What are best practices for Rental Security Deposits?

[Kevin Greer]

All,

In talking with various investors, I understand that in certain states security deposits must be maintained in cash, cannot be invested, and accounted for in a separate account.  Thus this would tie up tens of thousands of dollars in a non-interest bearing account.  Additionally, with a portfolio of properties, tying up this cash with a very low risk of payout while a new deposit is coming in would seem ineffective.

Is this accurate and does this apply to Colorado?

What are best practices for maintaining security deposits?  Any advice greatly appreciated.

Thank you.

Kevin