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San Francisco Company Offers Rent Guarantee to Small Landlords

SAN FRANCISCO -- Say you're a landlord and you could guarantee that, if your tenant doesn't pay rent, you don't lose money? Zumper, an online rental platform, is launching a first-of-its-kind rent guarantee program aimed at doing just that.

For roughly 10 million small landlords across the country cash flow from monthly rent is critical to stay afloat.

"Some landlords are worse off than the tenants, you know. They count on the income, they need to pay their mortgage, they need to pay their bills," said Patty Mayer, who helps her mother manage a small property in San Mateo.

When times get tough for tenants, their monthly rent payments to landlords can disappear. Zumper offers a way to ensure that small landlords don't lose out just because their tenants are struggling.

"At its core, we're trying to help the property owner make sure they get their 12 months of rent," said Vishal Makhijani, president and COO of Zumper.

It's called the Instarent guarantee. If a landlord finds his tenant through Zumper and agrees to pay Zumper 2% of the monthly rent, Zumper will guarantee the landlord won't lose out if his tenant can't pay.

"You start to have to provide some modest amount of documentation that's showing that this person isn't paying their rent and if they're not paying that rent, we end up covering you up to the 12 months," Makhijani said.

"It's only for the term of the lease so, if you sign a 12-month lease and a tenant becomes month-to-month -- on the 13th or 14th month they don't guarantee rent after that 12-month period," said Daniel Bornstein, an attorney representing small landlords in San Francisco.

Bornstein is encouraging landlords to read the Zumper fine print.

"Zumper is trying to limit the likelihood of a failed relationship within your unit to ensure that they don't have, they actually cover the rent," Bornstein said.

Zumper will only cover apartments that are less than 110% of the median market rate or around $4,000 a month. The tenant has to have a credit score of 650 or higher, an income of three times the monthly rent and no history of evictions to qualify for coverage.

If you've lost rent due to COVID-19 or any future recession it won't be covered.

"It's a tremendously stressful period for many, many people who are confronted with individuals who, for a number of reasons, are not able to pay the rent," Bornstein said.

At $4,000 per month a landlord would pay $80 per month to insure that rent continues if the tenant skips out at the end of the lease. Bornstein says that doesn't quite pencil out.

"So, on the 11th month, if you've paid close to $1,000 and all you're going to get is, potentially, one month of rent paid by Zumper if the tenant doesn't pay, you overpaid for that insurance policy," Bornstein said.

But, for others, it's purchasing peace of mind which, for some small landlords, can make all the difference when inviting someone to stay in your property.

"It's a decision fraught with a lot of stress ... and anxiety and so how can we help out in that regard ... and provide a level of comfort?" Makhijani said.

Zumper is the fastest-growing rental platform. With backers like Blackstone, it raised around $200 million since its inception in 2012.

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