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New York City landlords who want to ensure they get paid on the first of the month are using new start-up companies that will float funds for renters who struggle to pay on time.
It's something that renters need to be aware of—because there are fees involved, although they're relatively small. And while the programs are primarily aimed at helping landlords get your rent on time, they can be beneficial to renters who get paid on an irregular basis, like freelancers, and help them avoid late fees—and eviction. There are options to pay back the rent in installments.
Alex Pelin, co-founder of Xspaced, which launched in October 2020 as a Covid-relief product, says the program gives renters financial wellness and keeps them in housing during the pandemic and helps "landlords struggling with timely rental payments,” Pelin says.
Xspaced works almost exclusively with mom-and-pop landlords, “which have been more financially impacted during Covid, especially since they’re relying on rent for their mortgage payments,” Pelin says.
Till, which launched in 2018 and is partnering with their first NYC management companies later this month, also helps you customize your rent payment schedules and catch up if you’re late on rent. “We want to keep on-time payers on track with their best budget, and help folks that are behind, stabilize and catch up on their payments,” says Brady Nolan, co-founder and chief growth officer of Till.
What to look out for
It's important to get as much information as you can about what type of program your landlord is using.
“The first issue would be what are the fees associated with using these programs,” says Steven Kirkpatrick, a partner at the law firm Romer Debbas. If the fees are fairly low and there’s no impact on your credit score, then it can make paying rent much easier for some renters, he says.
Many landlords include clauses in their leases that say they want electronic rent payments, even if they don’t use an online rent portal, making it easier to add these services. “If I was a landlord, I would give it a try,” Kirkpatrick says.
These companies are different from personal guarantors and institutional guarantors like Insurent (a Brick Underground sponsor), which helps you qualify for an apartment if you don’t meet the income requirements, usually 30 to 40 times the rent in NYC. Instead, they help keep you afloat once you’re already in an apartment.
Keep reading for how much these programs cost and how they work.
How much does it cost?
Fees vary, but since some of these start-ups have millions in seed funding, they are low.
Xspaced’s Flex Rent Plus costs $4 a month, which allows you to split your rent into two installments, and $7 a month for Flex Rent Premium, which allows you to split it into four installments. Xspaced also offers a no-fee payment plan to cover a security deposit, if your landlord is willing to defer your security deposit at move-in. Pelin says they have seen several landlords who have offered this as a concession.
To use Till, there's no fee if you are on time with your payments, and you can use the service to help with your budget and break your rent into installments. If you want to use their program to pay your landlord back rent, “the fee is less than $20 a month, which is significantly less than late fees,” Nolan says.
Flex is $20 a month for a $2,000 loan to help cover your rent. According to their site, there are no interest rates or late fees.
How these programs work
To use most of these programs, your landlord has to be signed up for their service. This summer, Xspaced will have an option that renters can sign up for even if their landlord isn't, Pelin says.
Are there any qualifications to use these programs? For the most part no, and signing up is straightforward. Till and Xspaced are not offering loans, so there is no credit or background check. Instead, you verify your identity and place of residency.
You can then divide your rent into installments. Xspaced allows you to split your rent into two or four installments, and withdraws the money and deposits into a digital wallet. On the first of the month, all of the money is sent directly to your landlord. And, if for some reason you have a hardship during the month, you can transfer money from the digital wallet back into your bank account.
Till gives landlords the option to receive rent in installments or all at once, Nolan says. They don’t have a maximum amount of installments, so you could break it down weekly if that’s what best works for you. And, they takes it a step further by analyzing your finances, monthly rent, and income to create an optimized payment plan for you. Nolan says Till has seen a 97 percent success rate of renters paying on time once they are on a flexible payment plan—even during a pandemic.
Flex works differently because it involves a line of credit from Blue Ridge Bank, so a credit check is required and if you have bad credit then you may not be approved, according to The Real Deal.
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