You're looking forward to watching money flow into your account from your new tenant in Denver, Colorado, this year. But don't forget to collect a security deposit from your future tenant, too.
A security deposit is essentially the collateral that your tenant will pay you when they move into your rental property. This amount usually totals one month of rent, although the amount can vary.
However, you must consider several variables when determining how much to collect for security deposits, and legally, you can use them to cover only certain types of expenses.
Here's a rundown on what landlords need to know about security deposits.
Let's jump in!
What Is a Security Deposit?
Security deposits are monetary amounts that you as a landlord may request from your tenants before they move in. You should plan to return these deposits to your tenants once they have moved out.
However, you can retain the security deposits of any tenants who are behind on their rent payments. In addition, you may keep the deposit of a tenant who has damaged your property beyond normal wear if you'll need the entire deposit to fix the damage. Otherwise, you'll keep only the percentage of the deposit you need to repair the damage.
According to Tri-State property management, when you receive a deposit, you must give the tenant a receipt showing the name of the bank where you're storing the fee. This receipt should also include the institution's address, the deposit amount, the tenant's name, and the rental property's address.
How Much for a Security Deposit Is Appropriate?
Your local laws governing landlords and tenants influence how much you'll be able to charge for security deposits. Colorado has not instituted any security deposit amount limits, although landlords often charge 1-3 months of rent.
Keep in mind, though, that if the deposit amount you set is higher than those of other landlords in the area, you may struggle to attract tenants. For this reason, you should try to charge a reasonable amount for your locale.
How to Use a Security Deposit
If your tenant has damaged your property, you may use their security deposit to cover the following types of serious damage:
- Damage that pets cause
- Damaged appliances (e.g., dishwasher, fridge, stove)
- Excessive holes in the walls from pictures
- Broken windows
A security deposit may also help with covering burn marks, holes, and tears in the carpet.
How We Can Help with Security Deposits
Security deposits are amounts of money that tenants pay their landlords upon signing rental agreements. These amounts are refundable when the contract conditions have been fulfilled. However, you can legally deduct losses or damages from a deposit before refunding a deposit to a tenant.
At Mavi Unlimited, we take pride in helping landlords in Denver to navigate security deposit laws and other property management matters. We would be glad to help you to find a tenant, screen tenants, and handle rent collection.
Get in touch with us to learn more about our services, and let's partner together today!