I've had my share of the problems and arguments involving security deposits over the years. I see posts on this often here. A solution I've implemented that works for me and the logic behind it is this:

The logic is supposed to be that the security deposit keeps the tenant in line and gets them to leave the place clean and undamaged. Some of us are better at tenant selection and training than others.

I have mainly class C type properties and tenants. I've found that these level tenants almost always leave a mess and damages and lose their entire deposit and more. The key, to me, is the ability to collect from them if I get a judgement. Many are not collectible, know it and laugh about it, knowing they will never pay.

So, what I've done is this:

I do not charge a security deposit.

Instead , I charge a first months rent of 2 times the normal rent (for example, $1000 instead of $500). I don't say it is a cleaning charge, a pet charge or anything else. Just rent. Because these tenants typically both smoke and have pets (several), they are GLAD to find someone that will rent to them at all.

Then I tell them that IF they follow the lease and pay on time, future monthly payment will be $500 instead of $1000. If not, it is $1000. I simply ask them to leave the place broom clean when they move.

This has worked better for me than dealing with / arguing over security deposits.

Now I realize some states have rules that may say this is wrong or not allowed. But I've had little problem with it.

When they leave I expect to have to clean some. If they leave a mess, I just add it up and try to get a judgement and hopefully collect. Like many say, if you screen really well and try to choose tenants that have longer term and better jobs, you have less trouble.

Nice, I like it. If it works and everyone agrees, I don't think "the law" should have a problem with it.

Security Deposit limits should be abolished. They interfere with the rights of LL & T to negotiate and contract. Why can a plumber and Joe Homeowner agree on $1500 for a job, but a tenant and I cannot agree on a $1500 deposit if my rent is $600? MO State law limits me to 2 months rent max deposit. In some ways, this also causes me to discriminate against tenants with poorer references that I require. If I could charge 3 months deposit, then I might rent to them. We all know it takes a month to get folks out if you act quickly and they don't show up and demand their day in court; then it takes 6-7 weeks. That eats up most if not all of the deposit. Plus court fees and damages and even 2x the rent doesn't cover all costs and lost income. So the state in their "wisdom" made it to where I simply reject people without good references.

Funny too, since they allow Pay Day lenders to charge 370% interest. Don't tell me Security Deposit limits are about consumer protection when they allow those shenanigans.

However as we all know, lawmakers are not as creative as investors. One strategy to get around those arbitrary, harmful limits is to create an option contract and charge 3x (or 4x or 5x) the rent as an option fee and make the sale price high enough to where the tenant would never actually buy the place (or if they did, you'd be happy as could be!), with an unwritten agreement that the land lord/optionor will refund all or part of the fee after move out as long as the place is not damaged. Though, unfortunately, this causes risk for the tenant that the land lord/optionor will simply keep the option fee rather than refund it.

"We from the Gub'mint and we here to hep ya!"

;-)

Sid. I totally agree with you with regard to no limit on the security deposit. Repairs. utility bills and unpaid rent after they leave are usually way over the security deposit.