As a landlord, you expect your rental units to sustain a certain amount of wear and tear during the term of a lease. But there is a fine line between normal wear and tear and actual damage to a dwelling. You will need to be able to discern between these two to protect your investment and avoid breaking state laws or unlawfully seizing a security deposit.

Normal “wear and tear”: Even the most conscientious tenant will cause some minor damage over the course of a rental agreement. This minimal damage is typically referred to as "normal wear and tear." This can include small scratches on the walls or paint, worn or slightly stained carpeting, broken hinges, or other insignificant damage.
While you may not appreciate having to repaint your property after each tenant moves out, normal wear and tear usually makes this necessary. And a few scuffs on the wall or the odd nail hole does not constitute damage, and you will not be able to charge your tenants for this paint job if that is the extent of the damage.

Damage:  Actual damage to a property goes beyond normal wear and tear. For example, instead of small scuffs on the walls or a few nail holes, large holes in the wall would definitely be considered damage.
If the carpet is completely stained, ripped, or otherwise ruined, this can be construed as damage. Pet stains can also be referred to as an actual damage, particularly if you do not allow pets on your rental property. In this case, since you have not received a pet deposit to cover this damage, the security deposit can be used to repair the damage and restore the property to its original condition.

Excessive amounts of garbage, furniture, or personal items that a tenant has left behind may, in some states, are considered damage. In this case, since you will need to spend time cleaning the property or paying to have the furniture removed, you will be able to use the security deposit to cover these costs.

Once you are clear on these definitions, you will need to draft a damage policy and include it in your rental agreement. For example, if a wall is scuffed, you would need to state that this is considered normal wear and tear and the tenant will not be held responsible. You will also need to state what will happen if actual damages do occur, such as seizing the security deposit or deducting the amount that you spend on fixing the damage. By making these steps clear with your tenant ahead of time, you can help avoid any confusion that might arise.

It is also important to perform a walk through with your new tenant before they move in. Once you have restored your property to its normal condition after an old tenant vacates, note any existing problems, scratches, or scuffs, or any known issues with the property on a "walk through checklist." Then, once you have approved a new applicant, take them on a walk through of the property and review the checklist. Make note of anything that you may have overlooked.

Once you have completed this walk through, have the tenant sign or initial the checklist. Provide your tenant with a copy of the checklist and place another copy in their file. This will be used again when the tenant vacates and can help you determine the condition of the property when the tenant moved in. Photos and videotape can also help you discern the actual condition of the unit at the beginning of the lease term.

Documenting the state of your property will assist you should you have any difficulty in seizing a security deposit. You will be able to prove the extent of actual damages and delineate between what is considered normal wear and tear for your property and what is considered damage. 
You may need to check with your state laws to make sure that your definition of "normal wear and tear" complies with the state definition. Each state has slightly different requirements or guidelines, so make sure that you are aware of these differences.

 
If you own an investment property, you should make sure that you carry adequate insurance coverage. Accidents may occur and ultimately cause damage to your investment property. If you do not have the necessary insurance, you will be responsible for the full financial cost.
Owning an investment property brings with it a large degree of liability. In addition to the building itself, you may be responsible for injuries received by others while they are on your property. You could also be held responsible for damage to their belongings.