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How McKenna Handles Property Turnovers
12 Plays1 month ago
Below is what I came up with for the description for all podcast videos! The highlighted area, you would fill in as necessary.
🎧 Welcome to Thoughts For Rent — the podcast where real estate gets real (and local)!
Hosted by Jenni McKenna, a Las Vegas born and raised seasoned broker, and Owner of McKenna Property Management, this show is your inside look at what’s really happening in the Vegas property management and real estate world. With over 20 years of experience herself - Jenni brings not just knowledge, but heart to the conversation.
Whether we’re talking market trends, property tips, community happenings, or just the everyday quirks of Vegas living, this podcast is all about keeping you in the know.
💬 Real talk. Local stories. Professional insight – provided from a company who has their boots on the ground and hearts in the community.
In this episode, we’re covering what it will look like to experience a turnover on your investment property. What happens to the security deposit, how we document the condition of the home, and how the charges get applied on your owner ledger.
McKenna Property Management, proudly managing Las Vegas homes since 2005 (and loving every minute of it).
Hit subscribe and comment down below to join the conversation! 💛
✨ Stay connected with us!
Instagram: @mckennapropertymanagement
Facebook: McKenna Property Management
TikTok: @TheMcKennaTeam
Website: McKennaPropertyManagement.com
Phone: 702-434-HOME (4663)
Owner/Broker: Jenni McKenna B.29819
#ThoughtsForRent #McKennaTeam #LasVegasRealEstate #JenniMcKenna #PropertyManagement #MarketTrends #PropertyTips #Community
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Transcript
Introduction and Podcast Focus
00:00:20
Irelynn Zurflueh
Hi everyone. Welcome back to Thoughts for Rent. Realtors keeping it real. I am Ireland and with me as always is Jenny McKenna wearing my Japan shirt that I found in Japan that says Nevada.
00:00:36
Irelynn Zurflueh
Is that not the weirdest thing? She also bought some really cool ah platform heels. it was very in trend. They were like some people were walking around with platforms that were like a good six inches. And I absolutely love that because being five foot two, I can go as high as possible on platforms and never feel like I'm too tall for max. So that worked out.
00:00:57
Irelynn Zurflueh
Yeah, but no, we're here and we want to discuss a couple things. that have been interesting in property management. And i think, Ireland, because I've been in property management for so long, sometimes i assume that the general public understands certain things. And I was thrown off this week about a comment that was made by a long-term owner not understanding something. So I think it would be kind of ah a fun thing to talk about on our podcast. We can dive
Security Deposits: Collection and Legal Limits
00:01:28
Irelynn Zurflueh
into it. We can give the pros, the cons, and all kinds of stuff.
00:01:32
Irelynn Zurflueh
So the thing about it is when you rent a property, you collect a security deposit. And how does that happen and when does that happen, Ireland?
00:01:42
Irelynn Zurflueh
It always happens right before they pick up keys. So they're approved. And then before they pick up the keys, whatever time between the approval and the key pickup, that's when a first month's rent is collected as well as a security deposit. And is a security deposit set in stone on how much you can collect?
00:02:03
Irelynn Zurflueh
As far as amount? Yeah, for Nevada, we have a specific amount. I'm sure each state is also a little different, but for us, we are not allowed to charge more than three times the rent in security. So if your rent was $2,000, you would not be able to collect more than $6,000 in any kind of deposit. Key deposit, cleaning deposit, pet deposit, the entirety and total can't surpass three times the rent. Right. And that's governed by Nevada law. So you know you can never go more than three times. And
Optimal Security Deposit Amounts
00:02:30
Irelynn Zurflueh
in any rental market that I've ever been a part of, which I've been a part of since 2005, I would never recommend a super high security deposit because it's going to hurt you in the competition. If there's five or six properties that somebody's looking at and you're the only one that is close to the three times the security deposit, well, guess what? You're going to be 86ed out of that search because that's just a, that's a lot of upfront money on a rental.
