Security Deposit Guidelines for Rental Properties

As a landlord, you will need to determine how much you are going to charge for a security deposit. You need to put a lot of thought into how much you are going to charge, as it can influence whether you have tenants. Here are a few things to consider about choosing a security deposit amount.

Covering Damages

You should consider how much money you could potentially have to come up with if the tenant damages the property. Go through the property and determine what is likely to be damaged. Then you need to come up with some estimates as to how much it would cost to repair the damage. For example, if you have carpet in the rental property, you might want to get an estimate as to how much it would cost to replace the carpet. Calculate how much it would cost to repaint the unit or to fix minor dents in the wall. Add up all of these costs and come up with a figure that you think would be reasonable to repair the unit. Then make sure that you charge an amount for the security deposit that is close to this value.

Market Factors

You should also do some research to determine what the average security deposit is in the market. Start looking for rental properties that are similar to yours. Then you need to find out what other landlords are charging for security deposits. Sometimes, you will be able to find this information in the classified section of the newspaper. Other times, you might have to pretend that you are looking for a rental property and call a landlord directly. Do this with several different properties and see what the average price is for a security deposit. You do not want to charge a security deposit that is well above the market average. This will often take you out of the running for attracting tenants.


Something else to consider is the amount of demand that you have for your rental property. This will be determined by the condition of the economy and how many renters are in the market. If you have an abundance of renters that are looking at your properties, you might be able to charge a little bit more for the security deposit. When there is a great deal of demand, this should not negatively affect your ability to rent out the unit. However, if there are fewer renters in the market and you need to rent the property out, you should consider lowering your security deposit. If you know what the average security deposit in the market is, you might consider putting your security deposit at a price that is lower than this figure. This will effectively separate you from the rest of the marketplace and help you rent out the property.

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