Many Washington rental properties have significantly reduced their move-in costs to stay under RCW 59.18.610’s 25% deposit and fees threshold. And some have limited themselves to a $300 security deposit regardless of the rent. While reducing the security deposit for Washington rental amounts exempts you from the renter payment installment plans requirement, it also significantly reduces your asset protection. And with inflation at record highs, properties are more likely to accrue costs they can’t recoup. Here’s why a $300 Washington security deposit is not enough.
Washington’s code doesn’t account for rapidly rising material and labor costs. (According to the National Association of Home Builders, building materials increased nearly 20% compared to last year.) This poses a problem not just for new development but for any Washington apartment rental trying to complete repairs. A $300 security deposit collected 12 months ago has essentially been reduced by 20%, which means repairs will cost you—not your residents—even more.
An increasing number of residents are struggling financially, and nearly 15% of adults are behind on their rent payments. With low security deposits, properties have no collateral to cover unpaid rent, and onsite teams will have to spend more time attempting to collect after move-out or eviction. The time you thought your onsite team would save by avoiding renter payment installment plans will likely be spent on trying to recoup unpaid rent (and from residents who no longer have the funds to pay you back). Some of this can be avoided by collecting higher security deposits at the beginning of the lease.
Collecting an appropriate security deposit encourages residents to take better care of the unit. While a deposit doesn’t guarantee there won’t be any damages, it does leverage a core human operating principle – that people don’t want to lose their money. (In fact, researchers say the pain of losing is about twice as powerful as the pleasure of gaining.) While a $300 security deposit is still a significant amount of money for some residents, others may feel that’s an amount they wouldn’t get back anyway and are less concerned with taking good care of their Washington apartment.
A $300 security deposit for Washington rentals doesn’t cover you if a resident breaks their lease early or without proper notification.
While the risk of developing a poor rental history may be enough incentive for some to try to pay, others may simply not have the means to pay one or two months' rent to break their lease. You could end up with an empty unit, loss of rental income, and, in some cases, legal fees you’re likely to have to pay yourself.
Most residents will have the utilities in their name when renting a Washington apartment. When a resident moves out, the utilities are switched back to the property.
If a resident didn’t pay their last utility bills, you can usually use some of the security deposit to pay those bills. If you’ve collected just $300, it’s unlikely to cover all outstanding charges.
If you’re concerned about the risks of collecting a small security deposit and want to increase your asset protection, you have a couple of options:
If you decide to charge more than the typical $300 security deposit on your Washington rental and offer installments through deposit automation, there’s not much you’ll need to do. The platform connects to your property management system and is configured to meet jurisdiction requirements.
Deposit automation issues payments request on a predetermined schedule, notifies property managers and residents of status, and records payments in the resident ledger.
Regardless of the security deposit amount you charge for your Washington rental, improving transparency around security deposits is good for you and your residents.
One Roost survey found that 25% of respondents reported submitting a negative property review due to a lack of transparency and communication, and more than 50% of residents reported that the refund terms were not well communicated.
To help minimize stress for your residents and reduce negative reviews for your property, looks for tools and services that give residents more visibility into their security deposit money and keep them updated about any changes or charges.
A rising trend among Washington rental properties has been to charge a $300 security deposit to remain under RCW 59.18.610’s 25% deposit and fees threshold.
At first glance, doing so may reduce costs because you don’t have to offer installment plans. But the reality is quite different – the cost just comes in another form. Deposit automation can help properties meet the Washington security deposit code requirements and increase asset protection.
