If you’ve rented an apartment in New York you know how much of a hassle the process is. First you need to find somewhere, then you need to meet the building or landlord’s strict approval process.
But in New York (and a few other major cities) the approval threshold is so high that people aren’t able to get the apartment they want, even if they can actually afford it. This is because of crazy requirements imposed by New York buildings and landlords.
These include frequently needing a credit score above 700 as well as annual income in excess of 35-45 times one month’s rent. And even if you do have your own guarantor like a parent, most New York landlords require them to be located in New York or surrounding states and have income of 80-100 times one month’s rent.
Enter The Guarantors. The New York-based startup will act as your cosigner – allowing you to get into the apartment you want even if you don’t meet the strict requirements. The company has raised a seed round from Partech Ventures, Residence Ventures, White Star Capital and other angel investors.
The platform is designed for students, international workers or anyone who would have trouble getting approved for an apartment they could otherwise afford.
Once approved, the startup issues a Surety Bond to the landlord backed by The Hanover Insurance Group. If for some reason renters stop paying, landlords or building management can utilize this insurance policy to receive full rent payment as well as legal fees and holdovers.
While the bond is provided by a third party, The Guarantors is responsible for all of the vetting and approval process – and that’s where technology comes in. Even though all applications are given a final “yes” or “no” by a human, the startup’s algorithms can successfully assess the quality of an applicant and their potential to make on time payments.
The startup has already worked with notable landlords like Gotham Organization and Peter Cooper Village / Stuyvesant Town. There is no cost to the landlord, and in many cases they are happier to have the guarantee of a Surety Bond compared to just a regular guarantor.
The service costs anywhere between 5-10% of annual rent, essentially making it a little less than a broker’s fee. But this is a small price to pay – especially since a landlord may let you renew a lease without using the service once they see a year of on-time payment history. It also lets renters potentially avoid having to put up a large security deposit or prepay months in advance, other things that landlords may require of someone without a guarantor.
While the startup makes particular sense in New York City, Julien Bonneville, co-founder and CEO of the startup explained that there are around 10 cities in the world that historically have high barriers to rent like New York City.
Plus, the startup eventually hopes to offer additional services to renters. One option is helping renters find an apartment – not only could the company then take a broker fee, but they could also specifically direct renters to apartments that permit the company to act as a guarantor.Featured Image: Spencer Platt/Getty Images