Did you know that 44.1 million American households are renters and nationwide, renters spend $485 billion in rent every year? Even though there are some housing markets where buying is more affordable than renting, some people have no other option besides renting as they can't afford a downpayment.
If you are a landlord or property owner who's new to the business, then you might be wondering about the security deposit definition. Read on to find out all about the rent security deposit.
What Is a Security Deposit?
When you rent out your apartment or house to someone, you are trusting that they will take care of your property as if it were their own. But you can't live off of trust.
That's why landlords use security deposits, that is, the money given to the landlord or property owner as proof of intent that the person will move in and take care of the domicile. The renter gives the security deposit before taking possession of the house or before moving in.
If the house or apartment is damaged in any way due to the carelessness of the renter, the landlord can use the security deposit to perform repairs. It can also be used to replace the lost property of any kind.
Depending on the contract, it can be refundable or non-refundable. If the property is in good condition when the renter moves out, the security deposit may be refunded in full.
How Much Can the Rent Security Deposit Be?
Usually, the rent security deposit is equivalent to one month's rent. But it can be higher if the contract dictates that. For example, if the rental rate increases on an investment property, then the previous security deposit wouldn't be sufficient.
Some landlords use the security deposit as an advance on the last month's rent. Each state has differing rules on what amount is allowed as a security deposit and what's not.
Some states do not allow the security deposit to be used as advance rent and others do. Local legislation also sets limits on how large the security deposit can be. Too large a security deposit can deter low-income individuals from renting homes in certain locales.
Due your due diligence to ensure that you are following the law and protecting yourself from untoward renters. It might seem like a balancing act to protect your interests when renting out the property while following local laws. But it is something a property manager has to do.
Security Deposit Definition - It Protects the Landlord
You might have surmised that a security deposit definition is quite simple. It helps protect the landlord from the renter trashing up your property. If you would like some help navigating this landmine of property investing and renting, contact HomeRiver Group Holdings.
We provide Full-Service Property management in the Sumter South Carolina area. We help keep track of all rental details from security deposits to rent payments and more.