00:02:58
Irelynn Zurflueh
So that's one thing to consider. The security deposit 86ed. usually a month to a month and a half tops of what you want to collect in total. So if you want to go cleaning deposit, security deposit, key deposit, whatever, it needs to be less than the 3%, three times the rent, or in the real world, usually about a month's worth. that's
Returning Security Deposits: Processes and Legalities
00:03:23
Irelynn Zurflueh
That's kind of the rule of thumb. If you're coming with a pet, what do we do about a pet deposit?
00:03:27
Irelynn Zurflueh
Our starting pet deposit rate is $500, but that can vary based off of the breed and the size. It can also vary based off of how many pets. So we do per pet.
00:03:39
Irelynn Zurflueh
um So if you are bringing in two animals of a reasonable size, then you're looking at a thousand in total. So they come in, they've given the first month's rent, they've given the security deposit, they've signed their lease, everything's great.
00:03:54
Irelynn Zurflueh
yeah Now, that same resident, 12 months, 18 months, two, three, four, five years later, they're moving. They've decided, you know what? I'm moving out of this rental. or They've either bought a property or they're moving into another rental and they vacate.
00:04:10
Irelynn Zurflueh
And when they vacate, we, McKenna Property Management, the management company, is holding their security deposit in trust.
00:04:21
Irelynn Zurflueh
So that means it can't be in a community fund. It can't be in our owner's account. It has to be in a trust account, similar to like what attorneys do with retainer fees. So you have to identify it as a trust account, and it can only be used for that particular individual for that property.
00:04:44
Irelynn Zurflueh
So
Handling Damages Exceeding Deposits
00:04:45
Irelynn Zurflueh
we're going to say that Joe Smith gave us $1,000 in security and now he has moved out. What do we do at that point, Ireland? We've got their keys.
00:04:58
Irelynn Zurflueh
So from the day that you receive keys, and again, this is a Nevada-based legislation, the property management company or the owner has 30 days to return a security deposit transmittal to the past resident.
00:05:14
Irelynn Zurflueh
Correct. And that has to be done through certified mail. So always give your forwarding address, resident tip. Yep. And then that security deposit transmittal is a full breakdown, including receipts, of anything that had to be done at the property that was the responsibility of the resident.
00:05:33
Irelynn Zurflueh
So if nothing had to be done, then you're going to receive a one-page paper showing that you're getting your full deposit back. But if there were certain things that had to get done, then what you should be receiving is a full breakdown of what was spent and the receipts showing that those funds were in fact spent on that service.
00:05:52
Irelynn Zurflueh
So I'm holding $1,000 Joe Smith. And he left the property not very clean. He just ran out of time. He had to get the yeah U-Haul packed. There were some things that his wife was like, we got to get the other property taken care of. And he gives me the keys and he's like, so sorry, McKenna Property Management. I got all my personal belongings out, but I wasn't able to clean the carpets or I wasn't able to clean the unit.
00:06:19
Irelynn Zurflueh
No problem. So as our lease requires, they are to leave The carpet's cleaned and show a viable receipt. If they don't, then we're going to clean it for them. And then we're going to charge it out of their security. Same with janitorial. We're going to. do a janitorial, which is called a vacant home clean. And this is also a resident tip.
00:06:42
Irelynn Zurflueh
Vacant home cleans are a little bit more money than if you're just having a cleaning service that comes in once a month or every other week, because they have to do a little bit more inside cabinets, outside cabinets, all that, you know, the ceiling fan blades. So it is a little bit more detailed, but all in all, you're going to be looking at probably like 400 to 550 is what we see for those vacant home cleans. So let's say it cost us $500 for the janitorial and it cost us $300 for the carpet cleaning.
00:07:16
Irelynn Zurflueh
What happens with that security deposit in that scenario? They would get 200 back. Correct. So $200 goes back to the resident and all of the invoices identifying what we did is attached to the security deposit transmittal.
00:07:34
Irelynn Zurflueh
Perfect.
Owner Financial Implications of Excess Damages
00:07:35
Irelynn Zurflueh
But Ireland, same scenario. Joe Smith did not get all of his personal belongings out of the property.
00:07:44
Irelynn Zurflueh
And he left a couple holes in the wall where the doorknobs banged into it. Oh, there was a broken window in the bathroom. And there were a couple other things that were tenant responsibility that needed to be done at the time that they moved out. How does that get handled with a security deposit?
