We are often asked how RentMaster’s rental guarantee differs from a deposit guarantee, and by implication, which one is better.
A deposit guarantee is an insurance product that makes it possible for tenants – who actually cannot afford the deposit – to take occupancy, typically at an extra 10% of the rental amount. From the landlord’s perspective, it covers damages to the property and legal expenses associated with evicting a non-paying tenant, usually capped.
A product that benefits both landlord and tenant – what’s not to love?
At RentMaster we believe the deposit is an important incentive for a tenant to look after the property. Ask yourself: who will look after your property better: a tenant who had to find the money to pay a deposit and is relying on getting her full deposit back or a tenant who knows that the insurance will pay for damages?
We are passionate about cultivating best practice from all stakeholders in the property rental market. We actively mitigate risk, manage monthly payment administration and invest time and effort into encouraging good tenant and landlord behaviour.
What’s more, when tenants pay their rent promptly and develop good financial habits, they improve their credit rating which will eventually enable them to become property owners and even landlords of the future.
A deposit guarantee may well enable a cash-strapped applicant to qualify as a tenant, but it is not necessarily of long-term benefit to the tenant. If a tenant is planning on staying in a property for a year or more, she is probably much better off getting a bank loan to pay the deposit. By paying 10% extra for a deposit guarantee product, she will have paid off the deposit in ten months. From the 11th month on, the 10% premium is only of potential benefit to the landlord, and when she moves out of the property, she doesn’t get a cent towards her next deposit.
Let’s talk admin
Whether you’re signing up for a deposit guarantee or RentMaster’s rental guarantee, you’re going to have to do some initial admin to get your tenant approved. But with RentMaster ALL the admin is upfront. You never have to claim because we pay your rent on the first working day of the month, no matter what. And making sure the tenant pays is our problem, not yours. With a deposit guarantee, you have all the admin associated with collecting the rent and the claims admin every time something goes wrong.
But, you may ask yourself, why are rental guarantee products so popular with agents and property managers? There are a couple of reasons. Firstly, it increases the number of potential tenants: even if an applicant can’t afford the deposit but passes the credit check, she still qualifies. Also, a deposit guarantee is an easy add-on product for agents to sell: the landlord typically pays the agent one-month’s rent as a placement fee and the tenant covers the deposit guarantee. Remember, the agent gets his placement commission – irrespective of the tenant’s future payment performance.
While the deposit guarantee insurance may help place a tenant in residential areas where there is little demand and compensate landlords for some damages after the fact, it offers no administrative support or pro-active management of non- or late-paying tenants. RentMaster’s active management will prevent the problem in the first place, saving you time and the frustration of claiming after the fact.
In short: we’re hands on and right beside you every step of the way.