How owner/operators can get what they need from a deposit alternative
Deposit alternatives are here to stay, so what’s next…
2020 has been a year no one saw coming. Our team has been inspired by the stellar work of the people across the country who make the multifamily industry move.
Seven months into the pandemic it’s beginning to become clear what the long term effects will be. August showed the first signs of a decline in rent payments since the pandemic began with a decrease of around 2% from the previous year. September is now showing indicators that this decline will continue. Mid-month reports for September rent collection show that collection rates are expected to be down 2.4% in comparison to September of 2019 according to the NMHC Rent Tracker for market rate properties.
So how do we navigate this market?
Small operational changes have the potential to have real impact on bottom line. Micro-changes will inevitably add up and incremental gain will contribute to overall performance in ways that haven’t been observed before. One of the changes positioned within the market to have measurable impact is a growing commitment by owners/operators to provide financial options at move-in in the form of deposit alternatives and lease guarantee services. Once adopted, these solutions can directly affect the size of your applicant pool and improve operational efficiency across an entire organization. They also reduce bad debt by facilitating the recovery of financial losses in less time than ever. These services differ however in the ways they deliver their product, the effort required to manage them, and their long-term sustainability. While it’s true that owners have to partner with the right provider to fully capitalize on these benefits, the potential is exciting.
The intended purpose of implementing any technological solution today is to pinpoint efficiency and maximize revenue gains. Deposit alternatives should work the same or better than a cash deposit and give prospective residents a more affordable option to attain safe and accessible housing. Just as important is the reality that with deposit alternatives, residents are still held responsible for losses that occur, exactly like a cash deposit.
Why is this accountability so important?
Because creating a customer base with no accountability doesn’t benefit the industry. In order to cultivate a successful relationship, residents need to know that their actions and the care of their home remains their responsibility.
Additionally, we know that the prospect/resident experience is directly tied to satisfaction levels. People want to live in communities that will enrich and enhance their lives. Deposit alternatives are a logical first step for owners/operators to provide these types of communities.
How should you choose a deposit alternative?
Deposit alternative and lease guarantee services can come in many different models, and as a result they vary in their effectiveness/the promises they can deliver on. For example, lease insurance programs require residents to pay for their programs with a charge included as an additional fee on monthly rent. These types of products are described as plug-and-play solutions that integrate with native workflows and property management systems, but they neglect to inform owners how including additional fees creates the perception among residents that properties are charging higher rent prices, which challenges future rent increases. Lease insurance policies increase rent for residents without letting owners benefit from that increased rent the way they should. This type of bottlenecking will be a real problem for owners. It also places an operational burden on organizations at-large as they’re required to support the product, explain the fee, collect the payments, reconcile those fees, all while the lease insurance provider sits back and watches the work get done. Losing efficiency costs money, it’s that simple. Revshares won’t make up for what gets lost. This isn’t a true working partnership.
How else do deposit alternatives differ?
Not all prospective residents present with the same amount of risk, so choosing a provider that only offers limited coverage options at set pricing is beneficial to no one. This is also part of why these options are presented to prospects as part of their monthly charges. Set pricing sacrifices affordability for residents because it doesn’t account for different individual risk factors. When applicants realize that the upfront savings don’t tie out over time, they often walk away. These programs are mandatory because the opt out would be too high otherwise.
We’re different because Rhino is designed to offer choice to residents and owners. We deliver individual dynamic pricing for each prospect, which is the most effective way to apply a deposit alternative to the leasing arsenal. Every prospective renter has the choice to sign up for Rhino. Because of that, our product works for all communities and qualification levels, and adoption rates of Rhino are as high or higher than mandatory product offerings.
Additionally, not every deposit alternative lowers upfront costs like they say they will. Other offerings in the space are designed to assist prospective residents that don’t qualify on their own. These platforms still require prospects to pay a fee somewhere in the neighborhood of 5–10% of their annual rent upfront at move-in, resulting in the prospect coming out of pocket $800-$1560 for an average priced apartment. They also require rigid and lengthy lists of documentation for approval. Prospects are trying to lower their cost of moving regardless of their risk. When they’re told they can and that ends up being inaccurate, frustration sets in and resident satisfaction begins to decline. Not an optimal solution for most.
Providing a way for people to attain affordable housing from an owner’s perspective is what drove the creation of Rhino. Our reputation of quality service and transparency with owners and residents alike has facilitated our tremendous growth over the past 4 years. Rhino provides a quote to a prospect in less than 60 seconds every time. There is no secondary approval process because we approve who you approve. It works for everyone and delivers an affordable option for all. Highly qualified applicants especially love that they can benefit from the financial flexibility that the product provides. They can afford the deposit but value the option to keep that money in their pocket instead. This is exactly why Rhino is being adopted by more Institutional and NMHC Top 50 management companies than any other deposit alternative provider.
Choosing a partner is a critical decision. At Rhino, protecting and providing value to owners has always been our focus. This will in fact be key to your success and the success of a long-term partnership.