Today’s Apartment Academy guest is Ed Wolff with LeaseLock, and in Ed’s view, we’re heading towards a deposit-free marketplace that uses lease insurance.
The Problem with Security Deposits
Most property operators don’t like dealing with security deposits. There’s inevitable friction on the front end and an administrative burden on the backend.
One reason for the shift away from security deposits is housing affordability and the crisis that we’re in. Seventy-eight percent of Americans are living paycheck to paycheck. With rents being what they are, security deposits are becoming a hindrance.
Further, the pandemic has exacerbated the affordability crisis that exists today. People don’t have enough in their savings account, and if they do, it’s a rainy day emergency fund. They don’t want to come out of pocket for a security deposit to move and find a home if they can avoid it.
Also, tenants want the ability to move in without having to go through a painful and clunky process. They want a one-click Amazon experience that’s also affordable. This is the problem that multi-family operators are trying to solve.
In Ed’s experience, traditional security deposits are cumbersome, and they also don’t protect the owner. On average, move-out expenses are two to three times greater than what the traditional security deposit covers. And in an eviction scenario, you run into multiples of those costs.
Further, it’s rare that the resident gets their security deposit back due to wear and tear or damages that occur. The owner of the community will try to recoup expenses, but there’s never enough money collected upfront to offset those expenses.
Moving to a Zero-Deposit, Lease Insurance Marketplace
Finally, the next generation of renters already lives in a subscription-based society. So, lease insurance paid in monthly installments enables affordability, convenience, and multiple times the protection for the owner of the property is the future.
If you minimize the security deposit and embed it in the leasing workflow, it’s just that much easier. The acceleration of leasing, the ability to close those leases, the affordability issues are solved.
LeaseLock is lease insurance that eliminates security deposits altogether. It’s a B2B solution that is native in the workflow and vertically integrated into the tech stack. It requires a lease addendum, which is a one-pager filed in all 50 states. It’s fully disclosed as part of the lease application. The resident acknowledges that, for a monthly amount, they’re waiving the right to pay an upfront security deposit. There’s no selling. Finally, on the property website, you can say you’re a zero-deposit community.