The Wall Street Journal's Laura Kusisto looks at TheGuarantors, a financial services firm that sells payment insurance to renters, giving owners a guarantee that the rent will be paid even if the tenant is delinquent.
The insurance could be a boon for owners and tenants alike, especially in high-priced metros where some renters have difficulty qualifying for an apartment. For instance, in New York City, many owners and managers require an income that's 40 times greater than a month's rent, and if they don't have it, they need a guarantor who earns twice as much as that threshold.
TheGuarantors has a lower bar. It insures tenants who earn as little as 27 times the monthly rent and have credit scores as low as 630. The company also takes into account savings and other liquid assets and income earned outside the country. Even the cost and quality of degree a college student is pursuing can offer clues as to how likely the individual is to miss a rent payment.
The premiums approximate two weeks to about a month’s worth of rent a year, depending on how risky the applicant is. The company, which issued its first policy earlier this year, said it is experiencing its first default.
“We’re taking a little more risk than the landlord, but we’re charging a premium for that,” said Julien Bonneville, founder and chief executive of TheGuarantors.