Handling Rental Deposits in Denver – Deductions and Returns

Owning a rental property can be a great way to earn additional income. However, you’ll need to abide by the book in order to avoid conflicts and keep the peace.

As a landlord, you will need to collect and handle rental deposits when tenants come or go. It can be an area of contention when tenants move out. Make sure you and the tenant are on the same page, and you shouldn’t have anything to worry about. This post will help you understand the proper procedures for handling rental deposits!.


Before anyone moves in, make sure to do a full inspection of the property. Look for damaged walls, loose baseboards, dings to the counter and floors. If carpets haven’t been replaced, make note of the wear and stains. If at all possible, do the walk-through with the tenant so you can both take notes on any defects. Make sure everything is in writing and take photos and video as needed. Have both parties sign off, making sure the tenant understands their obligation to keep the property in the same condition in which they receive it. Taking these extra steps can save you a lot of hassle in the long run.


Every property is different, but you should always require at least one month’s rent as a deposit. The deposit should cover any damage beyond normal wear and tear. You can also think of the deposit as an insurance policy should your tenant decide to skip town and break their lease.

Additional situations may require additional deposits. Many landlords will require an additional deposit for a pet or waterbed. Anything that could accidentally cause additional damage to the property should be covered with a deposit.


Returning the deposit is when things can get tricky. Many people move into a new place, counting on their entire deposit to be returned in full. This is when it really pays to have everything in writing. The tenant needs to understand that you’ll most likely need to clean and make repairs (no matter how minor) in order to have the house in good condition for the next tenant.

Carefully review your initial inspection and calculate the costs needed to restore the home to this state. Anything owed back to the tenant will need to be returned as soon as possible and in no longer than 30 days. 

Handle With Care

Some states require all rental deposits are kept in a separate account. Even if your state doesn’t require this, it is a good practice to keep deposits from commingling with other income. Make sure you follow the rules for your state! And keep in mind, the money needs to be accessible for returns or repairs when needed. If you own many properties, a property management company can be beneficial in helping to manage your funds. They can also handle some of the headaches, repairs, tenants, and vacancy issues that come along with owning rental properties!

To make sure everything runs smoothly, always make all policies regarding the deposits known to tenants. Be as transparent and communicative as possible to avoid any conflicts. Always strive to make sure you and the tenant are on the same page! And remember to treat them the way you would like to be treated!

Would you like to learn more about tenant relations and property management? Send us a message and let us know how we can help! Or give us a call today! (720) 932-4402

Ken Blevins

Ken Blevins, CEO of Metrowest Real Estate Services, is a veteran in mortgage and default servicing with more than 24 years of experience in collections, foreclosure/bankruptcy, loss mitigation and real estate disposition (REO). Blevins was an original co-founder of Metrowest in 2003, a Real Estate Brokerage and Services Company focused on the resale, recovery and liquidation of distressed real estate in Denver, Colorado and surrounding metros. Blevins assumed the role of CEO in January 2014 and provides strategic direction and has management accountability for the day-to-day operations. Under his direction, Blevins drives all default management operations to maximize asset value recovery and reduce loss severity through a strategy focused on customer service and state of the art technology. Blevins has 18 years of direct operational experience in all facets of REO Asset Management having managed large national REO Disposition contracts for Fannie Mae, Freddie Mac, Wells Fargo, JP Morgan Chase, CitiFinancial, GMAC Mortgage and other various financial institutions. Blevins specialties include REO asset management, real estate investment, bulk REO acquisitions and distressed asset recovery and liquidation, and he has directed the resolution and liquidation of over ten billion in institutionally-owned residential real estate.

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