Why You Should Ask for a Damage Deposit, and Why vacation home Renters Should Want To Pay One

If you found this post googling "damage deposits", you're not alone! A lot of owners and vacation home renters are unsure about damage deposits. When we first started renting out our Oregon beach house, the agency we picked didn't allow owners to ask for a damage deposit. We rented out through them for three months in the offseason, and in four weekends had several things damaged. We then started renting out ourselves, and requiring a damage deposit. With over 50 rentals, we have had only two minor damage incidents (knock on wood!). 

Damage deposits are not for ordinary wear and tear or to cover rental, but to cover things that get broken (or damaged!). In our case, a drunk guest of the renter fell against a trellis panel, ripping it off the deck, and the renter asked us to deduct the repair cost ($80) from his damage deposit. He was mortified. The second incident was when a tap in the bathtub was smashed off – we're not sure how one manages to do that but again the renter let us know her guest had done this, and we deducted the cost ($50) from the damage deposit. 

Here are the top six reasons owners might want to have a damage deposit, and why renters benefit from staying at a house that asks for one:

1. A damage deposit puts the cost of damage squarely onto the shoulders of the person who caused the damage, rather than spreading it across all renters, which will eventually result in higher rates for everyone. 
   
2. Renters can choose to get accidental damage insurance to cover the cost through some rental sites, like VRBO.com, for as little as $49 per stay for $1500 coverage. The insurance also covers things like cancelations (check with the carrier for exact coverage details). 
   
3. The psychology of a damage deposit creates an incentive to be careful. I haven't seen any research on it (and I'd love to as I'm a research buff), but our experience and anecdotes from other owners and renters confirm this every time. 
   
4. Less damage overall means more owners are willing to share their nicer vacation homes, which means better selection for travelers. 
   
5. Less damage overall means vacation homes remain nice for all travelers to enjoy. There is nothing worse than renting a vacation home and finding stained carpets, chipped paint everywhere, half the appliances broken and amenities missing (yes that has happened to me!)
   
6. Damage deposits often reflect pride of ownership: When I rent a vacation home, I look for a home that requires a damage deposit because I expect it to be better cared for. I've paid as much as $1000 damage deposit and found those houses immaculate. 
   

The three main vacation rental websites make deposits easy to collect and refund. The procedure does vary a little:

1. VRBO.com: The owner sets the amount of the deposit, and it can be paid by the traveler by credit card with the rest of the rental cost and transferred to the owner a few days after payment. The owner is responsible for refunding it through the VRBO system once the guest has checked out. I ask guests to allow me three days but usually refund the damage deposit as soon as my housekeeper lets me know that everything is in good shape.  Note that VRBO refunds credit card fees, so the owner is not left paying credit card fees on the deposit. 
   
2. AirBnB: The owner sets the amount of the deposit, and it can be paid by the traveler by credit card with the rest of the rental cost. AirBnB keeps the deposit and refunds it to the guest if the owner does not claim damage within seven days. I have had no comments from renters about delays in refunding the deposit. 
   
3. Flipkey: The owner sets the amount of the deposit, and it can be paid by the traveler by credit card with the rest of the rental cost. Flipkey keeps the deposit and refunds it to the guest if the owner does not claim damage within seven days. Reports from several of my guests are that it can take a week or more after these seven days for the refund to show up on their credit card. 
   

Some owners collect damage deposits by mailed check – I think this creates an extra administrative burden and a risk of bounced checks (which cost!), but it is personal preference. 

What's the difference between damage and wear and tear? 
I always say to err on the side of generosity. Glasses get broken. Cups get chipped. Towels get stained. I'm not going to deduct for every chipped glass from someone's damage deposit. If every colored towel in your vacation home gets used for the hot tub and gets ruined by bleach spots, that's reckless damage. If one gets damaged, I will call it wear and tear. We allow 10% of our gross revenue each year to replace items that get worn out and doing maintenance and repairs on our vacation home. 

What To Do About Mismatched Items
That brings me to an important side note: Is your beach house a great place to send all your mismatched yard sale finds and things you no longer need at home? Maybe! If you're going for a shabby chic cottage look and have a good eye, I've seen this done very successfully. However, in a higher end vacation rental, this might not convey the luxury look you're going for.  Hit your local HomeGoods store or the January sales at Macy's, and buy a new set of glasses, dinner set, and stock up. When you buy a new set, get two so you can replace any that get broken without having to replace everything. If you need to replace a set and have leftovers from your old sets, donate them – you get a tax write-off and your local women's shelter, or goodwill will appreciate it.  We buy new sets of towels for our rental and take the older towels home or turn them into dog towels for our pet-friendly rental. 


What has been your experience with damage deposits?