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A Houston Landlord's Guide to Security Deposits

A Houston Landlord's Guide to Security Deposits

58% of Houston's residents are renters, which presents a fantastic opportunity for rental property owners.

With so many renters in Houston, you should never have a problem finding tenants. Good tenant screening practices will ensure you get a qualified tenant, but it won't guarantee protection for your rental investment. For that, you need to think about using security deposits as insurance.

Today's post will be a guide for Houston landlords who are new to the world of security deposits. Between security deposit laws and allowable deductions, it can be quite confusing. Keep reading and we'll make sure you know what you can and can't do.

What Is a Security Deposit?

Security deposits are effectively an insurance policy that landlords use on their tenants. You never know what a tenant will do in your rental property, so a damage deposit gives you a financial safety net if they damage anything.

When a tenancy starts, you'll do a move-in inspection with the tenant, making note of any existing damage or wear and tear. After the tenancy, you'll do the same inspection, and if there's new damage, you can cover the cost of repairs with some or all of the security deposit.

What Is the Maximum Deposit?

The first thing you need to properly navigate security deposits is to understand security deposit laws. Every state has a different stance on this subject, with the biggest difference being how much you can charge for a security deposit.

Unlike other states, Texas security deposits have no cap. You can charge your tenants as much as you see fit, but it's important to remember that the more you charge, the smaller the pool of tenants will be.

Most landlords will charge anywhere between half a month's rent to the equivalent of two months' rent for a security deposit. Any more than that and you're risking scaring away really good tenants.

When to Keep a Deposit?

Another aspect of security deposit law is the rules around allowable deductions. One important thing for landlords to understand is the difference between wear and tear and tenant-caused damage.

Minor issues like stained fixtures and loose door handles can be attributed to wear and tear. When you've got actual damage, like ripped carpets or holes in the walls, that can be classified as damage. You can keep some or all of the security deposit to pay for the repairs, but you'll need to keep receipts.

If a tenant thinks that you've overcharged them, they may want to see receipts for the repairs. For that reason, try to be as accurate as possible with rental accounting.

Precision Can Help With Security Deposits

Being a landlord comes with a set of responsibilities that can be uncomfortable at times. Dealing with damage to rental property and security deposits is one of those responsibilities. If you're worried about security deposits, it might be time to hire a Houston property manager.

Not only will a property manager collect security deposits and deal with them accordingly, but they'll also take care of other important tasks like repairs and tenant screening. Precision Realty & Management is one of Houston's top property management companies.

To learn more about what we do and how we can boost your investment, don't hesitate to contact us today.