Members have been discussing lease guarantors in the Forum, namely using a company specializing in them as opposed to relying on an individual co-signer for applicants who don’t meet the 40x income multiple, foreign employed persons with no US credit, renters who may not have good to stellar credit, US and foreign students , non-employed renters, etc. One of our Expert Vendors @Insurent Lease Guaranty, shares what landlords need to know about using a lease guarantee service.
NYC renters are expected to make a minimum of 40x the monthly rent and have a good credit score. This does not necessarily jibe well with the dynamic and varied lives of NYC residents many of whom don’t meet the 40x income test, are students with little to no credit, foreign employed persons with no US credit, US and foreign persons with significant cash assets, freelancers, artists or just had a bad stretch in life, to name a few factors. For these renters, they must resort to either paying a significant amount of money upfront (which many can’t do) or have an individual guarantor with superstellar income at 75x+ the monthly rent and stellar credit. Foreign students may have parents that can put up a significant amount of money upfront but do not have the credit and live overseas. Many US renters needing guarantors don’t have parents that meet the income test. Keep in mind that landlords may not accept upfront payment for rent-stabilized units.
The Insurent Lease Guaranty Program is the first and only institutional guarantor of residential leases (the “institutional mommy and daddy”), and is backed by Argonaut Insurance Company, an A rated insurer with $1 billion of surplus capital. It is free for landlords--all they have to do is accept the program and they eliminate all financial risk by doing so. The ultimate decision to accept the renter is always up to the landlord. The Insurent Program is a tool to reduce vacancies without the landlord having to reduce their credit requirements or take on additional risk, and it turns “lost deals” into closed leases for “creditworthy” persons that the landlord wants to close.
Renters pay for using the service, usually 80%-90% of one month's rent for US renters. Foreigners without U.S. credit history pay an average of 110% of one month's rent. Often, these applicants include relocated U.S. executives, college and professional graduates entering the workforce, unemployed renters with significant cash liquid assets, and foreign students and US students who don’t have parents meeting the income requirements or have parents living out of NY. Insurent is used for free-market, rent-stabilized and 421a/J51 buildings.
Here are some examples where Insurent can help close leases for landlords which might otherwise be considered high-risk:
*Renter’s income doesn’t meet the 40x the monthly rent
*Renter is a foreign employed individual or a foreign student.
*Renter is a high net worth individual or retired (US or foreign)
*Renter is self-employed
*Renter has a good credit score with good income but a lot of debt
*You, the landlord, want to close the lease quickly (even within 24 hours!) and not have to wait for documentation of a qualified individual co-signer/guarantor making 75x-90x the monthly rent
*Renter has a job acceptance letter but does not start their job for 30-60 days
*Renter is in a share situation with one parent that does not want to be the guarantor for several people
*Applicant is a trade-up renter seeking a larger unit
The Insurent Program covers the full rent obligation under the one year lease or the one year plus a partial month lease. In the event a tenant skips out on their lease or is evicted, Insurent will bring the landlord current with all past due payments within 24-48 hours upon the landlord recovering the apartment, be it through a court order or other settlement agreement or abandonment. Abandonment requires no court order. If there is still a remaining term on the lease after recovery, monthly payments for future months will be made on the 10th of each month until the earlier of reletting the apartment and the termination of the original lease term. In its eight year operation, there has never been a claim that wasn’t paid.
Insurent prides itself on its quick turnaround and closure of leases. As landlords and property managers, we know that feeling of frustration when we're about to close on an apartment and then something comes up such as the guarantor doesn’t meet the landlord’s requirements or the guarantor backing out. What's worse than that is having a tenant vacate with no notice and leaving you with several months' unpaid rent. To learn more on how you can prevent this and decrease vacancies, check out Insurent here.