Many vacation rental managers are in two minds whether or not to safeguard their properties with a security deposit. Some managers fear the risk of driving vacationers away with higher upfront costs, while others think that guests must feel a great responsibility for your home and have to pay if any accidents happen.
No matter how picky you are in accepting your prospective guests’ bookings and how firm your house rules are, vacation rental damages are inevitable as you let various groups of strangers stay in your home for a few days. Your rental’s revenue can barely cover the normal wear and tear, let alone the unexpected costs caused by damages and breakages. Luckily, security deposits for vacation rentals are there to provide a financial shield for vacation rental managers.
What Is Security Deposits for Vacation Rentals?
A security deposit for vacation rentals is an amount of money collected from guests to cover breakages and damages to a property, missing items from the home and excessive cleaning fees, as well as additional repair charges caused by guests.
How Much to Charge as a Security Deposit?
It is crucial to make sure you are charging your guests with the proper deposit amount. Your vacation rental security deposit depends on your nightly and weekly rates, amenities and the length of your guests’ stay, as well as the size and location of your vacation rental. However, it must be high enough to cover the damages incurred to your property and deter your guests from violating your rules and damaging your home, and quite reasonable not to put your potential guests off, and stay favourable in the intensely competitive short-term rental market.
The damage deposit can be a set amount like 350 GBP or 10% of the total rental price. Don’t forget to check out your local legislation and what similar rentals in the local market are charging before setting an amount for your security deposit.
How to Capture Security Deposits for Vacation Rentals?
There are several methods for capturing a security deposit. You can use the charge and refund form, in which you ask your guests to pay you an amount in cash, in cheque or through bank transfer. This method has many drawbacks such as currency and geographic limitations, lack of tracking and high transaction fees. Besides that, some guests exclude the rentals which charge a security deposit from their list of options because they feel uncomfortable about paying a tremendous amount of money to a host a few months up-front their arrival.
The other method is pre-authorisation, which is a temporary hold of an amount of money on a guest’s credit card reserving funds for a future payment transaction. When the payment is pre-authorised, the guests can’t access or spend it anywhere, and when it is the time to check out from a vacation rental, the security deposit is released to them or charged as damage fees. Pre-authorisation is a more convenient method. There are some time restrictions in place, though.
Fees and commissions of security deposits for vacation rentals vary depending on the method used, so these costs must be taken into consideration when choosing a practice.
How to Collect Security Deposits for Vacation Rentals?
As a host, you must ask your guests to report accidental damages to your property and train your housekeeping staff to inspect your rental for any damages and breakages after the guests’ departure. In case there aren’t any considerable damages to your home, the security deposit must be released shortly after a guest’s check-out.
If you are going to charge the guests for any damages, you must inform them that you are making a claim against a damage deposit and send them the photos of the damage, as well as the bill or receipt of fixing it. Afterwards, you must subtract the damage costs and refund the rest of the security deposit amount.
Security deposit pre-authorisation must be processed within a timely manner of 7 to 14 days, depending on the channels you receive your bookings from or your online payment solutions. Don’t forget to take care of the due dates and process the deposits quickly because this goes a long way toward building guest confidence and receiving positive online reviews.
Note that withholding or misusing security deposits will have severe harmful impacts on your business in the long run.
List security deposits separately from the nightly rates and explicitly state that you will release the funds after the check-out should there be no damages to the property. This can reassure your guests that you will not charge them this amount of money if they don’t violate your house rules. Set detailed house rules and be clear about your chargeable damages which will result in your guests’ losing part or all of their security deposit.
Don’t charge your guests for minor damages or normal wear and tear of your house as charging guests for small incidents will come at the cost of negative reviews and stating your brand image.
What has driven vacation rental managers to capture security deposits is its protection and ease of use. Thoughtfully setting chosen damage deposits for your vacation rentals is a great security measure to ensure your home remains in the best condition. Today, many vacationers are quite used to and have a clear mind about security deposits. As long as you make it straightforward ear for your guests that they don’t need to worry about losing their deposit or getting unfairly charged, you shouldn’t have any problems with setting up a damage deposit for your property. Remember that your guests should not deal with age-long, cumbersome processes to get charged or get back what’s theirs!