An article from The Independent Landlord suggests that property owners should be spending an average of 10% of their gross on repairs and maintenance each year.
You may be able to pay for some repairs using security deposits. It's important to know how security deposits work and what they cover so you can handle things correctly. Additionally, mistakes with security deposits could lead to legal complications.
In this guide, we'll go over some key things that all landlords in Wisconsin should know about security deposits. Keep reading for more.
What Is a Security Deposit?
A security deposit is a sum of cash that tenants must pay the owner of a rental property when they move in. Once they move out, the deposit is returned to them, assuming there aren't any issues. If there are, some (or all) of it may be used to cover things like repairs or unpaid rent.
How Much Should Security Deposits Be?
Some states have laws determining the maximum that a security deposit can be, however, this isn't the case in Wisconsin. As such, you can ask for as much as you want for a deposit.
Bear in mind that asking for too much would be a mistake. It will put renters off if they need to provide excessive funds up-front. Most real estate investors ask for deposits matching either one or two months' rent, so this is about what you should look for.
Note that some towns or cities have additional rules surrounding security deposits, so you should check with your local authorities. It can be a good idea to work with a local property management company here. They stay up to date with local property laws, so they'll be able to guide you on any legal aspects of a deposit.
Handling Security Deposits
Another law that varies by state is how security deposits must be held. In Wisconsin, there are no rules surrounding this, so you can hold a deposit in whichever way suits you.
In general, the best practice is to hold a deposit in a separate account (as is the law in some areas). Doing this will help ensure deposits don't get mixed up with other funds. When it comes time to return a tenant's deposit, you shouldn't be faced with any confusion.
Returning Security Deposits
Landlords in Wisconsin have a period of 21 days to return a security deposit (minus any deductions). If you do make any deductions, you need to provide an itemized statement to the tenant within this same 21 days. This period begins either on the termination date in the lease agreement or when the property is discovered to have been abandoned.
If you fail to return the deposit within this time frame there could be penalties, so make sure you handle all deposits appropriately.
Dealing With Security Deposits Properly
It's important to handle security deposits correctly to avoid any legal issues. Working with a reliable property management company is one of the best ways to ensure this.
PMI Northwoods is a full-service real estate asset management company based in Mauston, WI. Our experienced team can use the latest technology and their in-depth knowledge of the local real estate market to provide you with the best level of service. Take a look at our management services page for more information.
