Security deposit - high vs. low

[Al Bunch]

So I'm interviewing property mgmt companies and yesterday I talked to two new ones. While throwing questions at them, the second company said they typically only charge $300 for a security deposit (vs. the standard "equivalent to 1 mo. rent" - though I prefer to differentiate by making the deposit a little more or a little less depending...).

Anyway...

This guy's logic ran something like this: If I charge a tenant $300 for a security deposit, I'm communicating to the tenant that the deposit is simply token and they are liable for -all- damages above and beyond normal wear and tear on a property. I make up for the low deposit amount by screening out anyone with any type of criminal background, requiring a slightly higher credit score than my competition and a few other factors he said he had gleaned in his 30+ years of doing this.

He also said (and I somewhat agree) that because tenants value their privacy that regular property inspections are seen as an intrusion and that frequent inspections will cause a tenant to not renew. Based on that he inspects PRN or every 6 months. To me, this sounds like a lazy answer for, "I don't have time to inspect all the properties I manage, so I try to deter that type of requirement".

In the past, I've told tenants at my self-managed properties that I would be stopping by every couple of months to change the A/C Filter and walk the property to look for things that may soon be in need of repair/replacement in an effort to keep the property in shape. I always mail a letter to them a week in advance and ask them to tape the letter to the front door on the day specified so I know they received it and are expecting me - no letter, no inspection, but I always call to follow up and re-schedule for the following week.

Looking for more experienced opinions on all this as I plan on adding more rent properties to my portfolio and turning them all over to mgmt companies.

[Chris Masons]

Ben is correct. And I Agree 100% 300 dollars for a security deposit is a HUGE mistake IMO.

Sure they are liable for all damages but being liable and COLLECTING for damages are two totally different things.

Alot of tenants, not all, are renting b/c they cannot afford to buy and or have very little saved up for a rainy day. Living paycheck to paycheck is very common place for renters.

I would highly advise against such a small security deposit. YOu have absolutely no leverage when it comes to damages and or tenants breaking lease ETC....

I would definitely interview other PM companies before making a decision.

good luck,
CHris