As a Chicago landlord, should you collect a security deposit?

I stumbled upon the video below at YoChicago.  Originally titled What new renters need to know about landlord policies in Chicago, I think it is an even better resource for newly minted landlords.  Everything from when to begin marketing to security deposits is covered.

My team and I handle single-unit and smaller-building property management and consult daily with home owners finding themselves in the position of becoming a landlord.

Only issue I have with the video is the one taken regarding security deposits. If managing a single-unit or smaller-building it may be prudent to collect a security deposit.  Thoughts on this?

My first appointment this morning took me to a property I am currently managing for a Chicago client. I met a plumber at the property to address a leaky tub and radiator and I will be meeting a painter at the property this week to complete the work. My client is one of many Chicago home sellers who have decided to rent their property as opposed to selling it in this slower market. The Tribune addresses the topic of becoming an “Accidental Landlord” in a very informative article.

If you are faced with this decision, weigh your options carefully and make sure you are up to the task of becoming a landlord. Consider the following costs and areas of responsibility:

Monthly Carrying Cost – Understand your costs for carrying the property each month. In most cases market rent will not cover the cost of Principle, Interest, Taxes, Insurance, and Assessments (PITI+A) in the case of a condo.

Tenant Placement – Understand how to find and qualify tenants, and draft a lease agreement. This is not a onetime event, but occurs at the end of each lease term in the form of tenant turnover.

Ongoing Maintenance – It is inevitable that issues will arise with the property. The obligatory leaky sink or tub are par for the course. In addition, during turnover, cleaning and painting may be incurred due to normal wear. Ensure you have budgeted for these costs and have the time and desire to address these issues.

Capital Improvements – If the goal is to sell the property in the near future then improvements may need to be made in order to bring the property back to saleable condition due to wear and tear and changing market tastes. Floors may need to be refinished/replaced, appliances replaced, carpets cleaned/replaced, and walls re-painted to name a few key improvements.

Think through details and don’t let your decision to become a landlord be the next accident waiting to happen. If the task is overwhelming for your already packed calendar or you need practical advice then reach out for assistance.