Where do you store your security deposits for growth

[Cameron Philgreen]

Random question!  It's just recently occurred to me that I'm regularly holding $10k+ in security deposits.  I'm sure many of you are holding $50k, $100k or $200k in security deposits.  What would be a good place to put this money so it's "out of sight, out of mind" and also could get us a little return?

Obviously I / we could "invest" this money for rehabs, maintenance, operating costs, etc, but frankly, I don't trust myself, and I'd rather set it aside until it's time to pay back the tenant.  Any ideas?  CD?  High yield 12 month savings?  What do you guys do?

[David M.]

@Cameron Philgreen

Be careful about trying to "invest" security deposits.  You still need to give it back.  Maybe be more conservative and do a CD ladder.  Depending on your State's requirements, you can't use the money for other investments such as rehabs, maintenance, covering your cash flow, etc.  I don't see the deposit isn't just extra cash in your pocket.  Its almost like money in a Trust account.  Its not really my money, its the tenant's money.  I just hold onto it just in case they cause damages...  So, just follow your State's law and set it aside...  That's my conservative viewpoint.