When it comes to residential income property, there are many criteria that can lead to very expensive mistakes if you do not handle your decisions properly. Let’s start out by stating this: security deposits are not the landlord’s money until after the tenant has moved out and the landlord has proven what damages they need the funds for. Security Deposits are the tenant’s funds which they are allowing you to hold for them. Most states require security deposits be held in a separate bank account; Not the primary bank account used for income and expenses. You may not commingle these funds with other money not designated as a security deposit. It should come as no surprise that security deposits are in the top three incidents that landlords and tenants find themselves fighting over in small claims court, so here’s our top 5 tips every residential landlords should know:
1️⃣ Do Not Designate Specific Deposits
2️⃣ Have Thorough Records Of All Correspondence With The Tenant Including:
3️⃣Take Photos Of Every Angle Of Every Room Before Move In.
The 3rd of the 5 tips is important for security deposits that landlords should know; Implement this tip with your next tenant flip! Photos from phones and digital cameras have a date stamp and can prove that dent was not in the dishwasher before they moved in. In the same manner, landlords should take the exact same photos at move out. Do not take videos, many small claims courts will not allow video, only photos. Keep these in the tenant file or have it noted which electronic folder the photos are located in so you can find them easily. It can take months for the tenant to act on a legal action against a landlord. By then, hopefully, a new tenant is in place but you have no recourse to prove the damage occurred during their stay if you don’t have proof dated within their lease terms.