Security Deposit Waivers: Why 70% of Tenants Choose to Pay Monthly

When you give tenants the choice between a $1,500 security deposit or $29 per month, 70% choose the monthly option. Every single time.

That choice creates a new revenue stream for your company. The tenant pays monthly. The provider guarantees the owner's coverage. You earn $5 to $12 per unit per month for doing almost nothing.

Security deposit waiver programs are one of the fastest-growing ancillary revenue categories in property management. And the economics work for everyone at the table.

Here is how the programs work, which providers to evaluate, and how to roll this out across your portfolio.

What Is a Security Deposit Waiver Program?

A deposit waiver program gives tenants the option to skip the traditional lump-sum security deposit. Instead, they pay a smaller monthly fee for the duration of their lease.

The critical detail: this is not deposit elimination. The owner still gets full protection. The waiver provider guarantees coverage up to the full deposit amount (or more) in case of damage or unpaid rent at move-out.

Traditional model:

• Tenant pays $1,500 deposit at move-in
• Owner holds the deposit
• Deposit returned (minus deductions) at move-out
• Arguments happen over every deduction

Waiver model:

• Tenant pays $25 to $40 per month
• Provider guarantees coverage to owner (typically 1 to 2 months rent)
• PM company earns a margin on each monthly payment
• Claims processed through the provider at move-out

The tenant saves hundreds or thousands of dollars at move-in. The owner gets equal or better protection. You generate recurring monthly revenue. The provider makes money on the spread between premiums and claims.

Why Do 70% of Tenants Choose the Monthly Option?

Because moving is already expensive. First month's rent. Last month's rent in some markets. Application fees. Moving costs. Setting up utilities. The security deposit is the single largest barrier to signing a lease.

A tenant facing $4,000 or more in upfront move-in costs will choose the $29 monthly option almost every time. It is not even close. The psychology is identical to why people finance phones instead of paying $1,200 upfront.

This also reduces your vacancy time. When the move-in cost drops by $1,500, more applicants can afford to sign. Your approved applicant pool gets larger. Units fill faster.

We saw vacancy rates drop by an average of 4 days per unit after implementing deposit waivers. Four fewer days of vacancy on a $1,800 per month unit is $240 in recovered rent. Multiply that across your portfolio and the impact is significant.

How Does the Revenue Model Work?

Your margin is the difference between what the tenant pays and what the provider charges you. Margins typically range from $5 to $12 per unit per month depending on the provider and program tier.

Example on a 300-unit portfolio with 70% enrollment:

That is over $30,000 annually from a program that runs automatically after setup. No invoicing. No collections. No staff time beyond the initial enrollment process.

Stack this with pet damage guarantees and an RBP, and you are adding $30 to $50 per door per month in pure margin. That kind of revenue per door improvement changes your entire business model.

Which Providers Handle Deposit Waivers?

Four major providers dominate the PM deposit waiver space. Each has different coverage models, pricing, and integration options.

Obligo

Obligo uses a billing authorization model rather than a traditional surety bond. The tenant authorizes a charge up to the deposit amount. If damage occurs, Obligo charges the tenant directly. If the tenant cannot pay, Obligo covers the owner.

Best for: Companies wanting minimal tenant pushback. The "billing authorization" framing feels less like insurance and more like a flexible deposit.

Rhino

Rhino is one of the original deposit alternative providers. Tenants pay a small monthly fee for a surety bond that covers the landlord. Rhino is licensed in most states and integrates with major PM software.

Best for: Companies that want a well-known brand name that tenants may already recognize.

LeaseLock

LeaseLock replaces the deposit entirely with a monthly fee and provides coverage that often exceeds the traditional deposit amount. Their model covers damage, unpaid rent, and lease breaks.

Best for: Companies wanting the broadest coverage. LeaseLock often provides coverage of 2x the traditional deposit amount.

Jetty

Jetty offers both a deposit replacement product and renters insurance. The combined offering can simplify the tenant onboarding process by handling both requirements in one platform.

Best for: Companies that want to bundle deposit waiver and renters insurance from a single provider.

How Do Claims Work at Move-Out?

The claims process mirrors what you already do at move-out. The difference is who pays.

1. Conduct the move-out inspection (same as always)
2. Document damage beyond normal wear and tear (photos, cost estimates)
3. Submit the claim to the waiver provider with documentation
4. Provider reviews and approves the claim
5. Owner receives the payout (or you receive it for coordinating repairs)

Key point: the owner's protection is not reduced. The guarantee covers the same damage types as a traditional deposit. In many cases, the coverage is actually higher because providers like LeaseLock offer 2x deposit coverage.

The main change is behavioral. With a traditional deposit, you deducted from the tenant's money. With a waiver, you claim against the provider's guarantee. The documentation requirements are the same. The outcome for the owner is the same or better.

Is the Owner Still Protected?

Yes. This is the question every owner asks, and the answer is straightforward.

The provider guarantees coverage up to a specified amount. That amount is typically equal to or greater than the traditional security deposit. If the tenant causes $800 in damage, the provider pays it. The owner never sees a bill.

Some providers also cover unpaid rent, not just damage. This is actually better protection than a traditional deposit, which only covers what the deposit amount allows.

The comparison owners need to see:

When you frame it this way, the waiver is objectively better for the owner. More coverage. Less conflict. And their PM company earns revenue that funds better service.

How Do You Roll This Out?

Same phased approach as any ancillary program.

Phase 1: New leases only

• Add the deposit waiver as an option on every new lease
• Present both choices: traditional deposit or monthly waiver
• Let tenants choose (70% will choose the waiver)

Phase 2: Renewals

• At renewal, offer existing tenants the option to convert
• Refund the existing deposit if they switch to the waiver
• This creates goodwill and enrolls your existing portfolio

Phase 3: Default with opt-out

• Make the waiver the default option for all new leases
• Tenants can still choose the traditional deposit if they prefer
• Default bias pushes enrollment above 80%

Legal check: Some states and municipalities have specific rules about deposit alternatives. Check your state's landlord-tenant law before implementing. Most states allow deposit alternatives, but the specifics of disclosure and tenant choice vary.

What About States That Cap Security Deposits?

Several states now cap security deposits at one month's rent. California, New York, and others have reduced or eliminated the ability to collect large deposits.

Deposit waiver programs thrive in these markets. When the traditional deposit is already low, tenants still prefer the monthly option because even one month's rent is a significant upfront cost. And the provider's guarantee often exceeds what the capped deposit would cover.

In California, where AB 12 caps deposits at one month's rent for most landlords, a deposit waiver gives owners coverage that matches or exceeds the cap. The tenant pays less upfront. The owner gets equivalent protection. You earn the margin.

What Is the Next Step?

Contact 2 to 3 deposit waiver providers. Get pricing for your portfolio size. Compare margins, coverage amounts, and integration with your PM software.

Then start with new leases next month. Present the choice. Watch 70% of tenants choose the monthly option. Collect your margin.

This is one of the simplest revenue programs to implement and one of the most impactful for tenant satisfaction and unit economics. The tenants who choose the waiver move in faster, have a better first impression, and cost you nothing to service.