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Rent and Security Deposit Tips for Landlords

Rental properties are more than just an investment for many landlords. Renting out properties is a business. Like any business, landlords want to make money while providing a service. Landlords must understand rent and security deposit rules to enjoy a successful business.

This FindLaw article explores some rent and security deposit tips for landlords.


Rent is a sum of money a tenant pays a landlord, property owner, or property management company for the right to use the rental property. The best time to establish rent rules is before your prospective tenant moves into the rental unit. Your first step in establishing rent is setting the rent for a rental unit.

Setting Rent

Determining an appropriate amount to charge for rent is a delicate task. High rent may turn off prospective tenants, while low rent can harm the landlord's cash flow. Many landlords and real estate developers rely on loans to purchase properties and must include these costs when making these determinations.

There are several tools landlords can use to set an appropriate amount for rent. These tools include, but are not limited to:

  • Rental Market Analysis: A rental market analysis allows the landlord to compare their rental property to similar rental properties in their neighborhood.
  • Rent Control Laws: Restrict how much a landlord or property manager can charge. Landlords should consult local rental control laws or a real estate attorney before they set an amount for rent.
  • Online Resources: The real estate website Zillow is one example of an online resource landlords can use to determine how much to charge for rent. Landlords and property managers can use Zillow's rental property return on investment (ROI) calculator to set rent. Landlords can input their operating costs, including mortgage and expenses, to help calculate rent.

Lease Agreement

The best way to establish an amount for rent is in a written lease.

Lease and rental agreements are binding contracts between a landlord and a tenant covering a tenancy. Ideally, leases should cover all aspects of the landlord-tenant relationship, including the amount of money due each month for rent. A court will examine the lease to determine a resolution to a dispute.

The lease agreement should include the following:

  • Rent due date
  • Rent amount
  • Penalties for late or unpaid rent.

Leases and rental agreements are great tools for handling rent because they establish these rent basics. Receipts are another tool for handling rent.

Collecting Rent

Landlords and property managers have several tools to help them collect rent. One popular tool is online payments. Online payments help streamline the rent collection process. Renters do not have to withdraw cash from their accounts or write checks to pay their rent. Instead, they can pay their rent each month online or set up recurring automatic payments and receive automatic receipts for each payment.

Landlords and property managers should also offer traditional methods, such as using a money order or check to pay rent.

Rent Receipts

Although rent receipts are not required in all states, it is a good practice for any landlord or property management company. A rent receipt protects both the landlord and the tenant. It serves as proof that the renter paid their rent. Moreover, if you develop a consistent practice of giving rent receipts, this consistency can help you in a legal dispute.

A rent receipt should typically include the following:

  • Date the renter paid rent
  • Amount received
  • Name of the tenant
  • Tenant's unit number
  • Dates covered by the rent

As a good practice, landlords and tenants should keep a copy of rent receipts for several years.

Security Deposits

A security deposit is a sum of money a prospective tenant pays the landlord before moving in. This payment is separate from the first month's rent or application fees. The purpose of a security deposit is to financially protect a landlord if a renter defaults on rent or causes property damage to the rental unit.

Security Deposit Limits

Many states, like New York State, limit the amount a landlord may charge for a security deposit. In New York, a landlord cannot ask for more than one month's rent as a security deposit. For example, if the rent is $2,000 monthly, the landlord cannot charge more than $2,000 for a security deposit.

Handling Security Deposits

Many states and localities regulate how landlords and property managers handle security deposits. If your state does not regulate how you handle security deposits, these regulations guide best practices.

Landlords should keep security deposits in a separate bank account. Many states require landlords to deposit the amount of the security deposit into an interest-bearing account, with the interest going to the tenant at the end of the lease term. Be sure to give your tenant a receipt for the security deposit.

Returning Security Deposits

Tenants have a right to get their security deposit back. Typically, a landlord or property manager will return the tenant's security deposit after the tenant moves out, subject to an inspection of the rental property. Landlords can deduct from the tenant's security deposit to cover the cost of repairs or cleaning for a rental unit.

Landlords can only use the security deposit to repair actual property damage, not normal wear and tear. Normal wear and tear includes, but is not limited to:

  • Furniture marks on the wall
  • Faded spots on the carpet
  • Warped doors and windows due to age
  • Dents in the walls from door handles
  • Replacement of smoke detector batteries

The rules for returning the security deposit vary by state. In some states, landlords must give the tenant an itemized list of repairs, along with their costs.

Security deposit laws also provide deadlines for returning a security deposit, so don't delay making repairs when the tenant moves out. Landlords must return the itemized list and the security deposit balance before any deadlines expire. Landlords should include language in the lease agreement requiring tenants to leave a forwarding address in writing as part of their written notice to vacate the rental property.

Last Month's Rent

Last month's rent is distinguishable from a security deposit. If you decide to collect last month's rent instead of a security deposit, you can only use that money as the last month's rent. Landlords cannot use the last month's rent to pay for any of the following:

  • Repairs to the rental unit
  • Unpaid utilities
  • Cleaning the rental unit

Related Resources

Get Legal Help

Real estate law can vary from state to state. If you have questions about handling rent or security deposits, speak to an experienced local landlord-tenant attorney. They understand the nuances of landlord-tenant laws in your state.

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