Keep your tenants happy, but not at any cost.

Author: Scott Goodman • Scenic West Property Management

I recently came upon an article from Multi Family Executive, a trade publication for income properties, which left me scratching my head.  The article set out to give advice on ways to maximize tenant retention, listing the usual things you would expect:  Keep those repairs up to date, offer incentives like new appliances, new paint or new carpet and of course negotiate a new rent for those tenants who are determined to take advantage of a (from a landlord’s perspective) difficult market.  All these tenant retention strategies make economic sense when stacked against the loss of income resulting from a vacant unit.  

However, there was one item listed in this article which I strongly disagree with.  The article suggested returning the security deposit to long-term tenants who have a good payment track record. It is never a good idea to give back your tenant’s security deposit until the tenant has moved completely out and you have made all the necessary deductions – which you will then itemize in a security deposit refund letter.  You might look like the good guy by giving back the security deposit, but there is not enough room here to list all the problems inherent with this gesture.  The security deposit protects your investment. They may have been an ideal tenant for 30 years, but what if the moving company they hired to move them out damaged your elevator to the tune of $1000.  What are you to do then? Withholding the security deposit until you have done a move out inspection and have deducted all necessary expenses will save you from future hassles.

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