You’ve spent months getting an apartment or house ready to rent. Today you’re showing it to potential tenants. Wouldn’t it be nice if you could start to generate some positive investment income, starting today?

It would be nice, of course. Yet accepting security deposits from potential tenants is usually not a good idea. Granted, some landlords believe that taking deposits of several hundred dollars with applications separates serious potential tenants from tire-kickers. But other landlords take a dimmer view of deposits.

“When some people leave me a $300 deposit, they think they have rented the apartment,” one landlord explains. “They can go kind of crazy when I then say that their applications have not been approved.” Then there is the additional hassle of returning deposits to applicants you reject. You need to cut checks, mail them out, and discuss with your accountant how you are going to account for those transfers of funds.

There is also the possibility that if you don’t request deposits from everyone who files an application, some of the people you didn’t ask for deposits could accuse you of discrimination based on their age, ethnic background, or other off-limits considerations.

The bottom line? Talk this question over with your attorney to determine a strategy you can live with.

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