Here are some helpful guidelines regarding rental deposits:

• Require a minimum deposit of $200 or 15% of the total rental, whichever is greater.
• Process deposits right away. If accepting deposits by check, cash it immediately. Bounced checks are a sign of trouble.
• Only return deposits subsequent to the inspection of the premises after the renter checks out.
• Be sure to comply with laws governing how deposits are held. Some states require that you hold the deposit money in a separate, interest bearing escrow account.

Withholding Deposits:

It's perfectly acceptable to withhold a portion (or all) of the deposit if the renters didn't adhere to your rental policies. If you retain any portion of the deposit, you should keep sound record of the associated costs. You are only allowed to keep actual costs with the associated damages as clearly defined in your rental rules. Don't use deposits as a way to nickel and dime your renters out of more cash.

Payment Schedules:

The key to scheduling payments is to make sure you receive your money (including deposits and fees) well in advance of the guest's arrival date at your vacation home. Regardless of how far out the renter's arrival date is, you should request a deposit within three to five business days of the booking. And until you receive and cash the deposit, continue to accept inquiries for those same dates. It's legitimate and responsible to tell other potential renters that there is a pending booking, but request their contact information in case there is an opening.

Typically you should break the payment into at least two equal installments unless it is a last minute reservation, then request full payment. You should receive the first payment about 60 days prior to the rental date. This will give you ample time to get another renter in case of lack of payment or cancellation. The balance should be paid 14-30 days prior to the rental date. This provides plenty of time for funds to clear before you send directions, keys or lockbox codes. Remember, the more time you give yourself, the more flexibility you have with payments. With enough time, you could even split the transaction into six payments, which might be preferable for some of your guests.

Refund policy:

Be sure to have a clear refund policy in writing. It's acceptable to keep a nominal fee for cancellations made 60-90 days out, but within 60-90 days of the rental dates, you may want to establish a policy that protects you from lost revenue. If you rebook, it's honorable to refund the cancelled guest.

A bit of caution: You could run into a situation where a renter calls you several days after you receive the deposit check and cancels due to an emergency. If they request the return of the deposit, you should do so in a prompt manner. But do NOT send them the refund until their check clears your bank. Although they represent the minority, there are people who will try to defraud you by sending a bad check and then requesting a refund before their check clears. Don't be a victim!

And there you have it, protecting you and your renters from the financial burdens of collecting money! Now go and establish a written policy which will benefit everyone.

© Christine Karpinski 2006

Policies & Procedures    Rental agreements, sample contracts/leases, security deposits, best practices, and written communications with renters of your vacation rental home.

Complying with State, County, and City Short-Term Rental Laws    A list of considerations a new vacation rental owner should look into.

How to Encourage Repeat Renters    Having a past renter come back to your vacation rental property makes good business sense.

Merchant Credit Card Account Categories for Vacation Rental Owners    Be aware of the protection (or lack thereof) provided by your merchant account and/or business category.

Checklist for Creating a Thorough Rental Agreement    Use this checklist to sort through your own rental agreement and be sure you have all the necessary clauses.

How to Convert a Word Document to a PDF    Tips for changing your contracts, receipts, and invoices into PDF files.

Establishing Strict Check-in and Checkout Times for Your Vacation Rental Guests    Avoid potential conflicts and problems for your housekeeper and vacation rental guests.

The Different Types of Vacation Rental Fees    Definitions of common fees included in rental agreements.

Why You Should Include Warnings in Rules and Rental Agreements    Are there known dangers regarding flora, fauna, weather, danger areas, or just plain crazy neighbors in your area?

How to Handle Security/Damage Deposits for Vacation Rentals    Tips for accepting and refunding security/damage deposits from your guests.

Seal More Bookings with Your Inquiry Responses    Learn when to say yes, when to say no, and when to just pick up the phone!

Guidelines for Communicating with Renters    Learn how to create thorough rental agreements, directions, and inquiry responses.

Christine's Blog: Updating Your Rental Agreements (12/11/07)    Christine make a few alterations to her rental contracts.