Handling Rental Deposits in Conway – Deductions and Returns

Owning a rental property can be a great way to earn additional income. However, you’ll need to abide by the book in order to avoid conflicts and keep the peace.

As a landlord, you will need to collect and handle rental deposits when tenants come or go. It can be an area of contention when tenants move out. Make sure you and the tenant are on the same page, and you shouldn’t have anything to worry about. This post will help you understand the proper procedures for handling rental deposits.


Before anyone moves in, make sure to do a full inspection of the property. We at Clear Property Management LLC will do a video walk through once the cleaning and repairs have been done on the previous tenant.  We use this video two-fold for the next set of tenants as well as timestamped video of the condition of the property before the next set of tenants move in. Look for damaged walls, loose baseboards, dings to the counter and floors. If carpets haven’t been replaced, make note of the wear and stains. Another option, do the walk-through with the tenant so you can both take notes on any defects. Make sure everything is in writing and take photos and video as needed. Have both parties sign off, making sure the tenant understands their obligation to keep the property in the same condition in which they receive it. Taking these extra steps can save you a lot of hassle in the long run because this keeps everything up front and honest in the beginning.


Every property is different, but you should always require around one month’s rent as a deposit. The deposit should cover any damage beyond normal wear and tear. You can also think of the deposit as an insurance policy should your tenant decide to skip town and break their lease.

Additional situations may require additional deposits. Many landlords will require an additional deposit for a pet or waterbed. Anything that could accidentally cause additional damage to the property should be covered with a deposit.

Another option is a non-refundable pet fee that is either collected in the beginning or spread out of the duration of the lease.  At Clear Property Management LLC we prefer to lean toward the additional monthly charge added to the lease for such things.  This ensures that if a tenant decides to extend their lease that you are continually getting paid more on the back end.  If an owner stays and keeps a pet for several years, the damage could really add up.  Having the additional fee added to the monthly rent payment ensures that you keep getting costs of that.


Returning the deposit is when things can get tricky. Many people move into a new place, counting on their entire deposit to be returned in full. This is when it really pays to have everything in writing. The tenant needs to understand that you’ll most likely need to clean and make repairs (no matter how minor) in order to have the house in good condition for the next tenant.

Carefully review your initial inspection and calculate the costs needed to restore the home to this state. Anything owed back to the tenant will need to be returned as soon as possible and in no longer than 30 days. If you state that it will be a few weeks for you to process and return their deposit, they will not count on having that deposit to get into their next place.  This prevents them from hounding you for quick return because they need that cash now.

Handle With Care

Some states require all rental deposits are kept in a separate account. Even if your state doesn’t require this, it is a good practice to keep deposits from commingling with other income. Make sure you follow the rules for your state! Also keep in mind, the money needs to be accessible for returns or repairs when needed. If you own many properties, a property management company like Clear Property Management LLC can be beneficial in helping to manage your funds. They can also handle some of the headaches, repairs, tenants, and vacancy issues that come along with owning rental properties!

To make sure everything runs smoothly, always make all policies regarding the deposits known to tenants. Be as transparent and communicative as possible to avoid any conflicts. Always strive to make sure you and the tenant are on the same page.  All while remembering to treat them the way you would like to be treated.  It goes a long way.

Would you like to learn more about tenant relations and property management? Send us a message and let us know how we can help! Or give us a call today! 501-642-0202

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