If you have recently been appointed the property manager for an apartment building, then it is your job to take care of the day to day operations within the complex. You also must make sure that tenant needs are taken care of. One of your most important jobs will revolve around money handling. You will need to collect rent monthly, and you also will need to collect security deposits when the initial rental agreement is signed. Security deposits must be handled properly, so read through the tips below to figure out exactly what you need to do.
Ask For the Right Amount
A security deposit is a set amount of money that you collect from tenants before they rent an apartment. This deposit protects the property owner in case damage occurs inside the apartment. The security deposit can also weed out individuals who may not be able to pay rent on time. The money also can be used towards the last month of rent if a tenant decides to break their lease.
In some states, you can ask for the equivalent of one, two, or even three months of rent as a security deposit. It is illegal to ask for excessive amounts of money though. Also, when you set the security deposit amount, you need to ask for the same type of deposit from all tenants. You cannot ask for extra fees if you feel that a renter is a financial risk. This is considered discrimination and it is a much better option to consider whether a tenant is a risk or not before an apartment is offered.
Generally, a full month of rent is sufficient enough to protect the property owner. You do have options though, so consider them and set the security deposit amount before any rental agreements are signed.
Put the Deposit in the Bank
Once you receive security deposits from new tenants, you may consider investing this money in the apartment building. Deposits generally do not need to be returned to individuals for 12 or more months, and this allows you to improve the facility in the meantime. Also, apartment buildings generate revenue consistently, and the property owner will have the funds to repay the deposit on time.
Unfortunately, security deposits are not considered revenue. The deposit is a set amount of money that you hold on to for a period of time. In fact, many area laws state that this money needs to be placed in a separate bank account. Interest calculated on the account must be paid to the tenant once a year. You should place deposits in separate accounts, regardless of state laws. Also, provide dated receipts and give the tenant the location and name of the bank where the money has been deposited. This will protect you from any disputes that occur down the road.
Provide Detailed Records
As a property manager, you will likely need to keep a security deposit on occasion to make repairs to apartments after a tenant moves out. Unfortunately, disputes over security deposits are handled quite regularly by small claims courts. Not only is this a nuisance, but a legal case may make you look bad in the eyes of the property owner.
To make sure that disputes are minimized, create a video of the apartment before the tenant moves in. A detailed video that shows the condition of all rooms, appliances, floors, ceilings, and fixtures is best. Also, when you record the video, turn on faucets, ovens, microwaves, lights, furnaces, and ceiling fans to show that everything works properly. Record the same type of video when the renter moved out to indicate what is broken.
Share these videos with the tenant and also provide receipts that show how much was spent to make necessary repairs. If repairs are less than the security deposit amount, then provide the renter with the remaining funds.
If you have been hired as a property manager for an apartment complex, then you will need to handle security deposits. You may not know how to ask for, keep, and handle the deposits, so follow the tips in this article.