As a new Mississippi landlord, you have a lot to learn. Being a landlord isn't all about collecting passive income! You have rules and regulations to follow, a property to maintain, tenants to attend to, and so much more.
One thing that you need to know how to handle before you start bringing in tenants is their security deposit. Having a security deposit protects both you and your tenants, but what are you supposed to do with it? When do you have to return it, and what should you do in the meantime?
We're here to talk about it. Keep reading to learn all about security deposits.
Collecting Security Deposits: How, Why, and How Much
Most tenants fully expect to pay a security deposit when they move into their new home. They generally set this money aside along with the first month's rent when they're submitting applications to different properties. In other words, you don't have to worry about tenants pushing back when you're asking for a security deposit.
The security deposit protects you in the event that the tenant damages the property somehow. The deposit will allow you to make repairs when the tenant leaves.
It also benefits the tenant because they won't have to pay for minor repairs out of pocket. The money is already "gone" to them, even if it's refundable.
Collect the security deposit when you collect the first month's rent, preferably as soon as the tenant signs the lease. This makes it easier for everyone.
There is no state law that restricts the amount that you can charge for a security deposit, but we recommend matching it to the first month's rent or 1.5x rent if you want to find a good tenant.
What to Do With the Security Deposit
No landlord should spend their tenant's security deposit. It's important that you put this money aside somewhere so that you don't lose it. Your tenant is entitled to their deposit when they move out (except under certain circumstances).
We recommend setting it aside in a separate bank account to ensure that it stays safe and separate from your normal spending.
Some landlords allow tenants to use the security deposit for rent for their last month, but this isn't advisable. You never know if the tenant will leave damage behind.
Returning (or Not Returning) the Deposit
At the end of your tenant's stay at your property, they'll expect to receive their security deposit refund. Many landlords try to withhold the security deposit, but in most cases, this isn't acceptable.
You must pay the deposit back to the tenant within 45 days of them leaving your property unless you can provide proof that you need it to make repairs that were the fault of the tenant.
Make sure that you aren't mistaking normal wear and tear for damage. If a tenant has lived on your property for years, you can expect there to be small amounts of damage, chipped paint, and carpet discoloration (among other things).
You can withhold part of the deposit, but leave a receipt for the tenant. Take photos of the damage for proof.
Do You Need Security Deposit Assistance?
Handling a security deposit, especially for a first-time landlord, can be confusing. If you do it wrong, you may end up in legal trouble. This is where a good property manager can come in to save the day.
If you're in need of help with your property, Cissell Management is here to save the day. Reach out to us so we can start working together today.
