Property Management Blog

How to Process Security Deposits Properly – Landlord Education


Landlords must collect and process security deposits from tenants. People always have questions about how to properly handle the security deposit and what can be done to eliminate conflicts with the tenant who is moving out of a property.


Documentation is important. While a picture is worth a thousand words, a video is worth a million words. At PropM, we do a video inspection before a tenant moves in and a video inspection after a tenant moves out. Generally, this will squash any troubles or disputes with the tenant. If there was no dent in the refrigerator before the tenant moved in but there is a dent there after the tenant moves out, it’s pretty clear that the tenant will be responsible for paying for that damage.

Deposit Amounts

If you’re not sure how much of a security deposit to collect, we recommend that you ask for the equivalent of one month’s rent. So, if you have a property that rents for $2,500, then your security deposit will also be $2,500. Hold that money in a non-interest bearing account, as required by law.

Condition and Damage

Take good notes on the condition of the property before you rent it. An even better idea is to really fix the property up before your tenant moves in. Check the furnace filters, light bulbs and make sure door handles work. You want to be sure that things work before a tenant arrives, and then you’ll have far fewer troubles during the move out process.

Damage must be documented and deducted from the security deposit. Any remaining money must be returned to the tenant within 31 days. If the tenant left the home in perfect shape, and there is no damage, you’ll want to return the security deposit within 2 weeks.

Take care of your property, and document everything with video. If you can do that, you’ll eliminate a lot of security deposit conflict. If you have any questions, please contact us at PropM, Inc.