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How Security Deposits Should Be Handled When Renting Out My Indianapolis Home


When you are managing a Central Indiana tenant’s security deposit, there are two important distinctions that you need to make. That distinction involves the difference between wear and tear and damage. Wear and tear is considered a property’s natural deterioration due to common use. Examples might include worn carpet in high traffic areas, furniture marks on the walls or a few nail holes in the walls from where pictures were hung. A court would consider those things normal wear and tear.

Damage is something different. Broken windows, broken doors or doors that are missing and streaks of marker on the wall are all examples of damage. You will be able to keep money out of a tenant’s security deposit to pay for those repairs.

To avoid any disagreements, it’s important to communicate your expectations with the tenants up front. Let them know how you expect them to care for your property and what you want the place to look like when they move out. You should spell out all those details in the lease, so you and your tenants can refer to that written information.

Security depositsIt’s also important to document the condition of the property. Use pictures and videos to prove how the place looked at move in as compared to move out. You should take more pictures than you think you need. For a single family residence, this could mean up to 100 photos. Make sure you do a complete walk through and document everything from the condition of the carpet to the way the floors and ceilings look.

When you’re collecting a security deposit, we always recommend that it’s an amount different from the cost of rent. When tenants know they are moving out, a lot of times they will just think they can apply that security deposit to their last month’s rent. You don’t want them to do this, so make sure your security deposit is not equal to the amount of rent.

Finally, Indiana law regarding tenants requires you to keep those security deposits in a non-interest bearing account that is separate from your other funds. You also need to provide a clear accounting of those funds.


If you have any questions about security deposits and how to handle them, please do not hesitate to contact us at Indiana Property Management Group. We’d be more than happy to help you.

Posted by: Jason Warner on October 28, 2014
Posted in: Uncategorized