Rent and recovery are two words that shouldn’t have to go together.  Like oil and water they represent opposite sides of a no win scenario for multifamily operators who deserve to be paid for their product and shouldn’t have to operate with the knowledge that a percentage will go south. 

Thinking about the friction between risk and protection reminds me of the time my middle son at eight years old was white knuckled at the top of very tall tree with a zip line just inches from his grasp.  He wanted desperately to grab hold and go for a ride but was paralyzed by the fear of falling.  Finally, after much coaxing from a counselor, and a few cleverly worded reminders about a safety net, my son jumped.  He went for the ride, had a blast and discovered a little about his ability to tolerate risk.

Safety nets for rent reliability come in many shapes and sizes with all options designed to reduce fear of falling associated with delinquency and default.  Insurance recovery products, for example, assume at the get go that some percentage of renters are going to miss the mark when it comes to on time payment performance.  Surety program offered as alternatives to security deposits also come into play when rent recovery is required.  As a hybrid insurance product, they pool risk across a renter population with the hope that a larger percentage of residents will perform than under-perform.  Still other services empower communities to take the leap in renting to applicants with less than perfect credit by requiring a safety net that links rent to payroll so that funds are prioritized before they go into a resident’s bank account.  Risk becomes less vexing when communities know that applicants are willing to start payroll deposits from their employer so that funds will be sent every payday to make sure recovery won’t be needed.

In the context of a best defense is a good offense, communities are evaluating conditional acceptance terms to put the right combination of offers and protection in place.