How to set up security deposit alternatives that make move-ins faster and easier to manage

Disclaimer: Security deposit requirements can vary by location, so be sure to consult with a legal professional before implementing any policy.

Move-in should be straightforward. But for many property managers, it’s one of the most friction-heavy moments in the leasing process. Screening, back-and-forth communication, and especially payment processing can slow down you down. In a competitive rental market, those delays can cost you qualified tenants.

Security deposit alternatives are an easy way to speed things. Done right, they offer the same level of protection as deposits with much more flexibility for renters—something you can use to your advantage to get the tenants you want.

To help break down how these programs work in practice, we’ve included insights from Riley Egan at Obligo, one of the leading services that works with property managers to offer deposit alternatives.

With his advice we’ll show you what your options are and how to market and implement them quickly, without disrupting your operations.

What we’ll cover:

• What security deposit alternatives actually are and how they work
• How deposit flexibility speeds up leasing and reduces vacancy days
• Why deposit alternatives work across all rent price points, not just affordable housing
• How to market these options, get owner buy-in, and choose the right tools
• What to ask providers before you commit

Types of Security Deposit Alternatives

Security deposit alternatives replace or reduce the traditional security deposit that tenants pay at move-in. Instead of collecting a lump sum that sits in an escrow account, property managers use a different mechanism to secure coverage for potential damages.

Common forms of security deposit alternatives include third-party services that offer deposit-free experiences, billing authorizations, surety bonds, and deposit insurance.

Obligo’s Riley Egan compares billing authorization to how hotels handle payments . “If you recall the last time you traveled, you walk through the front lobby, drop off a credit card and an ID, then sign electronic disclosure on a screen.” Egan explains. “We took that same concept here and applied it to the long term rental space.” Rather than holding cash upfront, the provider authorizes a charge against the tenant’s bank account or credit card if damages occur at move-out.

There are other options worth considering, too. A surety bond is a third-party guarantee where a bonding company agrees to cover losses up to a set amount, and the tenant pays a small fee rather than a large deposit.

Deposit insurance is another alternative. It covers the property manager for resident-caused damages, and the tenant pays a monthly premium instead of a cash deposit.

Reasons to Offer Security Deposit Alternatives

With a clearer picture of what deposit alternatives actually are, it helps to think through why you’d offer them in the first place. The case for these programs goes well beyond tenant convenience. Deposit alternatives can affect how fast you fill units, how competitive your listings look, and how much time your team spends on compliance.

Here are some of the main benefits property managers often see when they add flexible rent payment options and deposit alternatives to their leasing process:

• Faster leasing and shorter vacancy periods: Tenants can avoid cashier’s check friction and waiting on prior deposit refunds, which can help speed move-ins. As Egan notes, “listings typically don’t sit for as long when you’re able to market a deposit flexibility solution at move in.”
• Competitive differentiation in tight markets: Offering payment flexibility can attract qualified tenants who have other options and are comparing properties side by side. With an alternative to traditional security deposit, they can envision themselves moving through the often stressful application process quickly and getting settled in their new home with fewer obstacles and less waiting.
• Reduced reliance on concessions: To get renters to sign, property managers often resort to concessions that could eat into revenue. “You see it all the time on listings,” Egan notes. “There’s descriptions that read ‘Apply by this date and get one month free’ or ‘$500 off for our next 4 applicants’ or whatever the case might be.” Deposit flexibility can provide tenants financial breathing room without complicated payment structures or having to lose out on revenue.
• Stronger tenant retention: A positive move-in experience can set the tone for the entire tenancy. As Egan puts it, “renters remember experiences where they’re treated the right way and have a seamless, easy experience….Those are the renters that typically stay.” Security deposit alternatives are an easy way to start with a low-friction experience that keeps tenants satisfied from day one.
• Reduced compliance complexity: Depending on your state, deposit alternatives may reduce your escrow management obligations, interest reporting requirements, and refund timeline headaches. However, requirements vary depending on the location of the property, so it’s always a good call to check the requirements in your area before settling on an approach.

