In rental housing, security deposits have long been the preferred way to protect property owners from damage and other losses. But as property management operations become highly automated, security deposits are seen as more of a burden than a benefit.
Savvy property managers have begun to look for security deposit alternatives. Here are 9 key questions to ask before implementing a deposit-free renting solution.
1. How is deposit-free renting better than taking a traditional deposit?
Property managers take security deposits for good reasons. Maintaining protection against damages and unpaid rent is the primary reason, but deposits also provide screening and establish accountability with renters – they now have skin in the game. So how is a deposit alternative better than a cash deposit in checking these boxes?
Handling traditional cash deposits is no picnic. Accepting, processing, and refunding deposits is a burdensome administrative process, made even more complicated due to ongoing regulatory changes. With Obligo’s deposit-free renting solution, residents only pay for damages if their property manager submits a charge, which gives them an incentive to take good care of the apartment. With a completely paperless process, you will save many hours on administrative tasks, and your residents will love keeping the cash to invest, save, travel, or spend as they please.
2. How do I make sure that my residents are still accountable for damages?
What good is a security deposit alternative if renters are unsure about their accountability and property owners are unable to understand pricing, coverage policies, and claims processes?
Obligo’s role as a credit-backed deposit alternative provider is to certify a renter’s trustworthiness and maintain that renter’s accountability. When renters sign up for Obligo, we make it clear that they are still accountable for any damages or unpaid rent.
Our secure Billing Authorizations provides properties with guaranteed protection up to the security requirement, as specified by the lease agreement at move-in. At move-out, we immediately pay the charge amount to the property and send a bill to the renter for repayment.
3. How does deposit-free renting impact my leasing and accounting process?
Property managers want to do their jobs efficiently, but the old school way of managing deposits is a massive hurdle to achieving that goal.
As proven by many of our partners, deposit-free living helps attract quality renters, boost retention, and reduce vacancies. It accelerates the leasing process by reducing the time property managers spend explaining cashier’s checks to applicants, meeting renters all over the city to receive checks, and manually updating their PMS.
Refunding cash deposits at move-out is time consuming. Accounting teams need to process deductions, track down forwarding addresses, and print and mail checks that often get lost or returned. The slow refund process is a top pain point for renters, too. Obligo will seamlessly match your move-out accounting workflows to automatically process deductions and engage with residents until their deposit refund is reconciled. Funds are pulled directly from your existing account structure, ensuring a timely and compliant process.
4. Is a deposit-free renting solution easy to implement?
With deep integrations, property managers don’t need to log into multiple platforms everyday or constantly train employees on new systems. Integrations are crucial to the property management tech stack.
Obligo offers a plug-and-play solution that’s fully integrated with the leading PMS systems. Once property managers provide access to basic lease information from their PMS, Obligo handles the rest, inviting renters to live deposit-free or pay a traditional deposit if they prefer. In both cases, the move-in payments are seamlessly processed via the Obligo platform.
“Obligo’s solution is easier to understand than any other product out there,” said Ben Nguyen, property manager at Real Property Management Heritage. “The implementation was as simple as set it and forget it.”
5. Does the deposit-free renting solution require proof of damage before approving charges? How are disputes handled?
It’s important to understand how disputes are handled by your deposit-free solution provider. Some deposit alternatives involve a third party claims process, which means you need to show proof for your deductions, and you’re at risk of payments being delayed or claims being denied.
Obligo does not require proof of damage to process move-out charges and pay property managers. We do not take sides in disputes and play no role in assessing the correctness or fairness of each charge. Residents who intend to dispute charges may ask for their repayment to be deferred — we want to provide sufficient time for them to either discuss the charge with their property manager or to formally dispute the charge via legal channels.
6. What happens if my resident wants to pay a traditional cash deposit?
Any solution you adopt should be able to handle both deposit-free and traditional cash deposits. If you’re implementing a point solution for deposit-free, you’re back to square one with multiple channels of deposit management, and the administrative burden remains. What you need is a one-stop platform that makes life easier for both deposit-free residents and those who prefer to pay a cash deposit.
Obligo believes in providing flexibility. If a resident prefers to pay a traditional deposit, we can collect that deposit and automatically certify and settle those funds to the property. Our free ACH processing also lets property managers collect first month’s rent, pet fees, or other move-in charges, all within one platform.
7. How do I explain deposit-free living to the property owner I work with?
Property managers need to align with their owners on what kind of deposit-free renting solutions to implement, how they are described to residents, and what it means for the owners.
Obligo creates a seamless process for leasing teams so they don’t have to worry about selling a product to residents. All residents go through Obligo and choose to either pay a cash deposit or live deposit free (70% of renters choose to go deposit-free). There’s no selling, and property managers can generate additional revenue by using our service while maintaining the same protection for their owners.
8. Can all my residents qualify for deposit-free renting?
You want renters who pay rent on time and take care of their units. Traditionally, security deposits serve as an “entry barrier” to riskier applicants. If you adopt a deposit alternative provider that accepts anyone, then you’re inviting the risk of bad debt.
When residents choose Obligo’s deposit-free service, they go through a qualification process based on an open-banking connection to their pre-authorized bank account. Obligo requires that residents provide authorization to one or more billing methods, typically both a credit card and a US bank account. We will connect to these billing methods and run a series of tests to make sure that sufficient funds are available.
We want to ensure that property managers are attracting more qualified renters, while also providing renters with more avenues to qualify for an apartment.
9. What’s the fastest way to boost my bottom line, streamline operations and improve the resident experience?
Schedule a demo to learn more about our deposit-free renting solution, and get started with Obligo today!