We all know that there is some risk when making investments and investing in real estate is no different. Luckily, security deposits exist to mitigate the risk that landlords take on when renting out their units to tenants.
Even though security deposits are meant to be helpful for landlords, they can become a headache if you don't know the laws surrounding them. In Texas, handling security deposits might be a little different than in other states.
Keep reading to learn what landlords need to know.
Security Deposit Limits
Texas is a landlord-friendly state, meaning that there is no limit to what landlords can charge for a security deposit under Texas law. It's still a good idea to be reasonable to ensure prospective tenants can afford your rentals.
Most landlords charge an amount equal to one month's rent. Charging more can hurt your ability to find quality tenants. High deposits are a difference maker in how many rental applications you receive.
If you come across a high-risk tenant, you can protect your investment by charging a higher security deposit than normal.
Security Deposit Deductions
Under security deposit law, landlords can deduct money from the security deposit for various reasons. These circumstances include:
- Non-payment of rent
- Unpaid utilities
- Cleaning fees
- Property damage
- Property alterations
Property damage must be more than general wear and tear. Damages might be holes in the walls, broken windows, stained carpets, etc. Tenants are liable for damages when they don't put in maintenance requests.
A leasing agent can help you put these terms in a lease agreement.
Returning Security Deposits
When a tenant moves out, the law says that you have to return the security deposit within 30 days. There are some exceptions to the rule. If your tenant fails to notify you that they are terminating their lease, you can keep the deposit.
When you refund a security deposit, you need to write a return letter. This is an itemized list of the deductions you made from the deposit. If you deduct money from the security deposit and don't send this letter, you could face problems down the road.
Wrongful withholding of a security deposit can lead to hefty fines. If you are found guilty of wrongful withholding, you might have to pay your tenant up to three times the deposit amount.
Additionally, you'll have to cover attorney fees and court costs. The best landlord advice we can give is to follow the security deposit laws closely. If you don't know what they are, a property management company will.
How Can Rental Property Management Help?
Staying compliant as a landlord and real estate investor doesn't have to be difficult. The best way to handle day-to-day tasks, including those that have to do with security deposits is by hiring a rental property management company.
PMI Heart of Texas is a full-service property management company that knows the security deposit laws in Texas and can keep track of these funds for your tenants.
For more details on how our services can benefit owners like you, contact us today!