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Yardi Corom
Are your security deposit requirements costing you good renters?
Sometimes, desirable renters are short on cash. But, do you really want to risk losing a good and potentially long-term resident because they can’t pay a high security deposit before they move in?
Imagine you show a unit to a young professional who is relocating to your area. They have a good new job and great credit along with excellent references. They’re the kind of reliable resident you’re looking for — and they’re ready to sign a lease. But, they don’t have enough cash to pay the security deposit you require.
Do you have to let them walk away? As it turns out, you don’t.
You can let good renters move in for less money up front by allowing them to post surety bonds in place of a traditional cash deposit — and still ensure your properties are protected. Read on to learn more.
What is a Surety Bond?
Surety bonds are a form of insurance that constitute a contractual promise to meet security deposit requirements while taking less money up front from new renters. Renters simply pay a one-time, non-refundable bond premium that is typically less than 20% of a traditional security deposit, and the surety bond provider acts as a third-party guarantor up to the limits of the bond amount.
While relatively rare before the mortgage crisis of 2008-2010 when many families experienced job losses and home foreclosures and needed help getting into rentals, surety bonds have become more popular with landlords in recent years to help renters deal with move-in costs.
What are the Benefits?
While renters are happy to keep more hard-earned money in their pockets and not worry about getting security deposits refunded, property staff are relieved of managing escrow accounts and processing deposit refunds — which also means saving banking fees and administrative costs.
Many property managers also find that offering a deposit alternative gives them an advantage in competitive rental markets.
Three Great Reasons to Accept Surety Bonds
- Gain a competitive advantage and fill vacancies faster: Without the barrier of a big security deposit, surety bonds can help you rent available units faster. Plus, accepting surety bonds as a deposit alternative for qualified renters could help you market your properties, especially in competitive areas.
- Take the burden off management and mitigate risk: With surety bonds, property owners and managers are removed from the collection process and, in most cases, from litigation should disputes arise over the return of security deposits.
- Reduce work for property staff and lower administrative costs: Opening separate trustee or escrow accounts with your bank for new tenants can be a hassle and takes hours of your staff’s time to process, in addition to monthly bank fees that eat away at your deposits over time. Surety bonds don’t require any of that, nor do property staff need to track and pay out interest on security deposits.
Ready to give your renters an affordable move-in option that also helps your busy staff and protects your bottom line? Download a free brochure to get started.
