So how should you handle security deposits? Most states have rules regarding handling security deposits. Some states even prevent allowing the security deposit to be used as the last rent. it’s good practice to not mix security deposits and rent monies. A good Commercial property management software will have the ability to keep deposits separate from all other monies. Best property management software should allow you to create separate bank accounts (chart of accounts) so that deposits can be separated from your main operating account.

Property managers should never agree to apply the security deposit to the last month’s rent. For one reason, what happens if the tenant damages the property? Property managers that use a property management app will typically conduct a ‘move out’ inspection. If there is damage that costs money to fix, you may be out of luck if you did not collect the last month rent.

Legally, there are laws/rules that dictate how you handle the disbursement of the tenant’s security deposit.

It will also make it a bit more complicated for your CPA when it comes to taxes. Bottom line keep it separate and simple. The best property management software will make it extremely easy for you to have separate accounts to handle the 2 types of income. If the tenant has any understanding of the laws and they find you are not abiding by them, the tenant can take legal action if there is any dispute.

Use property management app to keep separate accounts. Stick with the lease and don’t deviate. After the final move out inspection, then return the deposit in a timely manner, per the lease agreement. If tenant must pay any damages, best property management software will allow you to create invoices and credits and then apply the deposit to the invoice for any damages.

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