Anyone’s who’s tried renting an apartment in New York will know full well just how difficult that can be. First they need to find a place, then you have to make sure you meet the landlord’s strict approval process.
That approval process is a problem for many people, because the threshold is so high that they can’t get the apartment they want even if it’s one they can afford. Part of the reason is due to the insanely difficult to meet requirements of New York’s buildings and landlords, who demand credit scores over 700, an annual income 35 to 45 times greater than a single month’s rent, and a guarantor who lives in New York or a surrounding state.
That’s where The Guarantors comes in – it’s a New York-based startup that will act as your guarantor, allowing tenants to get the apartment they need without meeting all of the requirements. The company is backed with seed round funding from Partech Ventures, Residence Ventures, White Star Capital and other angel investors.
The Guarantors is aimed at students, international workers and anyone else who’s struggling to get approval to rent the apartment they want. Once applicants are approved, the startup will provide landlord’s with a Surety Bond that’s backed by The Hanover Insurance Group. This means that should the tenant stop paying the rent, the insurance will cover it, as well as any legal fees and holdovers.
Although the bond is provided by a third party, The Guarantors is responsible for all of the vetting and approval process – and that’s where technology comes in. Even though all applications are given a final “yes” or “no” by a human, the startup’s algorithms can successfully assess the quality of an applicant and their potential to make on time payments.
The Guarantors has already worked with famous landlords in New York such as Gotham Organization and Peter Cooper Village/Stuyvesant Town. The service is entirely free to landlords, many of whom admit they prefer the guarantee of a Surety Bond rather than a regular guarantor.
The service costs anywhere between 5-10% of annual rent, essentially making it a little less than a broker’s fee. But this is a small price to pay – especially since a landlord may let you renew a lease without using the service once they see a year of on-time payment history. It also lets renters potentially avoid having to put up a large security deposit or prepay months in advance, other things that landlords may require of someone without a guarantor.