Inflation and more expensive material and labor costs have raised U.S. homeownership costs. Homeowners now spend $18,118 yearly to own and maintain their homes, a 26% increase since the pandemic.
As a Boulder, CO, rental property owner, you might spend the same, if not more, if your tenants cause property damage that exceeds normal wear and tear.
Fortunately, you can protect yourself from such unwanted expenses by charging security deposits. So read on, as we've explained these fees and shared expert Boulder rental property tips.
What Are Security Deposits?
Security deposits are fees landlords can charge tenants in addition to rental payments. Renters make these monetary payments to their landlords in advance.
Security deposits protect landlords from potential tenant lease violations. The most common is property damage beyond expected wear and tear. Another is non-payment of rent, which is the leading reason for evictions in Boulder, CO.
How Much Security Deposit Can Boulder Landlords Charge?
In 2023, Colorado enacted several changes to its landlord-tenant law, including a cap on security deposits.
Under the revised Colorado landlord-tenant law, Boulder landlords can only charge security deposits equivalent to two months of rent. So, if your monthly rental fee is $2,000, the maximum security deposit you can charge is $4,000. If you charge any higher than this, your tenants can file a complaint against you, and you could face legal trouble.
You can also charge a separate security deposit of up to $300 if you let your tenants' pets on your property. That's on top of the pet rent or fees, capped at 1.5% of the monthly rent or no greater than $35 a month.
Managing Rental Deposits
One of the most crucial rental property tips Boulder, CO, landlords should follow is explicitly indicating in the lease agreement that they charge security deposits. You must also explain this clearly to your tenants before signing the lease.
It's also wise to deposit your tenants' security deposits into an escrow account. That separates them from monthly rental payments, making managing your rent-related finances more straightforward.
Refunding Security Deposits
You must refund unused security deposits within a month from the end of a lease or when a tenant leaves. You must also return the interest accrued on these deposits. For 2024, Boulder's interest rate for security deposits is 2.33%.
If you must use all or part of the security deposit for any allowed reason, you must provide the tenant with a written statement. Here, you must clarify what you'll use the money for, whether it's for repairs or non-payment of use.
Protect Your Rental With Security Deposits
Security deposits can protect your property and income from severe tenant-caused damage or non-payment of rent. Since the law allows it, there's no reason not to charge them. Just ensure you return whatever you don't use (plus interest) to your tenants who leave or whose tenancy ends.
If you need expert assistance with managing security deposits and your Boulder property, PMI Flatirons Group can help. We provide full-service solutions, from marketing to payment collection and property maintenance. We're also part of PMI, the country's largest property management franchise with over two decades of history.
So, get your free consultation today to learn how we can help!
