Last Updated on May 7, 2025 by Tanya Janse van Rensburg
When you decide to become a landlord and rent out a property, one of the first things you need to figure out is whether or not to collect a security deposit from tenants.
This upfront fee, typically equal to one or two months' rent, is meant to provide some protection against any potential damages or unpaid rent.
As a landlord, a security deposit can give you peace of mind, but collecting, managing, and returning security deposits also comes with administrative burdens.
Continue reading below as we learn more about the pros and cons of collecting a security deposit for your rental property.
A security deposit, sometimes also called a damage deposit, is an upfront fee that landlords require tenants to pay upon moving into a rental unit.
It is a set amount of money that serves as security for the landlord.
The purpose of collecting a security deposit is to give the landlord some financial protection if the tenant causes damage beyond normal wear and tear, fails to pay rent, or breaks the lease terms in other ways, like moving out early without adequate notice.
Having this buffer means landlords don't have to incur these costs out of pocket.
Typically, the amount of the security deposit is equivalent to anywhere from one to two months of rent.
Landlords are required by law to hold security deposit funds separately, either in a separate bank account or with records accounting for each tenant's deposit amount.
Professional rental management group in Atlanta will help you in finalizing the amount of security deposit your tenant must pay before moving into your rental property.
When a tenant moves out, the landlord can use the deposit to fix or clean the unit, cover any unpaid rent, or address other financial losses accruing from the tenant's occupancy.
If no deductions are needed, state laws require the full security deposit amount be returned to the tenant within a specific timeframe, often 30 days after move-out.
There are several important advantages to requiring tenants to pay a security deposit to rent your property.
Here are some of the main ways this financial buffer provides a net benefit to landlords:
Tenants are usually required to pay the security deposit on the rental property before receiving the keys to the unit.
When a tenant lives in a rental property day in and day out, wear and tear and minor damages are inevitable.
Sometimes tenants cause more significant damage to the unit or property—carpets ruined by a pet's accidents, water damage from letting a sink overflow, broken doors and windows, and so on.
Without a security deposit, landlords would have to pay for these repairs and replacements out of their own pockets upon moving out, which could add up to huge, unexpected costs.
However, with a deposit, landlords have a pool of funds per tenant to tap into in order to return the property back to good condition for the next occupants.
Requiring a deposit may deter reckless tenant behavior.
Knowing they could lose their deposit for damaging the unit or violating the lease, tenants have added financial motivation to take proper care of the property during their stay and follow all rental policies.
This helps mitigate any losses or unnecessary repairs for the landlord.
Unfortunately, some tenants face sudden financial issues and cannot afford the last month's rent.
Some may even sneak out one night and disappear while owing rent. In these cases, the security deposit gives landlords at least some money to put towards what's owed.
In contrast, landlords without a deposit policy just lose that money entirely.
No matter how tidy, whenever renters vacate an apartment or home, some intensive cleaning and repair will likely be necessary—fresh paint, professional carpet cleaning, hole and nail patching, debris removal, and so on.
The deposit helps landlords pay for these move-out preparation costs.
While security deposits come with additional payment for landlords, there are also some drawbacks and setbacks involved with collecting and managing deposits:
Collecting a security deposit involves multiple layers of administrative tasks, including:
This takes considerable time, organization, and paperwork. Some landlords opt not to take deposits simply to avoid this administrative chore.
For renters, paying the first month's rent, last month's rent, and a full security deposit upon move-in may prove too big a financial hurdle.
Quality tenants could be deterred from renting your unit if the total move-in costs are too high compared to the market rates in your area.
Offering a unit without a security deposit requirement makes it more affordable.
State laws dictate specific timelines for returning deposits after the tenant moves out, which typically ranges from 14 to 60 days.
This means you cannot use the funds until the unit is vacated, inspected, and the deposit is processed. This can cause delays for landlords since they need to prepare the rental and take a new renter.
The biggest risk with taking security deposits is the prevalence of disputes over deductions taken out of deposits.
Tenants may take landlords to court if they feel amounts are unfairly withheld, which increases legal costs regardless of the outcome.
As a landlord trying to manage properties effectively, the administrative and legal headaches surrounding security deposits may simply become more effort than they're worth.
Aligning move-in costs also attracts more interested prospective tenants. Weigh the trade-offs carefully for your situation.
