Owning property often leaves you feeling like you're constantly on the defense. You need to look out for potential dangers and shore up your base or else.
It doesn't take a lot of damage to start stripping the value from your property, often before it's paid for itself, let alone generated profit. One of the most obvious lines of defense for landlords is security deposits.
While the deposits provide a buffer and piece of mind, it also serves as a major sticking point for many renters.
The following elaborates on the limits you may charge, what is covered, and how to approach your target number.
Limits to Security Deposits
Under Idaho rental laws, there's no set limit to how much a landlord can charge for a security deposit. The state statute spells out a timeline for refunding the deposit and imposes restrictions on third-party agents such as property managers.
As there is no set limit, deciding on a security deposit is left to landlords and often comes down to what the market will bear. A security deposit set too low places a landlord at risk of loss in the event of an eviction, lease break, or gross damages. Too high and you'll find it difficult to get tenants either through mistrust or lack of means.
Coverage of Security Refunds
Security deposit laws indicate a difference between normal wear and tear and other forms of damage. While the letter of the law is broad, this generally refers to the ravages of time.
Consider the kinds of damage that occur simply from something existing. Electronics wear out, the sun bleaches what it reaches, and finishes to walls and floors rub off.
Deducting damages from a security deposit requires an itemized list to be supplied to the tenant along with any remaining deposit. Cleaning costs don't need to be broken down but a tenant can request clarification of costs in writing.
Landlords aren't obligated to change their minds or respond to tenant complaints about security deposit withholdings. That said, tenants do have legal recourses and can sue a landlord in civil court over unreturned deposits.
Deposit as Ratio of Rent
While there's no perfect amount to charge for a security deposit, ideally you want to cover your expected repair costs. Listing the value of the property, though allowed, is hardly a fair scenario.
Some landlords break down the overall cost of the property and charge a percentage. Others abide by a simple one or two months of rent figure. When considering rent costs, remember to consider all of the potential pricing overhead.
The best way to ensure your property stays protected is to have thorough language in rental contracts regarding security deposits. the deposit is meant to be a safety net more than a stick and you want tenants to feel the same.
For more advice about real estate and rental properties, or to invest in seamless property management, contact us.
Andrew L. Propst
MPM® CPM® CCIM®