00:08:05
Irelynn Zurflueh
So same situation, you still have to provide the invoices, you still have to do the work. But when the amount starts to supersede the deposit, that's all still tracked.
00:08:18
Irelynn Zurflueh
And then what is now a part of your security deposit transmittal is an outstanding balance. Correct. So you as a resident will receive in the mail all of the receipts and all of the breakdowns on top of probably a one-page letter on your property manager's letterhead that says you owe this much money.
00:08:40
Irelynn Zurflueh
And at least in McKenna, our procedure is that we give them a certain amount of time to create a payment plan with us or to rectify that balance. I believe that is 60 days that we offer yep for anyone to make contact with us and begin talking about the past due balance.
00:08:57
Irelynn Zurflueh
After the 60 days, if there's been no contact and no payment plan request or no kind of discussion about how to pay that bill, then we do use a third-party company to send them to collections. Correct.
00:09:10
Irelynn Zurflueh
Now, this is what was a little bit surprising to me. So all of that makes sense. You know, if you have $1,000 and it took $3,000 to get the property back on the market, there's going to be a $2,000 that is owed from the resident.
00:09:27
Irelynn Zurflueh
But my owner actually thought that we got that $2,000 from the resident right then and there. And that's never possible because the resident is out the door. The resident's already given us keys. There's no way we can go to the resident and say, oh, by the way, we need to pay this vendor and we only have a thousand and it was 3000. So write us a check for $2,000. That doesn't happen in the real world. So what we have to do is we have to go to the homeowner because the homeowner is the homeowner. That's their asset.
00:10:00
Irelynn Zurflueh
They own it. And this $2,000 becomes a charge to them. And so they pay that initially so that we can pay the vendors for the jobs that were completed.
00:10:13
Irelynn Zurflueh
And that's where the homeowner was confused. Because even though they know that it's the tenant responsibility, it's identified as tenant responsibility,
00:10:25
Irelynn Zurflueh
Because it superseded their security deposit, it now gets paid for by the homeowner and it becomes a debt to the tenant. And that's where the payment plan comes in. That's where collections comes in. And quite honestly, to be totally transparent, we probably only see maybe five to 10% of the residents that stand up and say, let me make a payment plan. Let me pay that off. At least initially, because they don't really care. They've moved on and they're like, I don't want to pay McKenna property management that money.
00:11:07
Irelynn Zurflueh
So in truth, if you own a rental property, and there's times where it's called a tenant turnover, you may end up paying for the most part, even to just get it cleaned up, even if it's not tenant responsibility and just some other things that need to happen. You're probably
Wear and Tear Responsibilities for Owners
00:11:25
Irelynn Zurflueh
going to be coming out of pocket in order to get the property in good rental condition. Would you agree to that?
00:11:31
Irelynn Zurflueh
I'd say so. I think obviously life has evolved and things are becoming higher cost. But with that also comes usually a little bit of a higher rent. So when things or the security deposit is matching one month's worth of rent, we're obviously using very clean numbers like $1,000 and $3,000. But that deposit is definitely a really nice cushion. So I think that a lot of times owners...
00:11:57
Irelynn Zurflueh
You might still see that the tenant responsible items can be in the 3000s, but maybe the security deposit you had on file was 2100 or 2200, which is a very average rental price in Nevada right now. So that difference doesn't usually get as drastic unless you've already gone through something significant, maybe like an eviction or an actual removal of somebody. Then you can start to see a lot higher prices. You can also see really high prices when you had a really long tenant, you know, because They have lived on that floor for seven years. They've lived with that paint for seven years. The plumbing is 10 years old or how, you know, maybe the appliances are when you first bought the house, which was back in 2010 or 2005. And you didn't have to think about any of those things because you had a tenant in place. um And the tenant didn't even necessarily do anything bad to the property. They were very respectful of the property, but they lived there for eight years. So there's eight years of wear on that unit. And that's the thing in Nevada, again, speaking in Nevada, a judge is going to look at that as seven years. The owner really is responsible for almost everything about the only thing that you could charge towards a security deposit on a resident that's been there seven years or longer is
00:13:13
Irelynn Zurflueh
a janitorial if they left the property not in good clean condition because they should be leaving it in clean condition. but if
Holding Last Month's Rent for Turnover Costs
00:13:21
Irelynn Zurflueh
But other than that, like the walls needing to be painted, the carpet needing to be replaced, those kinds of things in Nevada, seven years or longer, that is an owner responsibility, not a tenant responsibility. And that trickles down even from five years. So if if a resident is a property for five years, and let's say the whole unit needed to be repainted, you can't charge the resident for the full paint, but you can charge it a prorated amount. They do and they should get credit for normal wear and tear for the five years they're there, but then exceeding it, they need to to be responsible for a portion of it. So that's that's kind of how it works with the security deposit. And I guess what I was a little bit um blindsided about is that in my mind, it's always been the homeowner owns the house. So therefore, if there's something over and above the security deposit, the homeowner knows they're going to pay for it. And then it's just a question of, am I going to get any of that reimbursement from the resident?
