Security deposits are one of the most important tools you have to protect your rental property.
Maybe you don’t need them?
What is ARDI and LOR?
CHBO Annual Report found 92.4% of “by owner” landlords regularly collect some kind of security deposit. Let’s discuss some of your common security deposit questions below…
Do you HAVE to require a security deposit?
No, you don’t. But if you choose not to collect a cash security deposit, instead consider offering Accidental Rental Damage Insurance (ARDI) – it’s a great alternative to the security deposit and offers the same protection.
ARDI is insurance that covers accidental damages to your corporate rental property caused by guests. The plan is available in two options – a maximum coverage limit of $1,500 and a maximum coverage limit of $3,000. With ARDI, there is no need for your guests to tie up their funds in an expensive security deposit. When your guests choose to purchase this program at an affordable cost, ARDI covers them for up to the maximum coverage limit purchased if the property or its contents are damaged by them during their stay.
- Benefits to You: No more hassels of collecting security deposits. Better protection for you. There is no cost for you to offer this program to your tenants.
- Benefits to Your Tenants: Guests don’t have to worry if and when their security deposit will be returned. Guests don’t have to tie up large amount of money in deposits.
If you’d like more information about how you can offer ARDI to your tenants and avoid the hassles of security deposits altogether, please contact CHBO.
Wondering what other “by owner” landlords are charging?
If you decide to collect a security deposit instead of ARDI, here are some stats to help you set your rate:
- 32% of CHBO landlords charge one month’s rent as a security deposit
- 36% charge between $500-$1000
- 12% charge between $100-500
- Corporate housing companies charge, $726, on average, according to the annual survey by the Corporate Housing Provider’s Association.
Should you require an additional security deposit for pets?
Yes, many owners charge an additional pet deposit or fee to insure themselves against damage and wear and tear caused by a pet. On average, “by owner” landlords charge a one-time, non-refundable $175 pet deposit fee.
What are the rules to returning security deposits?
Security deposits must be given back to the tenant (if no damage is done to the property) in a timely fashion. State laws govern this time period (generally within 21 days), but you’ll need to confirm return limits in your state (we created a cheat sheet here for your reference). We recommend returning it as soon as the tenant leaves and you’ve had a chance to inspect the property. The more time that passes, the more questions may arise as to whether the damage was done by that tenant or a following tenant.
Why do some corporations deny security deposits?
Corporations often balk at the idea of locking up money in a security deposit – and it can kill a deal. Because landlords feel pressure, they may skip the security deposit in order to “seal the deal.” Beware if you do this because someone who isn’t willing to pay a security deposit may have something to hide. Do your homework and research the tenant/corporation before making any decisions about whether or not to skip the deposit. If it’s a reputable corporation, you can probably feel good that the property will be gently used by its employee and that the company will cover any damage to the unit.
After doing a little research on the company or individual and things turn up okay, you can also have them sign a LOR, or letter of responsibility, which you can download from your MyCHBO account.
Remember, security deposits and accidental rental damage insurance are meant to protect your property and yourself from unruly tenants. Plus, they make an effective incentive for a tenant to keep the place orderly. Don’t overlook their importance!
- Security Deposit 101 for your Corporate Rental
- CHBO’s New Insurance Offering Takes the Hassle Out of Security Deposits
- Rental Security Deposits. What you should ask for and how to handle disputes
- Most Corporate Housing Landlords Require Security Deposits; Few Require Insurance
- Corporate Tenants: Who is sleeping on the sofa and where is Fido?