How Are Security Deposits Managed with Airbnb Rentals?

Knowing whether or not to set a security deposit for your Airbnb and how much to charge can impact your bookings and overall experience.

When managing any rental property, it’s essential that the landlord collects a security deposit. This is held as a bond to cover any damage that may be incurred to the property throughout the tenant’s stay. If the tenant leaves the house in a bad state and professional cleaners need to be hired, walls need to be repainted or furnishings replaced, the money for this will be taken from the security deposit.

Short-term rentals are no different from standard long-term rentals in this respect; that is to say that Airbnb security deposits are a good idea to protect your property from potential damage.

Are security deposits required?

There are two different types of security deposits that Airbnb hosts may encounter. These are deposits required by Airbnb and those that are set by the host.

Airbnb security deposits

Airbnb does not always require security deposits for reservations. Instead, they assign deposits on a case-by-case basis depending on factors like the timing of the stay and the features of the property. Guests should ensure that they have sufficient funds in their bank account to cover the Airbnb security deposit. It will then be returned to them after their stay, assuming no claims to use it have been made.

Host security deposits

Regardless of whether or not Airbnb requires guests to pay a security deposit, as the host, you can also decide whether you would like to charge your own security deposit. Unlike the Airbnb deposit, the guest is only charged should the host request reimbursement. No authorization hold is placed on their account for the duration of their stay.

How much can you charge for a security deposit on Airbnb?

Should Airbnb decide that your listing needs a security deposit, they will calculate the amount based on 60% of the nightly rate (with a maximum amount of $1,000). Longer stays may incur a higher deposit amount.

On the other hand, hosts can charge between $100-$5,000 deposit for the security deposit. Although a higher deposit will mean more security when it comes to potential damage, keep in mind that a higher deposit may also put some guests off. They may be worried to book your listing as they fear they will be charged the full amount, should any accidents occur. As such, the charge should be relative to the property and the features it offers.

Depending on where your short-term rental property is located, peak seasons, such as summer months or holiday periods can see a surge in demand for bookings. You may choose to increase your security deposit to account for the busy period where you have a high turnover of guests.

If you aren’t sure how much to charge, a good idea is to look at comparable properties in your area that are available to book in the same season as yours. This can give you a rough indication of how much you should be requesting.

Airbnb security deposits and discrimination

While you may set the security deposit depending on the type of property and the features it offers (e.g. you may wish to charge more for a property with a pool or hot tub), you may not set or adjust the deposit based on a guest’s race, nationality, ethnicity, age, sex or gender. Discriminating against guests in this way is unethical and could lead to not only your listings being taken down but also legal action being taken against you.

How are the security deposits handled?

However much you decide to charge for your security deposit, it’s essential that everything is handled through the official Airbnb platform. Accepting deposits of cash or using other third-party services to manage them is prohibited and a direct violation of Airbnb terms.

Needless to say, the Airbnb system is secure and reliable, so you do not need to worry about keeping track of how much the security deposit was for a particular stay or chasing after your guests for their bank details.

How can a host collect on their security deposit?

As a host, if you wish to use some or all of your assigned security deposit to cover damage to the property or furnishings, you need to make sure that you have relevant and clear supporting documents. Depending on the claim, this could be anything from photos, videos, and receipts to records of conversations between you and your guests, and more.

Using a property management app like Landlord Studio that has a built-in receipt-scanning feature will enable you to digitize and store important documents. What’s more, is that it can also assist you with other areas of short-term property management such as rental accounting and lease management.

Once you have all of the appropriate supporting documents and records, a host can report an incident and submit a request for all or some of the security deposit within 14 days of check-out or before the next guest checks in (if that is sooner). If a host submits a request after the next guest has already checked in, it will no longer be valid.

Final words

Correctly pricing and listing your short-term rental property will go a long way to ensuring a smooth experience for you as the host and your guests. Deciding whether or not to set a security deposit, how much to charge and what it should be used for are all considerations to take into account.

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