Landlord Action with Security Deposits

[Reece Bierhalter]

I am always looking for ways to leverage.  As a landlord, the more properties you acquire, the more cash you will have to deal with and store.  With every rental comes a sizable security deposit that you will hold onto for generally a year or longer.  Have any of you considered or do any of you put that money into a CD equal to the length of the lease so you can gain a significantly greater amount of interest on that money you will hold onto for the foreseeable future rather than letting it sit in a low yield savings account. There is a significant difference in yield rates on a short term CD and a savings account, sometimes up to a 50x difference.  I know there is always the possibility of having to pull that out earlier if something happens with the unit or the lease agreement, and with that would come penalties in the CD route, but the possibility of penalties vs the potential gains may outweigh the risk, especially if you keep a certain percentage as a back up and not place all security deposits into a CD account. I am curious to know if anyone has considered doing this, does this, or if it is even legal, etc.?  Once you start to get in the thousands of dollars in security deposit value, you could gain a few extra hundred dollars at the end of the year, and you could keep compounding the earnings into new CDs and eventually a snowball effect will be created.  All thoughts are welcomed.  I am located in Texas for clarification on local laws.