Why Owners Should Consider Eliminating Security Deposits

New technologies allow multifamily owners to eliminate the need for security deposits—but why should they? According to LeaseLock, which offers a Zero Deposit program, eliminating security deposits has big benefits for both owners and renters. The benefit for renters is pretty self-evident: it decreases move-in costs. For owners, however, can accelerate the leasing cycle and increase occupancy rates.

“For apartment owners, eliminating security deposits has proven to accelerate the leasing cycle. Operators are experiencing an increase in lead traffic anywhere from 10-20 more leads per week on properties marketed as Zero Deposit. Those leads are converting to leases, on average, two-and-a-half days faster with LeaseLock in place,” Reichen Kuhl, CEO for LeaseLock, tells GlobeSt.com. “Additionally, occupancy rates are increasing as renters are moving into their apartment homes 10 days sooner as they are no longer having to wait for an additional paycheck to pay any move-in fees. LeaseLock also slashes the high administrative costs of dealing with security deposit refunds and offers greater coverage in the instance of vacancy loss due to a resident skip or any other bad debt.”

While increased occupancy and fast leasing cycles is a more quantifiable benefit for the owners, the improved leasing experience for renters is also a benefit. “Data from HotPads has indicated that, on average, a renter pays more than $3,400 in additional fees to move into a new apartment—a majority of this is due to the security deposit,” says Kuhl. “Additionally, the Federal Reserve reports that close to 40% of today’s population can’t afford to pay a $400 emergency expense in cash. By eliminating security deposits completely on every new lease, LeaseLock helps to improve affordability opportunities for all renters.”

Security deposits are historically a cause of acrimony between owners and renters. “The most common dispute between renter and their former apartment community is about security deposit refunds,” says Kuhl. “There is often a misunderstanding of that process and how much money a renter will receive after they move out. Unfortunately, more often than not, renters do not receive any refund on their security deposit and may even have to pay the apartment community for more damages. LeaseLock also solves for this by eliminating the need for a security deposit completely, on every new lease.”

For these reasons, owners actually look for ways to eliminate the need for security deposits, and LeaseLock is seeing strong demand as a result. “After working in the trenches of multifamily real estate for years now, the writing is on the wall,” says Kuhl. “Security deposits have become a vestigial blocker to the leasing cycle that offers little to no protection for the property owner, and that provides only friction and no value to the renter, ruining their overall customer experience at move-in and move-out.”