00:14:30
Irelynn Zurflueh
But that's not how this particular owner viewed it. And I just thought maybe there's some other people out there that don't really understand or the or have the concept of the procedure of security deposit. Yeah. Something that we actually instituted, i want to say coming on almost two years now, is that we actually notify the owner when someone is set to move out.
00:14:52
Irelynn Zurflueh
And then part of that notification is that we actually tell them that we will hold their last month's rent that we collected. and we're going to apply that to any outstanding costs, whether it's tenant related or even if it's an owner responsible item. And I think at first people were a little upset because obviously you want your paycheck, everybody wants their money. But I do think eventually they kind of saw what we were seeing, which is you start to build that you start to build that money. so in that way, you're not
00:15:26
Irelynn Zurflueh
having to find or come up with all these finances yeah all at once during a vacancy, you can kind of build it. And I do think for a couple of our owners, that month rent that we collect and hold covers everything that needs to be covered. They don't have to make any kind of additional contribution. And then in some cases, they can even get some of that rent dispersed to them. So I think that that's been really good to our owners because it if you owe or you need to put down, you know, $3,000 for all of the repairs collectively, but we're already holding your rent, which was $2,100. I think it's a lot easier for people to come up with $800, $900 than it is to come up with three grand. Heck yeah. and And I just call it the reserve. So that last month that we're holding, it's really just a reserve for anything that happens for the move out.
00:16:18
Irelynn Zurflueh
And like you said, it could be for the owner upgrades and or it could be for the tenant responsibilities that went over and above the security. But Ireland's absolutely right. When you are not, uh,
00:16:29
Irelynn Zurflueh
getting rent and you have a vacancy, we know it's going to cost. And so if you don't have to come up with such a big check, it makes the whole process a little easier to swallow. So yeah,
Risks of Increasing Security Deposits at Renewals
00:16:41
Irelynn Zurflueh
I agree with you 100%.
00:16:43
Irelynn Zurflueh
Something else that I thought would be interesting just to talk about, because this has been asked and it's it's really not something you want to do. And so if you think of it, you think it's really good on paper, but it's not very good in the real world.
00:16:58
Irelynn Zurflueh
So here you are, we're going to use Ireland's analogy, $2,100 is what we collected in security deposit because that's what rent was at the time that we rented the property. But two or three years later, that rent has gone up to maybe $2,400 or $2,500 just in the course of lease renewals and the environment and rent's gone up and everything that's happened. So you really don't have equal to the first month's rent or equal to the month's rent because your rent has gone up.
00:17:29
Irelynn Zurflueh
Sometimes my owners say at the renewal, increase the security deposit. So they'll say to Jill, who is our team member that does all the renewals, hey, Jill, yep, let's do the you know the new rent $2,400, but we want to increase the security So add another
00:17:52
Irelynn Zurflueh
I do not think that's the way to go. What are your thoughts on that, Ireland? I think it always has to be a very special case scenario. We've ah talked on our podcast before that we do site evaluations or site visits, and that's right before renewals. And sometimes in those scenarios, we have ran into dogs or maybe we've ran into additional occupants or maybe we've ran into guinea pigs, guinea pigs, things of that nature. yes So there have been times during that renewal where we'll circle back to the site evaluation and we'll say, hey, you don't have this pet on file.
