beginning of their tenancy. Believe it or not, a security deposit is beneficial for both tenants and landlords (even if tenants may not always feel that way).
The deposit helps the tenant because it secures the rental before they move in. It will also cover any light damage should it happen during the tenancy. This way, that money doesn't have to come out of the tenant's pocket.
At the end of the tenancy, the tenant gets the security deposit back as long as the rental property is in good condition. This means they can put that deposit toward other expenses.
For the landlord, the security deposit protects them from unexpected costs, like damage costs. In the event of preventable damage, the repair budget can come from the deposit.
How Much Should a Security Deposit Be?
While security deposits are helpful, you don't legally have to require one at all. It's beneficial to do so, but some landlords choose to waive deposits for a variety of reasons, especially if they've had long-term vacancies.
There's no lower or upper limit for security deposit costs in Oregon, but it's in your best interest to keep the deposit reasonable. Most landlords make their security deposits equivalent to one month's rent for unfurnished rentals. This is what the average tenant expects.
You can charge more if you're worried about property damage, but you may have a harder time finding high-quality tenants as there are so many other options.
Do You Have to Return Security Deposits?
Security deposits are always refundable. A landlord can not keep a security deposit and they must return it within 31 days of the end of the tenancy. A tenant can file a lawsuit against a landlord for not returning a deposit.
Landlords can keep a portion of a security deposit in the event of property damage. Remember that normal wear and tear is different from damage. If you're unsure whether or not you're entitled to part (or all) of the deposit, it may benefit you to speak with your lawyer or an experienced property manager.
Security Deposits Are Simple
Security deposits don't have to be complicated. As long as you don't over-charge and you remember to give the deposit back, your tenants will have no problem paying your security deposit.
Are you a Portland-area landlord who needs help with your rental property? Kerr Properties can help. Contact us about our property management services today.