With rent hikes and rapidly evolving renter expectations, operators are looking for ways to provide more convenience and added-value for residents without sacrificing the property’s financial performance. One such strategy involves reframing deposit-free leasing with a risk mitigation model.
To discuss this recent industry trend and bring insight to the latest advancements in property technology, our Chief Revenue Officer, Ed Wolff, caught up with Apartments On the Go hosts, Courtney Smith and Matt Ruedlinger.
As rents continue to rise and inflation surges, nearly two-thirds of Americans live paycheck to paycheck. People across many income levels are feeling the pinch, and we see this among renters in particular, as they increasingly demand options that give them the flexibility to break down their expenses into smaller fees. Apartment operators in turn, are responding with new payment solutions like flexible rent payments as well as security deposit replacements like lease insurance.
“If a renter can move into an apartment without having to come out of pocket with one month’s security deposit, they welcome that and that’s why operators are removing that barrier to entry,” said Ed Wolff, Chief Revenue Officer of LeaseLock. “The leasing consultant tells the prospect that they are a Zero Deposit community, meaning the renter doesn’t need to pay a deposit to move in.”
Deposit replacements create a win-win solution making move-ins simpler and more affordable for renters, while providing significantly more coverage than traditional deposits for operators. By eliminating the financial, operational, and regulatory risks associated with security deposits and their alternatives, lease insurance eliminates longstanding pain points for property teams resulting in optimized asset performance.
“LeaseLock is integrated with every major property management system, making life easier for on-site teams,” Ed said. “As a business-to-business solution the [resident] never has to interact with us. When the resident signs a lease agreement, they are able to pay a small monthly fee in lieu of a deposit—it’s that simple.”
As Apartments On the Go host Courtney Smith pointed out during her conversation with Wolff, multifamily has long been change-resistant but accelerated its technology adoption during the pandemic. In particular, forward-thinking operators led the way toward new insurance technology solutions that offer more modern and smarter loss protection throughout the lease lifecycle.
For firms like Western Wealth Communities, a multifamily operator in Texas and the Southwest, replacing security deposits with lease insurance was the obvious solution to resolve operational inefficiencies leading to lost revenue.
Jennifer Staciokas, the firm’s executive managing director of property management, said it was a no-brainer to deploy LeaseLock’s AI-driven insurtech platform. The move really paid dividends when amidst the large labor shortages, the company was able to increase the bandwidth of on-site associates while also maximizing asset value.
“Without the barrier of a security deposit for residents, Western Wealth Communities was able to reduce the friction and accelerate their leasing,” Wolff explained. “What they really liked was that on top of that they were also able to reduce bad debt, because every Zero Deposit [lease] is covered by lease insurance. The owner is made whole on skips, evictions, attorney fees, damages (including pet damage).”
In addition, Wolff discussed one of the fundamental problems with security deposits: relative to the risk they are designed to protect against, deposits do little to mitigate risk and, in fact, compound it.
“What we know is that the security deposit was actually never enough to cover [skips, evictions, attorney fees, damages] at move-out, and so bad debt was left on the property. Now, they have lease insurance to cover them and enable them to reduce bad debt by 50%.”
More and more operators are looking to ditch security deposits and alternatives for a smarter solution that actually reduces their exposure to potential loss and improves property performance.
To get full insights from the Apartments On the Go episode with Ed Woff, listen to the full episode here.