00:18:28
Irelynn Zurflueh
We get it. But let's correct the contract and let's also collect the $500 in pet deposit so you don't get fined. And then we'll collect some. yeah We had a special case scenario where we actually had discovered that they were smoking in the unit through visual and...
00:18:48
Irelynn Zurflueh
smell evidence and the owner didn't necessarily want to remove them from the home because they had been there pretty long. And obviously kind of once you get that smell of smoke in the home, it's there for a while. So rather than kicking them out and then doing all the ozone treatments and all of that, their suggestion was, well, let's just increase the deposit to cover what we know is going to have to be those ozone treatments. And that resident was actually also on the same page. yeah So I think that it has to be a very special case scenario. And it usually has to be because we know that
00:19:23
Irelynn Zurflueh
the deposit is going to get spent to some degree right later. Whether it be the PET or whether it be the ozone treatment, there was a real purpose on why we increased that security deposit you know at a lease renewal. But if owners have a beautiful evaluation or a very decent evaluation, and then they just want to collect more money from their residents, that's where I would say it's probably not in your best interest. People already are trying to grasp the increase of the rent. Yep. And so if they're also being told, hey, you're going to receive a monthly increase and you're going to receive a one-time payment that you need to pay us, usually they end up not putting pen to paper and they end up not renewing. And then you have a vacancy, which is going to cost you more.
00:20:08
Irelynn Zurflueh
Yeah. What I have noticed is when you try to do that, they are embarrassed about not wanting to come up with that extra money. So they kind of just ghost you when it comes to the lease renewal, which is even worse because you think you're going down this path of a lease renewal. And then all of a sudden they're going to give you a 30 day notice and they're going to say, Nope, I'm out. And then by that time, they've already found a place. You're not going to bring them back in You can't retract and go, Oh, I was just joking. You can keep the security deposit where it is. So if you're out there and you're a landlord, that's not a good way to increase security deposit. Like Ireland said, if you're going to increase a security deposit, it needs to be for a true issue, like a pet that was unauthorized and now gets authorized. So you increase it with a pet security deposit or with the case of the smoking because ozone can get costly. So you want to make sure that if you know you're going to need it, let's increase the security deposit to cover that. And quite honestly, the resident caused it. So the resident should be paying for that.
00:21:16
Irelynn Zurflueh
Yeah. Yeah, I think that, and we've also ran into certain situations like at renewal where people want to switch out specific occupants. They don't want their old roommate or they went through a breakup or a divorce or what have you. They're adding somebody new. That new person has not so great credit or something of that nature. I've also seen situations where we increase the deposit to accommodate for that change. So yeah, I think a really good rule of thumb is if it needs to happen, if there's an action behind it go for it. yeah But if there's no action behind it, you're just wanting to do it to have have it all match, then you might be shooting yourself in the foot with that one. It just makes you look like a greedy landlord.
00:21:59
Irelynn Zurflueh
i mean, there's just, I can't candy coat it. That's exactly what the interpretation is for that resident. That resident is not going to look favorably on it. And then more than more than likely you're going to lose them.
00:22:12
Irelynn Zurflueh
that's just kind of what it comes down to. And we know what the secret is in property management, keeping tenants in your property. That's
Conclusion and Listener Engagement
00:22:21
Irelynn Zurflueh
long. Yep. Longevity is your secret to making wealth in property management.
00:22:27
Irelynn Zurflueh
Absolutely. All right. Well, i wanted to make sure that we got that out there because i was a little surprised about that misunderstanding. And I just wondered if other people had that you know idea and I wanted to get that cleared up. And so hopefully we've offered some clarity on that and tune in for our next Thoughts for Rent, Realtors Keeping It Real. I'm Jenny McKenna.
00:22:49
Irelynn Zurflueh
I'm Ireland. We'll see you guys next time. And if you have any questions about security deposits or transmittals, or maybe you want to share your crazy security deposit story, please feel free to leave in the comments and like, share, and make sure you keep up with our weekly drops. Sounds good.
00:23:05
Irelynn Zurflueh
Bye, guys. Bye.