We get it: change is hard. At ePremium® Insurance Agency, our team recognizes the money, time, risk, and stress involved with changing business processes. However, if updating your traditional methods of receiving security deposits from your residents could save you more time and money, wouldn’t it make sense to switch?
Let’s Compare
Traditional security deposits and security deposit alternatives serve the same fundamental purpose of providing financial security for property management companies (PMCs) against potential tenant damages or unpaid rent. However, they differ significantly in how they achieve this goal and the implications for both PMCs and residents, with traditional routes typically requiring a lump sum to be paid upfront and requiring more handling and paperwork.
In comparing the two, the following considerations must be made:
- Financial Impact: Traditional deposits tie up a significant amount of money upfront for tenants, whereas deposit alternatives may offer more flexibility in payment.
- Risk Management: Both options aim to protect PMCs but the mechanisms may vary, impacting how effectively they mitigate risk.
- Resident Perception: Some residents may prefer the simplicity and lower upfront cost of deposit alternatives, while others may prefer the security of traditional deposits.
So What’s the Deal with Deposit Alternatives?
Deposit alternatives were a hot topic during the COVID pandemic, with the National Apartment Association reporting on the benefits of “renter’s choice” legislation while advocating for lawmakers to ensure the benefits are balanced for both PMCs and the communities they serve. The current economic state for the US does not change this sentiment: properties need to be protected whilst citizens affordable options.
With a popular 2023 Federal Reserve study revealing that 37% of Americans could not come up with the cash funds to handle a $400 emergency expense, we must conclude that lump sums required for traditional security deposits might be hard to find for the average household.
The right security deposit alternative can benefit both your residents and your teams in several ways:
- Financial Accessibility: Traditional security deposits can be a financial burden, especially for renters with limited income or those needing to move frequently. Deposit alternatives offer a more flexible financial solution, often requiring a lower upfront cost or providing payment plans.
- Resident Attraction and Retention: Offering deposit alternatives can make rental properties more attractive to potential tenants. In a competitive rental market, properties that offer alternatives may stand out and attract more applicants. This can also improve tenant retention as it provides a more affordable and appealing leasing option.
- Risk Mitigation: For PMCs, deposit alternatives can mitigate financial risk. They may provide a level of protection against damages or unpaid rent, similar to traditional deposits. This can be achieved through insurance-backed alternatives or guarantees that cover potential losses.
- Compliance and Regulation: Some jurisdictions have regulations regarding security deposits, such as limits on the amount that can be charged or requirements for deposit refunds. Deposit alternatives can help PMCs comply with these regulations while still protecting their interests.
- Convenience and Efficiency: Processing and managing traditional security deposits can be time-consuming and administratively burdensome. Deposit alternatives may streamline this process, reducing paperwork and administrative costs associated with managing security deposits.
- Rental Community Satisfaction: Offering deposit alternatives can improve satisfaction by providing a more transparent and predictable rental experience. Rental communities may prefer the flexibility and simplicity of deposit alternatives compared to traditional deposits.
- Environmental Considerations: Moving away from traditional security deposits can have environmental benefits by reducing paper waste associated with processing and returning deposits.
Overall, security deposit alternatives contribute to a more resident-friendly and efficient rental experience while addressing financial, regulatory, and operational considerations for property management companies in the multifamily industry.
Meet ePremium’s Deposit Select
Our team understands that selecting the right service provider for your deposit management needs is a significant decision. If you are in search of a deposit replacement program to lower move-in costs for your residents, increase your pool of qualified residents, and reduce bad debt all with tailored and customized coverage for your properties, we have a solution. By utilizing our Deposit Select program, you can improve the resident experience and protect your communities.
Advantages include:
- Flexible and Affordable Premiums
- Additional Revenue Stream
- Integration with Existing Systems
- Efficient Claims Processing
Ready to up your rental communities’ satisfaction with flexibility and efficiency? Schedule a call, and be sure to ask about bundling benefits with our renters insurance!
ePremium Insurance Agency, LLC, a limited liability company organized under the laws of Ohio, is a licensed insurance producer in all states, except Alaska with its principal place of operation at 4770 Duke Drive, Suite 200, Mason, OH 45040 (NPN 9925625, California License No.: 0G66570, Texas License No.: 1549460). ePremium Insurance Agency, LLC does business under the following names: in NY dba – ePremium Insurance Agency LLC; in FL dba – ePremium Insurance Agency, LLC; in CA dba – ePremium IRIS Insurance Solutions, LLC.