Think Security “Funds” - Not Security “Deposit”
TIP NO. 3:
Stop thinking about the security as a one-time deposit. Think of it more like a security fund or monies from which you may deduct damages discovered during a quarterly inspection. My lease agreement requires the tenant to replenish the security funds if the funds are more than 25% depleted due to a quarterly repair. How you design this clause is entirely up to you. Perhaps you would like the tenant to replenish the security funds if they are more than 10% depleted due to a quarterly repair.
STOP THINKING ABOUT THE SECURITY AS A ONE-TIME DEPOSIT.
TIP NO. 4: Consider Insurance Bonds Instead of Security Funds For some areas where tenants cannot afford a security deposit at all, you might want to consider shopping for a security deposit alternative or insurance bond. This works in a manner very similar to auto insurance. The tenant pays a premium which is far less than a security deposit. For example, instead of paying a $1,200 security deposit, the tenant may purchase a bond or LeaseGuarantee with a premium of $300. With a bond, if there are any damages, then you make a claim with the insurance company the same way you would if your vehicle was damaged. With LeaseGuarantee, you can get reimbursed for damages or unpaid rent once you obtain a court judgment against your tenant.
THE TENANT PAYS A PREMIUM WHICH IS FAR LESS THAN A SECURITY DEPOSIT.
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