With over 300,000 renters in Utah, it's clear that it's a viable place to make some extra money as a property investor. As a new landlord, you have an exciting time ahead of you, but you also need to know the basics. For example, do you know how to manage security deposits?
If you've never rented before, these common deposits may be confusing for you. We're here to help you understand them so you can start bringing new tenants onto your property. Read on to learn more.
How Much Do Security Deposits Cost?
In some states, there are limitations regarding how much a landlord can charge for a security deposit. In Utah, there is no minimum or maximum deposit (though responsible landlords should make sure they keep up with current rental laws just in case that changes).
So in that case, how much should you charge? Is there any rhyme or reason for it?
Some landlords waive deposits altogether, at least sometimes. They may do this if they're dealing with extended vacancies or if they have other strict rental requirements for their tenants.
Most landlords charge about one month's worth of rent for a security deposit. So if the rent is $1,200 per month, the security deposit will also be $1,200 per month. You can charge up to two month's rent before tenants start looking elsewhere, but one month is standard.
Landlords may charge more in specific situations. If, for example, they take on "riskier" tenants with bad credit or unclear income, they may have a higher security deposit.
How Do You Store a Security Deposit?
In some states, landlords have to hold their security deposits in a special type of account. However, in Utah, there's no such requirement.
If you're charging a refundable security deposit, you're responsible for returning it later. That means that you need to store it somewhere safe. Do not spend that money.
How you store it is up to you as long as you're able to retrieve it when the tenant leaves.
Do You Have to Refund a Security Deposit?
In the state of Utah, landlords have the option to request nonrefundable security deposits. This is uncommon, as in most states, the deposits are always refundable. However, tenants may be less likely to rent with you if you go this route.
The deposit is refundable by default unless otherwise made clear in the lease agreement.
If you're charging a refundable deposit, you can only keep some or all of it if the tenant has caused damage to the property or otherwise done something lease-breaking. The landlord should only use the money they need to repair the damage and they should return the rest.
Security Deposits Are Simple
Understanding security deposits is important for new landlords. Remember that tenants expect security deposits, and most people who have rented before understand why the deposits are necessary. Landlords have nothing to worry about as long as they stay up-to-date with security deposit law.
If you're a landlord in the Provo, Utah area who could use some help, PMA Made Simple is here for you. Reach out to get a free rental analysis and schedule a consult with our experienced property management team today.