1. Collecting a Security Deposit: Ensure that the Security Deposit is Part of the Rental Agreement
Whether you own a large apartment building or a small duplex, make sure that you have a boilerplate rental agreement. Having a standard format with standard requirements will make any negotiation you may have with a potential tenant easier to manage and more quickly to resolve. A boilerplate also saves you the time of “re-inventing the wheel” every time you structure a new contract.
Another benefit of using a standard format on your lease agreements is that it will eliminate any “gaps” you may have missed were you using one-off formats. For instance, if you prefer your occupants not to have pets then that will be covered in the agreement. You also want to be clear on when rent is due.
2. Payment Up Front
All landlords have the discretion of how they want to manage interaction with their renters, but it is always best to get the first month’s rent, last month’s rent and security deposit prior to giving your tenant their key. Sticking with this rule will save both landlord and tenant from painful misunderstandings.
However, certain renters may have difficulty coming up with a first, last, and security deposit all at once. If their credit scores and job histories are solid, then some landlords will allow the tenant to pay their security deposit in installments.
3. Different Avenues of Rent and Deposit Collection
Of course, you have several ways in which to collect the security deposit as well as rent. As we have stated collecting upfront is a priority but, depending on the style of renting you have some options. Landlords of smaller units, especially if they live in the units themselves, sometimes collect these in person.
Payments via online applications are becoming more common all around and standard post, otherwise called snail mail, is a traditional stalwart method. By far the most effective method for managing all lease transactions is online, as the process builds a history of transactions that can be reviewed.
4. Keep Rent Payment and Security Deposit Payment Separat
Rental payments and security deposits are completely distinct colors of money, meaning they absolutely should not commingle. Rental payments are the revenue that you accrue from the rental whereas the security deposit is legally the renter’s property.
The best way to keep rent and security money separated is to maintain one account for rent payments and another for security deposits. Establish an escrow account in which to hold the tenant’s money until such a time that it needs to be returned.
5. After Lease Signing Conduct a Move-In Inspection
After the paperwork is done, make sure that you and your tenant do a walk-through of the residence. This will allow each of you to identify pre-existing conditions. Having a firm knowledge of the state of the unit prior to formally moving in will save on disputes once the lease is terminated.
Make sure that you and the tenant agree on what you are seeing and write down what you see so that both you and your tenant can keep a copy for records. Making the end of the contract as pain-free as possible is worth the extra effort.