The New Financial Amenity Game
Millennials may not have invented the subscription economy, but they’ve expanded it beyond our wildest dreams. And they can teach us a lot about finding and wooing customers. For example, today’s renters are facing tough financial times due to student loan debt, higher living costs and unexpected expenses. In the face of these challenges, why have some elements of multifamily, such as security deposits and move-in costs, remained the same? At the 14th Annual Apartment Innovation and Marketing Conference (AIM 2019), which took place at the Hyatt Regency Huntington Beach on May 5-8 a panel of experts discussed successful ways to mitigate owners’ financial risk while helping renters to improve their financial standing. Moderated by Valerie M. Sargent, President, Yvette Poole & Associates, panelists
- Reichen Kuhl, CEO, LeaseLock
- Damian Langere, CEO, Domuso
- Debbie Nicholson, Executive Vice President, First Communities
- Michael DeFrang, Regional Sales Manager, RentDynamics
shared insights into a relatively new financial amenities like leasing insurance, digital payments and credit reporting.
“Millennials live in a subscription economy,” observed Sargent, “Many have a precarious financial situation. However,” she added, “they still want to live in a very nice place, have friends over, be proud of where they live.”
Historically, prospects seeking an apartment faced three challenges of affordable rent, coming up with a security deposit and maintaining a good credit rating. Of these, circumstances around the credit are perhaps the most surprising. “There was a misconception in the past,” noted RentDynamics’ DeFlang, “that when you’re paying rent, you’re building your credit.” Actually, “there was a study done in 2017 by FICO, which learned only .3 percent of property owners were reporting rent to the credit bureaus.” So while renters gained nothing from paying on time, not paying rent on time had the immediate effect of lowering credit scores. RentDynamics’ product RentPlus, incentivizes renters to pay on time by reporting any good payment history to credit bureaus. DeFrang said that people who use services like these “stay at properties 28 weeks longer. Adoption is around 85 percent.”
That bad credit scores might also shrink the prospective rental pool was not considered a challenge until recently. Instead, property owners concerned themselves with managing rental deposits, which had gotten more complicated over time. “Recently a lot of laws about security deposits - which vary with all the states and all their requirements - have become very stringent,” said First Communities’ Nicholson. Not only that, rent deposits are a chief driver of poor online reviews, said LeaseLock’s Kuhl. “Everybody reads online reviews today before they do anything or go anywhere. Ninety of bad reviews are related to security deposits.” The answer, in his view, lease insurance. “For as little as $29 a month, renters have reduced move in costs. We’ve learned that what renters want are not gifts that they weren’t expecting, but money in their pockets.” Kuhl started a pilot with Graystar in 2016. “We have a 50,000-unit property company reporting $200,000 in savings just from not managing security deposits.”
Advertising apartments “with no money down” is a great marketing strategy, said Nicholson. “‘No deposit’ advertising is the key. You generate probably 30-40 more leads just off those two words. The buzz is out there. I’ve rented 50 percent more apartments.”
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