Additional Passive Income Through Being a Landlord

A few weeks back I was writing a post about how I had forgotten about the tax benefits of being a landlord. That article reminded me of something else - the security deposit. Suddenly I realized that I didn't have it, my ex did.

My ex rented the apartment to the current tenant in April, while he was still living in the house. So naturally he got the security deposit from her. However, I realized that when I moved in in June I should have gotten it, since now I am her landlord. So, I wrote my ex and he agreed to send it. It took a couple of weeks, but I got it yesterday. Technically the tenant's lease isn't up until April, but leases have been broken before. In any case, I need to keep the money on hand for when she does end her lease, and assuming she has completed the full term and the apartment is in the same condition it was when we rented it out, I will return it her.

I hope that the lease will go through April (or longer!) and she does keep up and clean the apartment. As a landlord, I do not and could not consider this money mine. I am not going to add it to my monthly goals. I am fully expecting to return it to her when the time comes.

However... all you savvy personal finance people will have already figured out that there is a benefit I can take from this - interest. I am going to deposit this money in a higher interest savings account and take advantage of the interest earnings. The security deposit is $550 so we aren't talking about a lot of money here, but as I like to say... out of pennies, dollars are made!

I've said before that bank interest is probably my favorite form of passive income. While you don't earn a lot that way, necessarily, it really is passive. All I have to do is deposit the check. Fantastic!


Further Reading:

Writing off Expenses as a Landlord

Rentals as Non Passive Income - Being a Landlord

MSN Money - Do You Have What it Takes to be a Landlord?



Photo by: DryRot