Whether you manage a handful of doors or several hundred, these benefits show up in the same places: vacancy days, resident satisfaction, and time spent on administrative tasks.

How Security Deposit Alternatives Speed Up the Lead-to-Lease Process

Now, lets take a closer look at some of those benefits in practice to show how deposit alternatives should be remove friction in your day-to-day leasing tasks. You can use these benchmarks as a test once you’ve introduced your own alternatives to see how well they work.

Keeping Move-In from Becoming a Drawn-Out Process

The lead-to-lease model has a hurdle built into it model right that’s typically a source of frustration for both property managers and renters. A prospective tenant is ready to rent. They want to move forward. And the typical response is to send them away to handle logistics before they can come back and sign.

“It’s one of the few spaces where when somebody wants to buy something, we almost send them away,” explains Egan. “We’re telling prospects that are ready to rent to go to the bank, get a cashier’s check, get a reference and then come back.”

With a deposit alternative in place, the tenant can handle the deposit requirement on the spot. “With solutions like Obligo, a renter can kind of handle their security deposit responsibility right there in the office and they’re going to know if they qualify right away,” Egan says. The qualification moves forward, the paperwork advances, and the lease can be signed online without the back-and-forth.

This means you can fill units faster. The tenant starts their tenancy with a better experience. Both parties are better off.

Eliminating the Need for Concessions

When a listing sits vacant for too long, the instinct is often to sweeten the deal. A month of free rent. A gift card for signing. These concessions can fill units, but they come at a direct cost to your revenue.

Deposit flexibility puts less of an immediate demand on renters’ finances, reducing the need for traditional concessions. This means your listings may appeal to a broad range of renters by lowering move-in cash requirements.

That appeals to more than just affordable or workforce housing renters. “There’s this connotation with some of these programs that they’re all like affordability solutions,” Egan explains. “But our sweet spot is really a deposit requirement equal to one month’s rent. Renters would rather pay a (service) fee and keep most of the cash in their pocket rather than pay a traditional deposit and let it sit in someone else’s escrow account for 12 months.”

It creates an option that’s appealing to most tenants that also lets property managers and owners keep the full rent amount and security coverage that more traditional options offer.

Breaking the Deposit Refund Cycle for Renters

One of the most common reasons a qualified tenant stalls at move-in has nothing to do with their finances or their interest in your unit. They’re simply waiting on money that is tied up somewhere else.

“In markets with higher rents, you might see 1.5x monthly rent as the security deposit,” Egan explains. “It can create a real snowball effect at move-in with move-in fees. [Renters] might also be waiting for their last security deposit to be refunded from the previous property manager.”

When a tenant’s cash flow is temporarily tied up in this refund cycle, it creates a major obstacle, one that a deposit alternative removes entirely. They no longer not need to wait. They can qualify, sign, and move in on a timeline that works for both parties.

Protecting Owners’ Interests and Not Compromising on Risk Protection

One of the first concerns property owners raise when they hear about deposit alternatives is straightforward: they want to know their property is still protected. They are used to seeing a cash balance in an escrow account. A letter of credit or a guarantee feels less tangible, even if the coverage is equivalent.

But many security deposit alternatives, especially those offered by experienced third-party services like Obligo, offer the same level of protection. Egan stresses that, with Obligo, risk is all accounted for and protection remains the same. “Yes, a renter can move in without paying a traditional cash security deposit,” he explains. “But they did qualify for the service and the coverage is guaranteed up to the original security deposit amount.”

That guarantee is backed by a letter of credit for security and peace of mind. “We want owners to sleep rest assured knowing the risk is all still protected here,” Egan adds. “You’re able to maintain the security requirement and all the security on the back end.”

Not all services offer the same types of protection, so it’s important to research the guarantee whatever option you’re exploring offers before adopting it

How to Market Security Deposit Alternatives to Renters

Once you’ve chosen alternatives that work for your business, the next step is presenting the option to renters and owners. There could be concern among property managers that advertising flexible deposit options might attract applicants who are not financially qualified. The key is in how you position the offer.

