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Several tech startups are now offering programs to would-be renters struggling with rental restrictions like high security deposits, minimum income requirements, and credit scores. Critics warn such programs may be risky, as renters could financially overextend themselves.
Typically, a security deposit is worth one month's rent. In some cases, it can be more, pricing out the rental hopeful. One startup insurance company, Rhino, insures rental security deposits. The company guarantees that it will reimburse the landlord in full if the tenant violates the rental contract, or damages the rental unit. The tenant would then owe the insurance company for any damage or lease violations. The insured amount is double that of the security deposit, to further entice landlords to take part in the program, Realtor.com reports.
"I'd caution people [against] using these services," says Roger Ma, a certified financial planner and real estate agent based in New York City who runs the financial planning company lifelaidout. "Doing so may allow you to overextend yourself [financially]." If tenants don't fork over a deposit and their dog ruins their apartment or there are other unexpected damages, they could be on the hook for quite a bit of money they don't have. "Find a less expensive alternative, whether that’s moving to a different area that gives you more bang for your buck or having a roommate or multiple roommates or finding a cheaper apartment," Ma says.
