Bringing The New Concept of Crowdsourced Rental Deposits
Before we dive deeper into the security deposit problematics, it will be smart to review the overall mechanics behind this basic procedure. So what is Security Deposit?
Basically, it’s an additional sum that you’ve got to pay to the landlord when you move into the new place besides the actual rental payment. In the first place, security deposits were created to protect the landlords and their property.
This sum is usually deposited in a bank until you move out and once you terminate the rental agreement with your landlord, you receive back your deposit in full if there are no penalties applied. The penalties may be applied in case of any damage caused to the property.
Of course, the list of damage penalties is pretty huge, but it’s also important to note that the general rules for the security deposit deductions may vary depending on the state you live in. The state laws can also set the maximum amount a landlord is allowed to charge the tenant.
Quick Tip: Make sure the security deposit terms are included in the lease you sign. These terms should include the amount of the security deposit, where the landlord stores it, what are the penalties/deductions rules and when and how you’ll get the security deposit back after you move out.
Some state laws try to unfreeze these deposits, so they require a landlord to store the security deposit in the escrow account, so it would generate the interest. So when a tenant moves out, he received back the security deposit itself along with the interest it generated (minus the damage costs or other deductions mentioned in the lease).
However, even these laws are not perfect, let me explain.
What’s Wrong With The Escrow Account
It’s an obvious fact that only a certain number of states require landlords to keep this money in the interest-bearing accounts. But even if we consider applying this policy to all states, there are two key reasons why storing the security deposit in the escrow account is not a panacea.
- The generated interest is too low
- It’s a painful procedure for a landlord
If you are a landlord, you know for sure that it requires performing a lot of actions on your side: choose a bank, go and open a separate account there, deposit the money. When your tenants moves out, you have to cash out the money, pay the whole deposit along with the interest, close the account.
Unfortunately, the actual interest is not worth a hassle for both: tenant and landlord.
For example, do you know what is the rental security deposit interest rate in Chicago this year?
This is too low. The overall approach to this procedure is bad and simply too old-fashioned.
Please note that the majority of states simply do not have this rule and all those billions of dollars are frozen in security deposits or generate the lowest interest rate possible on the escrow accounts.
Rentberry Wants to Reinvent The Security Deposits
It’s easy to criticise the existing world order, but we want to bring something new to the table. Our new approach should revolutionize the rental market and shake things up in this stagnating industry.
Here at Rentberry, we are accepting the challenge and launch something entirely new — crowdsourced security deposits. The idea behind it is that each member of Rentberry’s community can contribute to other people’s security deposits and get interest rates/financial rewards in return (usually around 3 or 4 percent).
Basically, a tenant should only pay 10% of the actual security deposit to the landlord and the other part of it will be covered by micro-lenders.
For example, if the deposit amount is $2000, tenant pays only $200 in the first place. After that, community backs him with the other $1,800. So as the year goes by, renter pays a few dollars on a monthly basis to the community members that backed him. So when he moves out, the lenders receive the money back along with the interest and the renter only pay around $50 additional dollars throughout the year.
We believe that fifty bucks is a small amount of money for the possibility not to pay the whole security deposit at once. Especially considering the fact that renting a property and moving is already costly enough. So the obligation to pay a security deposit immediately after move-in might cause additional financial difficulties for some tenants.
As a result, everyone wins: tenants no longer need to pay hefty fees when moving in, landlords still get their financial guarantee, while third parties collect rewards or their interest rates. The win-win-win situation as it is.
By the way, we mentioned the escrow account requirements, so landlords should be happy to hear that even in those states you won’t need to perform this whole procedure and here is why:
“The loophole is that we use our own cryptocurrency and it’s essentially decentralize. We are not mandated by law to put it into the bank because everything is done on smart contracts. It’s not even really qualified as a security deposit because it’s done on the blockchain, not in U.S. dollars.”
Alex Lubinsky, Rentberry CEO
Investing in Crowdsourced Deposits is More Profitable and Less Risky
It’s a common thing to look for the investment opportunities around. Once you’ve watched the ‘Suits’ TV show, The Wolf of Wall Street or something like that, you’ll definitely look up to the stock market and consider investing and becoming a stock market player.
However, as statistics show, it’s not that profitable now and it’s smarter to look around for other options.
As you can see, the interest rates are around 0,01% or 0,03% and don’t forget about the risks that you’ll face on the stock market.
Rentberry crowdsourcing rental deposits offer you the tastiest 3% or 4% rates, safety, and hassle-free experience. The blockchain-powered ecosystem will make sure that frauds or any transaction manipulations are out of the question.
Since all this information can be securely stored on the blockchain, it becomes relatively simple to analyze it and translate into something of value for users — tenant and landlord scores. Based on all available information on tenants/landlords, Rentberry will generate a score between 100 and 1,000 that will be used to help both parties assess risks related to signing a rental agreement with a particular person.
The major advantages? Both landlords and tenants are armed with information. The score is calculated based on rental-related factors only. All information used for calculation is transparent and can be checked by anyone on the network. Not even to mention that this score is legally binding all around the globe.
Initial Coin Offering is Live
As we’ve already mentioned, the crowdsourcing functionality will be backed by BERRY tokens, but where can you get those?
Originally published at rentberry.com on February 1, 2018.