Use Qualified Renter Language in Listings and Follow-Ups

Deposit alternatives are not a last resort for tenants who cannot afford a deposit. They are a financial option for tenants who qualify and simply prefer to keep their cash available. Your marketing language should reflect that.

“In Obligo’s materials we are very transparent with our property management partners that we’re not trying to attract renters that can’t afford a deposit,” explains Egan. “Rather, we’re trying to attract renters that can come up with a deposit. They’re just looking for different flexible ways to handle their security deposit requirement at move in.”

In practice, this means adding language along the lines of “deposit flexibility for qualified renters” to your listing descriptions, approval emails, and even your listing photos. Your phrasing should set clear expectations. Applicants still go through your normal screening process, and the deposit alternative is available to those who meet your criteria.

Advertising deposit flexibility to your listing or even creating an explainer on your company’s website can also improve your competitive position. In a rental market where tenants compare multiple properties at once, offering a lower move-in cost for qualified applicants is a meaningful differentiator that you should call out.

Treat Deposit Alternatives as a Financial Amenity

Think about the other amenities you highlight in a listing. Online rent payments. A resident portal. A mobile app for maintenance requests. These are all conveniences that make renting easier. A deposit alternative fits into the same category.

It gives qualified tenants more control over their cash flow at move-in, which is something tenants at every income level can appreciate. Framing the option as a financial amenity rather than a financial accommodation can change how applicants value and appreciate the option

Explain What Happens If a Renter Does Not Qualify

Not every applicant will qualify for a deposit alternative, and being upfront about that protects both the tenant relationship and your leasing workflow. If a tenant does not qualify through any available method, they can still satisfy the deposit requirement through traditional means.

Having a clear fallback process in place avoids confusion and keeps leasing workflow moving without lapses in communication or coverage.

How to Introduce Security Deposit Alternatives with Less Effort

To roll out a new program you’ll need to get owners on board and your team up to speed. Here’s what you should consider to avoid disrupting your operations.

Getting Property Owners on Board

When you introduce deposit alternatives to owners, the conversation goes better when you lead with what they care about most: protection. Not the leasing benefits, not the operational efficiency. Start with coverage.

“A lot of times it’s introducing a new concept to different property management companies or owners,” explains Egan. Stress that coverage is guaranteed up to the original deposit amount and that the backing comes from a letter of credit, not just a promise. Once owners understand that their risk exposure has not changed, they are usually more open to hearing about the operational upside.

Ask your deposit alternative provider if they offer owner-facing materials you can share directly. A one-page summary or a short FAQ document can make those conversations much easier, especially if you manage a large number of owner relationships.

For property managers who want to keep owners informed about how their properties are performing and how funds are protected, Buildium’s Owner Portal gives owners real-time access to financial reports and transaction details, which can support those conversations.

Picking Tools That Fit Your Current Property Management Software

Adding a new program to your leasing process should not mean adding a new platform for your team to learn. If your staff has to toggle between systems or re-enter data manually, adoption will be slow more prone to errors.

Look for deposit alternative providers that integrate with the property management software you already use. When the integration is in place, your team works from the same screens they always have. The deposit alternative becomes part of your existing leasing workflows rather than a separate process you’ll have to integrate manually.

Buildium’s Open API and Marketplace integrations allow property managers to connect deposit alternative providers and other fintech tools without breaking existing workflows. According to Egan, this lets Obligo’s service “meet the staff where they already are,” so that the shift is more conceptual than operational.

Training Your Staff with Simple Talk Tracks and Support Materials

New programs often underperform because their benefits aren’t communicated clearly. A leasing agent who is unsure how to answer tenant questions about deposit alternatives will default to the familiar deposit setups without informing renters that other options are available.

Short, focused training sessions work better than long onboarding documents. Give your team a few clear answers to the most common questions: What is it? How does the tenant qualify? What happens if they do not qualify? What does the owner get instead of cash?

If your provider offers onboarding webinars or one-on-one support calls, take advantage of them. Bringing new staff up to speed is much easier when the provider can do part of that training directly.

