LeaseLock is hoping to do away with the need for security deposits in order to help renters gain approval while insuring property managers for losses due to unpaid rent or damage.
The startup says it’s the first security deposit insurance company to go nationwide in the U.S. Renters pay a small monthly fee as opposed to a large security deposit, while landlords and property managers pay nothing at all. LeaseLock then provides an insurance policy that covers them against financial losses due to non-payment of rent or damage to the unit.
LeaseLock insures the property manager against loss of rent in the event of renter default. It also replaces the need for a cosigner, guarantor or collection of extra security deposits.
It works like this: The renter applies for approval at LeaseLock’s site, and once they’re approved they will pay a fee ranging from $15 to $75 per month according to their risk profile.
The idea is to help renters who’re unable or unwilling to fork out for a big security deposit, which could range from $500 to $2,000 for an apartment that costs $1,500 per month to rent. LeaseLock replaces that security deposit with its policy that provides assurance for landlords, while tenants get to free up their deposit money to spend on other things.
LeaseLock reckons something like a third of all renters are seen as high-risk, which means these people are usually charged an extra one-month security deposit. Usually this is the case for people with bad credit or no credit history, younger people with a very thin credit file, and those who’ve had foreclosures or bankruptcies in the past.
LeaseLock perform its own financial checks using proprietary software that it says goes beyond regular credit checks. Approved applicants will gain approval for the lease once they’ve made their first monthly payment.
“There is so much data we can use to best serve our clients and renters,” says LeaseLock CEO Reichen Kuhl, "and LeaseLock -- a company that combines true InsureTech, RealEstateTech, and FinTech -- will stay #1 because of how we use it.”
Property management companies using LeaseLock include Greystar, Equity Residential, Lennar and Avenue5 Residential.