Are Security Deposits the Best Way to Limit the Losses From a Bad Renter?

Originally written by Emily Gallagher and published in Propmodo.

Years ago, on the heels of the 2008 housing crisis, Omri Dor bought a single-family home with the intent of renting it out. It was his first-ever investment property, but the excitement was quickly wiped away when his first tenant, who had only been living at the house for two months, stopped paying their rent. After months of a tenuous eviction process, Dor found that the tenant had left the property in shambles. He was relieved to start afresh with a new tenant once the property had been cleaned and painted…until the very same thing happened again. And again. After the third tenant stopped paying rent and left the place trashed, Dor cut his losses and sold the house.

Dor was no stranger to being on the other side of the transaction, he was a renter himself when he lived in Israel, England, both coasts of the U.S, and even Australia. “The rental market is so different from country to country,” he told me, “but one thing that’s kind of constant is the fear of the unknown relationship you’ll have with a landlord, property manager, or broker. You never know who you’re up against and you always feel like someone is trying to take advantage of you.” To his surprise, that reality was an even harsher pill to swallow when he transitioned into a landlord himself.

For Dor, the problem was the entire system of trust between renters, landlords, and property management companies. “I realized that there needs to be a trusted third-party with an incentive that makes sure that the renter is a good renter and the landlord is a good landlord,” explained Dor. In 2018, Dor and his brother Roey founded Obligo, a fintech startup that aims to be that trustworthy third party and it does so by mediating through money.

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