Investment Property Purchase - How to handle security deposit?

[Chase Gibson]

I am closing on my first investment property soon and was hoping to get some insight regarding the following question.  I am fully aware that I will be getting the deposit from the current landlord at closing.

If you purchase a property that has tenants in it, how do you go about determining their refund of the deposit when they move out?  How can you prove/justify that any required repairs that the deposit will be used to complete are truly from the tenants and were not already present when they moved in?(Current landlord does not have pictures or a move in inspection report)

[Cara Lonsdale]

How did the owner rent it out the last time with no pix?  Go back to any advertising that he may have used to view the pix to use as a baseline.

Then make an appointment to walk through with the current owner AND the current Tenant and complete a move-in report based on the condition as it stands.  As you go through the owner will point out things that were not there before, the tenant may relent or dispute, but either way, it will be between them and not you and the new tenant.  Lean in favor of the tenant on items that they dispute as there is no proof to the contrary, so unfortunately, you have to take them at their word.

Once complete, have your tenant and you sign it.  This is where you go from this point.  Once the tenant moves out, you will use this report to evaluate the condition beyond this to determine what you deduct from Security deposit.  

Keep in mind (many landlords don't realize this), if this is a long term tenant (years and years), you cannot charge them for items that are beyond their "shelf life".  Carpet is the most common example of this.  It has a 4 year shelf life.  So even though it may be stained or damaged at the end of the lease term, if it is more than 4 years old, you cannot charge the tenant for it's replacement.  So know the items in the property.  FYI.

Also, be sure to get, not only the Security deposit, but your prorated portion of the December rent.  Don't leave money on the table.  :)