What Is Deposit-Free Rent?

One common obstacle that can keep people from moving to a new neighborhood or a better apartment is the extra cost of the security deposit.

Most of the time, this added expense, which can equal a month’s rent or more, is unavoidable. Fortunately, that isn’t always the case. Once you learn how deposit-free rentals work, you can determine whether this is the right option for your situation. 

And a quick note about us: Roomrs partners with Obligo to offer a deposit-free rent experience for our NYC coliving spaces.

What Is Deposit-Free Rent?

More people are using zero-deposit options to keep their Manhattan rental costs lower. Before you enter into this type of rental agreement, however, you should know what it involves.

All property owners take steps to protect against tenant damage, so zero-deposit rent doesn’t mean you won’t have to pay anything. Rather, zero-deposit agreements require a considerably smaller monthly cost.

Most agreements require a monthly charge of $10–$15, but some property managers may charge more. On the high end of the fee scale, your agreement might equal one week’s rent, which is still less than a full security deposit.

What is deposit-free rent doing to help renters, you ask? It could benefit you in two ways.

For one thing, you won’t have to pay the upfront security deposit, which is huge if you’re on a tight budget. You may also get your monthly fees returned to you. As long as you haven’t damaged the property, the landlord or property manager will return the full amount you paid in monthly fees.

If you damage your rental, your landlord will deduct the repair costs from the fees you paid, similar to your state’s security deposit laws. After completing the repairs, they’ll return the remaining balance to you. Essentially, you’ll still pay a security deposit, but the full amount gets spread out as monthly installments.

The Benefits of Deposit-Free Rent

As you gain a better understanding of deposit-free rent, the benefits of this arrangement will become apparent. Most notably, it saves you from having to come up with a larger lump sum at the time you move into a new apartment. There are also several smaller benefits worth noting.

Enjoy More Flexibility

Whether you go with a traditional lease or a co-living apartment, you might want to leave your rental earlier than expected. With a zero-deposit rental, you’ll get your monthly fees back no matter when you move out. This gives you a little extra cash to help with your relocation.

Add to Your Savings

Another advantage of deposit-free rent is that it allows you to add your monthly fee to your budget to better organize your living expenses. You can put the money you would have paid for your security deposit in your savings account or use it to cover your moving costs.

Get Something Back

When you move out, your property manager will return the monthly fees you paid throughout your time in the rental. Depending on how long you lived there, this can amount to quite a bit.

The Downsides of Zero-Deposit Rent

While there are benefits to this type of rental agreement, it also has its share of drawbacks. Making yourself aware of these disadvantages can help you avoid unpleasant surprises.

You Might Be Charged for Unrelated Damage

When entering into a zero-deposit agreement, it’s important to survey the condition of the rental. Use your phone to take pictures and videos of the apartment. Make it a point to document any damage and report it to the property manager immediately. Otherwise, they could end up charging you for damage you didn’t cause.

You Might Pay More Than You Expected To

You’ll pay the monthly fee for as long as you rent the unit. Adding up those costs, you might find that you’ve paid more than you would have for a traditional security deposit. And if the landlord or property owner finds damage, you might get less of that money back than you anticipated.

You Might Not Qualify

Qualifying for zero-deposit rent can be challenging. Similar to qualifying for a traditional lease, this alternative requires strong credit and a positive debt-to-credit ratio. In addition, property managers only offer this option to those with good rental histories. Issues with previous landlords could disqualify you.

Is Deposit-Free Rent the Best Choice for You?

In the end, only you can decide whether a zero-deposit rental agreement is the best option for your situation.

If you decide that the benefits outweigh the potential drawbacks, this arrangement could help you save big on the costs of moving. In this way, zero-deposit renting offers more opportunities for renters eager to relocate closer to school, work, or loved ones.