Two days ago an ex colleague of mine sent me a worldofbuzz.com article about a Malaysian couple leaving an ipoh rental room in horrifically dirty condition and skipping out on debt. You can read that article here. I agree with the article which starts off by saying that being a landlord is not easy as you’ll never know if you’re renting to honest and consistent tenants or ones from hell. I don’t want to comment about the particular tenant mentioned in the article as I believe that they probably have their reasons why they would leave the place in a mess and run away owing unpaid rental and other monies but it brings me to this point.
No doubt, renting out your property to tenants helps you pay for the monthly installment of your rental property. I believe that with the surplus of properties for rent nowadays, the majority of rent monies received can’t give you a positive cashflow after paying off the mortgage of your property (maybe only in certain cases but not in the majority of cases). However, in today’s rental market, being able to cover at least half your monthly installment is considered good enough, and with capital appreciation over 10-20 years, you may be able to recover your losses if you refinance the property or sell it off for a profit.
If you didn’t know yet, BlueDuck offers a solution for landlords to screen tenants to see what kind of people they are dealing with. Our service ties in to the CTOS system and landlords get to see financial information on the prospective tenants they are considering renting out their units to. You can know what kind of CTOS score this person has, whether they have any special attention account, whether they are blacklisted and more. Because when a tenant wants to sign up for a zero deposit package, they are required to purchase this Tenant Profile first as a first requirement in order to be eligible to rent a property with zero deposit.
The next question you may ask is, why would I want to rent out my property without collecting any security or utilities deposit? Have I gone mad? Well for one, having the tenant’s security and utilities deposit on hand and getting paid back the same amount by the insurance company that provides the zero deposit coverage is the same thing. You still get back the money in the end. Sometimes, the utilities deposit collected isn’t even enough to cover the unpaid utility bills by a runaway tenant. Let’s say for a RM1500 per month rental, you collected RM750 for the utility bills but when you received the bill, it showed RM1000! You still need to pay another RM250 out of pocket. Personally I have seen a RM4800 TNB bill for one of the rental properties I rented out for a landlord before. The tenant used 3 aircons everyday and didn’t bother to pay the bill for months. The funny thing was TNB didn’t cut the electricity even though the bill raked up till that amount. I guess the tenant was smart enough to make payments in small amounts and negotiated with TNB to not cut the electricity until the bill became so high.
Taking a security deposit vs renting out with zero deposit
Personally if you ask me, if I would prefer to take a security deposit vs renting out my unit through zero deposit coverage, I’d choose the second option, not just because I’m with BlueDuck but it makes more sense. First of all as a landlord you do not need to pay anything upfront for it to start. The tenant pays for the zero deposit coverage which is valid for a year. With this I am assured that in the event this tenant does run away, I am assured of getting back up to 2 months security deposit owed to me and for utility bills as well as malicious damage to my property if there’s any up to the sum assured of the plan my tenant has bought. For a residential whole unit which is RM450 per month (which provides RM5000 sum assured), the utilities bill coverage is up to RM1,000. If I rent out my property for RM1500 per month, the 2 months security deposit amount would be RM3,000 and the utility bill is covered up to RM1,000. (total RM4,000) With the traditional security deposit collected in cash, I would have collected only RM3750 and through my experience shared about, sometimes this may not even be enough to cover excessive utility bill spending of some tenants.
On top of that with the same amount of RM3,750 collected as security and utilities deposit, the amount may not even be enough to cover for malicious damage to my property which is very common nowadays. Things like broken furniture, broken electrical appliances like tv or fridge, or even damage to my fixtures like kitchen cabinets or wardrobes in the bedroom done on purpose by the tenant. This might require a few thousand to fix and replace to its original condition so that I can rent out my unit to the next tenant who is interested (should my current tenant run away without paying and messes up my house like the one in the worldofbuzz article)
Is zero deposit rental something new?
Zero deposit renting is not something new. In fact even with BlueDuck there are already over 3,000 tenants renting this way. What does this mean? It means that more and more landlords like yourself are open to this idea and it’s not something novel or experimental anymore. If you do the math you will know for sure that it is definitely something you might want to seriously consider the next time your property is up for rent in the property market. If there is a lot of stigma and uncertainty attached to it, we wouldn’t have over 3,000 tenants renting with zero deposit today would we?
So to have peace of mind when renting out your property, and not have your story in articles like the one shared above, do consider us as a viable solution. Visit us at www.blueduck.my to discover more and get your tenants to start on their zero deposit rental journey today!