Learn how Security Deposits work at Nomad, and the options we give to owners and residents.
Q: Who holds the Security Deposit?
A: Security deposits are held in two different ways at Nomad, the differences depend on the state the property is located in.
1. In Arizona, California, Colorado, Florida, Georgia, North Carolina, and Texas, Nomad collects and holds the security deposit in a secure trust account, in the tenant's name. Nomad disperses the Security Deposit to the owner of the property at the end of the lease, and the owner makes any necessary deductions before sending the remainder on to the tenant.
2. In All Other States, Nomad collects the Security Deposit and distributes it to the owner within 2 weeks of the payment date. The owner is expected to hold the deposit in accordance with all local laws. At the end of the lease, the owner will distribute the deposit to the tenant after making all necessary deductions.
Q: Who sets the deposit amount?
A: The owner of the property sets the deposit amount when they are creating their lease in the Nomad portal. Owners must be informed of local laws regarding Fair Housing and security deposit maximums. Nomad will recommend a deposit range based on the applicant's credit risk.
Q: Can I set the deposit below 1 month's rent?
A: You can, if you think this is the right decision for you and your resident. You will have less coverage on your property in this situation. There are two ways the security deposit protects you:
1. The security deposit serves as security for your 3rd month of Guaranteed Rent, in the rare event of extended non-payment. Section 2.6.3(b) of Nomad's Terms of Service discusses this more. You can review our Terms of Service in your portal under the "Profile" or "Earnings" tabs.
2. The security deposit protects your property against damage. Often, when there is extended delinquency, there is also damage to the property.
Keep both of these things in mind when choosing a security deposit amount. Nomad will recommend an amount or range to you in your lease builder, based on the resident's credit score.
Q: Can I set the deposit above 1 month's rent?
A: Maybe -- it depends. Some states or municipalities limit security deposit amounts. You can use this resource to begin your research. Be sure that if you are asking for a larger deposit, you are doing it in line with Fair Housing rules, and applying your deposit decisions equally to all renters.
Q: What is Nomad's Security Deposit Installment Plan?
This is a product Nomad offers to residents in order to give them financial flexibility when moving into your property. The cost to move can be quite large when you factor in first month's rent, a security deposit, movers or a truck rental, time off from work, potentially overlapping leases, new furniture, etc. In some circumstances, this can put residents in a bad place financially and make increase their chances of late payments or rental defaults.
Nomad seeks to reduce friction in this part of the journey to give your renters flexibility to pay their security deposit over time. You are still protected for the entire amount of the security deposit if the tenant defaults before paying the full balance.
Residents pay a one-time fee to Nomad equal to 10% of the security deposit, and then make payments over a 6 month period. If you are in a state where Nomad holds the security deposit, nothing will change for you. If you are in a state where you hold the security deposit, Nomad will transfer the security deposit to you in installments as the resident pays.