If so, can you draw interest on the value? And why won’t the professional property manager let you hold the funds?
If you are a natural person, not a business entity, such as an LLC, or corporation, you can put the money in your personal operating account as long as you do not own and rent out more than 10 properties or manage property for other people (O.C.G.A. §44-7-36).
Many investors like the idea of holding title to rental property in a business entity for liability protection or perhaps for estate planning purposes. In such cases, the money must be kept in a separate account established only for this purpose, and the bank must be regulated by the state or an agency of the US Government. Additionally, you must notify the tenant about the location of the account (O.C.G.A. §44-7-31). You can earn interest on the deposit as long as this has been agreed to in the lease agreement.
If the property is professional managed, the property manager in Powder Springs could set it up so that the owner holds the security deposit as long as the landlord is compliant with the above rules. But most will not permit it. There is a good reason for this. Even if the language in the lease indicates that the owner, and not the property manager, will hold the deposits, the tenant will look to the property manager to get their money back. If the landlord is unable to produce the funds on demand, there is a good chance of a lawsuit. Even though the property manager was not technically responsible, one can be sure they will get their day in court to prove their innocence. Just the hassle and cost in time is enough to motivate most professional property manager to disallow owners holding the deposit.
Daniel R. Wilhelm
Managing Broker
3 Options Realty LLC.
http://www.3optionsrealty.com
678-397-1282
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Read MoreThe author of this Blog is not an attorney. Nothing written should be construed as legal advice. Conclusions conveyed are outcomes based upon practical experience and should not be depended upon to be a common outcome of other similar circumstances.
About Dan:
Licensed in 1993, Dan is the founder (2008) of 3 Options Realty, LLC. With a master of arts degree in business management, he also has distinguished himself by earning a variety of professional designations including the Master Property Manager designation. Dan is also a real estate investor, having bought and sold dozens of homes since 1997.
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