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Security Deposit Alternatives: What are the options?

Jan 11, 2012 Matt Roesly

As a landlord traditional security deposits aren’t the only solution for protecting yourself and your property from accidental damage and unpaid rent.  There are security deposit alternatives to consider for replacing a traditional deposit. These options enable you to cover expenses securely and reliably. They assist the tenant by lowering initial move-in costs which can give you an edge against your competitors. So, what are your options?

Surety Bonds

As an alternative to a security deposit you can offer a surety bond. These bonds are underwritten by an insurance company and are non-refundable. The cost is based on a small percentage of the security deposit. Once the bond is purchased by the tenant, it replaces the need for a security deposit.

Deposit Insurance

You can buy the deposit insurance and then bill your tenants monthly or annually for the cost of the premiums. Depending on the size and cost of the rental, these premiums vary widely.  The premium is based on the specific tenant's credit history, prior rental history, the presence of pets and other factors. On a long term lease a tenant could end up paying more than a one-time security deposit.

Security Deposit Replacement

Security deposit replacment blends a felxible solution that allows you the option of a security deposit waiver which covers accidental damage and skipped rent on a fully approved tenant that's been screened through numberous credit and background databases such as tenant evictions, sex offender, driminal and alternative credit scoring.With all three options:

  • You'll be covered for any damages and expenses beyond what a security deposit may have covered
  • You're tenant does not have to pay a large up-front security deposit
  • Tenants do not have to pursue a security deposit refund on move-out

But the Security Deposit Replacement gives you the added opportunity to accept lower credit scoring tenants and still be covered for accidental damages.  It also opens the field of prospective tenants in higher vacancy rental markets.

Regardless of which you choose, the flexible choices of surety bonds, deposit insurance and security deposit replacement as security deposit alternatives, offer both you and your tenants more secure options. This increases the possibility of successful deals, with lower costs and added financial security.