Security Deposit Amount

[Jill Keller]

How much do people typically charge for a security deposit? Is 2 months reasonable? I live in Indiana. I used to typically do 1 month but I've had tenants try and not pay the last month so i want to cover my grounds incase there are any damages.

[Kerry Noble Jr]

Have you ever tried first and last months rent as a deposit?

[Richard F.]

Aloha,

You need to check local landlord/tenant laws, as they typically limit what you are allowed to charge and/or collect.

[Jill Keller]

Quote from @Kerry Noble Jr:

Have you ever tried first and last months rent as a deposit?

 I have not but that sounds like a great idea. I heard that gets tricky if you need to evict for any reason because you received rent for the last month. Also, i have it setup that they can break the lease but are responsible for rent until i find a new tenant. Would having last months rent be applied to the last month the tenant would be living there before the new tenant took over? I was reading the landlord/tenant laws and it seemed like Indiana did not have a maximum amount landlords could charge but maybe I'm missing something. I would love to just hold 2 months deposit if that was legal.

[Greg M.]

Indiana state has no limit. However, individual cities may and competition limits what you can ask for.

I try for 1.25x-1.5x monthly rent. That way if you try to use the security deposit as last months rent, I have extra for the late fees and some damages, if any. 

[Chris Merchant]

Just be sure to understand that the security deposit is the property of the tenant until they move out than certain items can be deducted.  It is a good idea to set up a separate bank account for security deposits or have an escrow account for them.  That way there is no possibility that you spend the money before you are legally allowed too, or on something you aren't supposed to which would be considered theft.

[Tim Miller]

We have it stated in our lease agreement that the security deposit can not be used for last months rent. The SD is to cover any damages to the unit first, then to any unpaid fees, rents or other expenses.

We had one tenant refused to pay last months rent, stating that we can use the security deposit. We took the tenant to court for non-payment of rent and received judgement. Then filed for eviction, guess what, the tenant paid up.

No, the tenant still didn't get their SD back due to the damages.

[Linda Thomas]

I live in PA and I charge 2 mths but after the first year if they stay for a 2nd year i have to return 1 month, not allowed to keep 2 mths after one year. 

[Nathan Gesner]

Quote from @Jill Keller:

How much do people typically charge for a security deposit? Is 2 months reasonable? I live in Indiana. I used to typically do 1 month but I've had tenants try and not pay the last month so i want to cover my grounds incase there are any damages.

I charge based on the level of risk. High-risk tenants pay equal to two months rent, while low-risk tenants pay one month. Some Landlords charge last month's rent in advance, but I find that causes confusion and additional problems.

Check your state laws because some states limit how much you can charge.

[Mark Jones]

we have had success with security deposit insurance companies like Rhino.  The tenant pays a little each month and doesn't have to pay a deposit.  The amount depends on the strength of the tenant.  The property is then insured against tenant damage.  You pick the amount of the insurance.  1, 2, 3 months rent.  Tenant loves it since they don't have to come up with a big chunk up front along with the first month's rent.