When we moved into the place we’re living now, we had to have just shy of $2,500 on hand. That included first month’s rent, last month’s rent and a security deposit.
That’s an insane amount of money when you’re making just above minimum wage—which we were. We’re fortunate that our income has gone up since then, but even still, security deposits are one of the big expenses that have made staying put rather than moving a better financial choice for us over the past few years. Even if we get our full security deposit back, rent inflation has gotten a little crazy lately, which means the deposit refund wouldn’t cover the security deposit at our hypothetical new place.
Get Out of Paying Your Security Deposit
What if you could eliminate that security deposit? It seems like a dream, but in an era of progressive financial products, it’s not.
Jetty, an insurance company that serves city-dwellers like us, has this really cool product called Passport Deposit. Essentially, you’re buying a surety bond through Jetty. You purchase this bond for 17.5% of the cost of your security deposit. Then, you don’t have to pay your security deposit up front.
Your landlord is the recipient, and carries no risk. Jetty is literally insuring that you won’t trash the place. If you do, you’ll have to pay for damages. So don’t mess your place up.
If we were to move right now, we’d likely be looking at a place with a minimum monthly rent of $1,100. That means our security deposit would also likely be $1,100.
We could save for that for sure. But to be honest, it’s preferable for me to not have to pay that much upfront.
With Jetty, we’d only have to pay $192.50. We wouldn’t get that money back, but we could take the other $907.50 and invest it. Assuming a 6% annual return, we’d have made that $192.50 back and then some by 2020. Within 11 years, we would have more than doubled our initial investment.
That’s way better than throwing it all at a security deposit that will lie dormant for the duration of your rental period.
If you don’t have the $1,100 upfront, to invest or give to the landlord, Jetty’s Passport Deposit can be a lifeline. While I don’t advocate for living outside your means, the reality is that the rental market is wreaking havoc on American families. We frequently like to think about housing from a buyer/seller perspective, but since the bubble burst in 2008, renters have been paying a steep price.
If you can afford the rent, are a responsible tenant and just don’t have the extra money for the security deposit, this product can help you get into your place with a lot less stress.
When You Don’t Meet Income Requirements
The last time we moved, we were lucky that our landlord didn’t set income requirements. Like I said, we were making just above minimum wage.
We’ve never missed a month, by the way. Even in hard economic times.
A lot of other landlords did, though, and it disqualified us from moving to those locations. We aren’t talking about luxe high rises with amazing city vista views, either. We’re talking about basic, affordable housing.
The only place I could find where we made 3x-4x the monthly rent every month had a blanket hanging in the stairwell, separating us from our future neighbors, and a busted up stove. When I asked the potential landlord about replacing it so we could do things like cook, he said, “Well, that’s expensive.”
Let’s take our $1,100 per month place as an example again. With kids in Pittsburgh, one of the most stable housing markets in the country, we’re talking about some pretty basic housing. It likely won’t be in a blighted neighborhood, but it’s not going to be in a super ritzy part of the city, either.
To make 3x-4x monthly rent, you’d have to be pulling in $3,300 to $4,400 per month. Fifty percent of families in this country make under $68,000 per year. While people at the top of the $0-$68,000 income range would have no issue meeting those standards, those in the middle of the pack would. And do.
That’s why Jetty also has Passport Lease. If you don’t meet income requirements, you typically will need a cosigner. The standards for that cosigner are typically higher, requiring that they make 8x-10x your monthly rent.
With Passport Lease, you don’t need a cosigner. You can move in without meeting the income requirement for a one-time fee of 5%-10% of your annual rent on a 12-month lease. On the $1,100 place, that would be $660-$1320.
While it’s not ideal to have to pay an extra fee, it is worth it if Passport Lease can get you and your family into a safe and healthy home.
Be a Responsible Renter
Only move into a place if you know you’ll be able to pay the rent on time each and every month. Cover yourself with renters insurance—which is insanely affordable and covers you in times of disaster, theft or liability. Take care of the place while you live there.
If you do all of these things and the barrier to entry is still just too high, look to Jetty’s Passport. It’s an innovative new product that can help you get your foot in the door.
This post is brought to you by Jetty Insurance, who has recently expanded into the Pittsburgh region.