Deposit alternatives have emerged as a game-changing option in the rental market, allowing tenants to significantly reduce their upfront move-in costs compared to the traditional five-week deposit. Simultaneously, landlords receive extra protection on their property in the event of damages and/or rent arrears.
These are the well known benefits of deposit alternatives, yet this hardly scratches the surface with regards to their usefulness. In this blog, we’ll explore some lesser-known benefits for agents, landlords, and tenants alike.
Agents
- Removing lengthy deposit administration
Handling traditional deposits comes with administrative challenges and legal obligations. Agents must register the deposit and issue the tenant with prescribed information within strict timeframes. For example, in England and Wales, agents have 30 calendar days to complete this process. Failure to comply can result in fines of up to three times the deposit amount.
With deposit alternatives, this process becomes much simpler. As no deposit needs to be registered, agents avoid time-consuming paperwork and potential legal complications. Everything can be completed online in just a few minutes, freeing up valuable time for agents to focus on their core business operations.
- Forward-thinking and tenant-friendly reputation
By offering deposit alternatives, agents build a reputation of being modern, flexible, and tenant-friendly which can help to attract long-term, high-quality tenants. During the cost of living crisis, offering a deposit alternative provides your tenants with a lower cost alternative whilst other basic living expenses continue to rise.
Promoting that you provide this important choice on social media or with potential new clients can set you apart in a competitive industry, reinforcing your brand as both modern and understanding of tenants' financial needs.
Landlords
- Collection of money beyond the protection levels
If a landlord uses a traditional deposit and charges exceed the five weeks of cover provided, they must attempt to recover the debt themselves. This can often be a long and unsuccessful task.
Deposit alternative companies often make a payment to the landlord upfront and have a team of debt collection specialists working to fully recover the sums owed, even if the charges exceed the protection levels offered. This means landlords are not left out of pocket, allowing them to quickly reinstate their properties for their next tenants and maximise profitability.
- Tenants maintaining rent payments
Moving homes can be a really expensive time for tenants. Paying their first month’s rent and five week traditional deposit costs tenants an average of £3,251. Then you need to consider other expensive costs associated with moving, such as removals and new furniture.
The significant savings made by tenants using a deposit alternative allows them to maintain a healthier cash flow and as a result, maintain rent payments.
Tenants
- Not waiting for a deposit to be returned
At the end of tenancy, tenants can often wait a long time for their deposit to be returned, especially if there are deductions for charges to be considered. The process can become frustrating and time consuming.
When moving into their next property, the last thing tenants want to worry about is when their previous deposit will be returned and whether they will receive deductions. Deposit alternatives eliminate this issue, as tenants aren’t burdened by waiting for refunds. Instead, they can easily pay for charges they are responsible for on our slick online platform.
- Allocating funds for better use
The average traditional rental deposit costs tenants £1,656. By choosing a deposit alternative, tenants save, on average, over £1,000 in upfront move-in costs. However, the real advantage lies in how those saved funds could be used.
Instead of being locked in a deposit scheme, that money could be invested in a savings account or an ISA, generating interest. Alternatively, tenants could put it towards new furniture, or a deposit on their own home. The opportunity cost of locking away such a large sum makes deposit alternatives a smarter financial choice for many.
We hope this blog has helped you to better understand the many different benefits of deposit alternatives. If you would like to discuss offering a deposit alternative to your clients, then book a no-obligation call today.
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