Replacing Security Deposits with Low-Cost Insurance
In most real estate markets today, apartment managers and owners commonly collect a security deposit upfront. This deposit covers the property owner for various types of losses, such as property damages and skipped rent. In areas like New York City, the security deposit may be as high as $3,000 or more. This deposit is generally due with the first month’s rent or even with the first and last month’s rent. This means that a typical tenant must make a large upfront payment to start a lease. At the same time, the tenant may be staring at other moving-related expenses.
Adam Weiner works for Rhino, an innovative company that strives to combat this commercial real estate challenge head-on. Specifically, it enables multifamily property owners to collect a low-cost insurance premium each month. This is in place of large security deposits. Through the service, the tenants can move into an apartment more easily and often more quickly. At the same time, the property owners are protected against financial losses.
Specifically, the insurance policy is between the property owner and Rhino. The property owner conveys the cost of the coverage to the tenant, and this is presented to the tenant as a financial amenity. The cost of coverage equates roughly to $5 per month paid by the tenant for a $1,000 security deposit.
In a traditional security deposit situation, the landlord holds the deposit funds throughout the length of the lease. At the end of the lease, the landlord is exclusively responsible for determining which damages will be paid for out of the deposit. With this low-cost insurance, however, Rhino holds the funds. More than that, there is a claims process. Currently, Rhino ensures about 500,000 apartment units across the United States, and it takes pride in providing commercial real estate owners with a digital claims process that is fast and easy. The landlord or property manager simply uploads images of the damages or documentation showing lost revenue. The claim can be submitted online quickly, and most claims are processed within an hour.
On a more detailed level, Rhino utilizes Managing Group Agent. This is an end-to-end processing platform that fully manages everything from premium collections to claims processing. Managing Group Agent ensures that the financial pipeline is healthy at all times. Furthermore, Rhino is backed by State National. State National is an A-rated carrier with a $14 billion wallet. In addition, Rhino services clients that range from mom-and-pop owners to large institutional owners that manage many thousands of units. Today, Rhino has more than 40 employees, and it continues to grow to meet the demand for its service.
According to Adam Weiner, a look at Rhino’s growth reveals tremendous lessons in scalability. These lessons convey to the commercial real estate world to an extent. For example, he states that it is crucial to focus on hiring the right people from day one. When you hire top recruits initially, other top candidates will be attracted to the business. In this way, you build a quality team from the ground up. Adam describes these individuals as smart, driven, and intelligent people.
During the hiring process, he does not ask specific questions. Instead, he launches into a conversation to determine how well the applicant connects on an intelligent level. This aligns with what Rhino is about. Rhino’s success is rooted in having deep partnerships with progressive multifamily owners. Through the conversation approach, Weiner can more accurately determine if the candidate has the ability to build rapport and speak thoughtfully.
Adam Weiner firmly believes that one of the most important steps that a multifamily property owner can do is to get away from a system involving security deposits. He specifically states that Rhino’s insurance service is increasingly relevant in the current economic climate. Housing is approaching unaffordable levels for some people. At the same time, moving is an expensive event for many people. The need to pay a security deposit is cost-prohibitive in some cases, and it can create a bottleneck in an apartment owner’s leasing process. By choosing a low-cost insurance system as an alternative, the bottleneck is removed, and a much-needed service is provided to the housing applicant.
According to Adam, there is one scenario when Rhino’s insurance service would not be advantageous for apartment owners. This is when the property is located in a state that permits capital improvements to be paid for out of security deposits. However, only a handful of states allow this.
Prior to joining Rhino, Adam worked as a salesperson for a series of technology companies, including Yelp and Google. Notably, despite connecting well with Rhino’s many real estate owner clients, Adam does not have any interest in becoming a real estate investor himself. He is content with the professional challenges that Rhino presents to him. However, he would likely move into real estate sales if Rhino were to collapse one day.
Altogether, Rhino strives to remove bottlenecks throughout all stages of the lease-up process, and this extends to the tenant move-out stage when the security deposits would actually be applied to true expenses or losses. The service benefits tenants by making it more affordable to move, and it helps landlords decrease vacancies. This is accomplished without placing the landlord at risk of financial loss. Plus, with an easy claims process, there is no inconvenience to the landlord after the tenant vacates. You can learn more about Rhino’s services by contacting Adam Weiner at Rhino’s New York office.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.