Having other reliable leasing tools in place also helps by creating a unified process. For example, Buildium’s tenant screening tools help property managers apply consistent qualification criteria across all applicants. From there, leasing agents can offer flexibility to approved applicants without slowing down the leasing process.

Questions to Ask Before Getting Started

Before you commit to a deposit alternative provider, it pays to ask a few specific questions. The deposit alternative space has seen providers come and go, and the details of how coverage works matter a lot when something goes wrong at move-out.

Are You Covered If the Provider Changes or Shuts Down?

The deposit alternative market has seen consolidation. Some providers have merged. Others have stopped offering the product entirely. If your provider shuts down or is acquired mid-tenancy, you need to know what happens to your coverage.

“There’s been a lot of these type of companies in this space, some are still around, some have kind of sunsetted or merged together,” notes Egan. Ask specifically whether coverage is backed by insurance, a letter of credit, or another financial instrument. Ask what happens to active policies if the company is acquired or discontinues the product.

What Is the Approval Process and How Do Fallbacks Work?

Before you launch a deposit alternative program, you need to understand how tenants qualify and what happens when they do not. Different providers use different qualification methods. Some use open banking, where the tenant connects a bank account through a service such as Plaid. Others may run a credit check or allow the tenant to add a credit card as a backup payment method.

Knowing the qualification process helps you set expectations with applicants from the start. And knowing the fallback process matters just as much. If a tenant does not qualify, they should still be able to satisfy the deposit requirement through a traditional cash deposit. Having that fallback clearly defined keeps your leasing process from stalling.

Does the Service Integrate with Your Current Software?

Integration is a practical requirement for sustainable adoption. If your team has to manage deposit alternatives in a separate system, the extra steps will create friction, and the program will be used inconsistently.

Ask the provider for a list of property management software integrations before you sign on. If they integrate with the software you already use, ask to see how the workflow actually looks. A demo is worth more than a feature list.

“The important questions to ask is whether this integrated with your current software,” says Egan. “Is this going to be something that’s baked into the tools that you are already using, or is it gonna be an additional platform that you’ll have to learn, master, and then provide training on?”

Learn more: You can learn more about Buildium’s integration with Obligo here.

How Does the Program Support Compliance and Documentation?

Security deposit laws vary significantly by state. Some places have detailed rules about deposit amounts, interest accrual, and refund timelines. Others are relatively light on regulation. Either way, you need to know how a deposit alternative program fits into your compliance obligations.

Ask providers whether they offer compliance resources, state-by-state law summaries, or automated alerts for lease end dates and documentation deadlines. For example, Obligo has an online Security Deposit Law Center with details on each state’s regulations

For property managers who want a centralized place to store lease agreements, program disclosures, and addenda, Buildium’s document storage keeps all of that in one secure location, accessible from anywhere, so its easier to track records and stay compliant.

Build a Move-In Experience That Attracts Renters and Saves Time

Security deposit alternatives give property managers a practical edge by reducing the time between application and lease signing, cutting vacancy days, and lowering the admin burden for deposit management and compliance.

Key Takeaways:

• Security deposit alternatives can help fill vacancies faster by lowering upfront costs for renters, without requiring concessions that cut into revenue
• Security deposit alternatives also appeal to a broad range of renters by lowering move-in cash requirements, including tenants who prefer to keep their cash available
• Market deposit flexibility as a financial amenity for qualified renters to protect applicant quality and attract more renters
• Choose providers that integrate with your existing property management software to make rollout much easier for your team

If you’re ready to simplify move-in and offer deposit flexibility can explore how Buildium brings rent payments, tenant screening, and resident communication into one platform, consider a free, 14-day trial or guided demo of the platform to see its comprehensive leasing and payment management tools in action.

Frequently Asked Questions About Offering Security Deposit Alternatives

What Happens When a Renter Does Not Qualify for a Deposit Alternative?

If a tenant does not qualify for a deposit alternative, they can still satisfy the deposit requirement through a traditional cash deposit, so your leasing process does not have to stall while a fallback is figured out.

Do Security Deposit Alternatives Change Your State Security Deposit Compliance Duties?

Deposit alternatives may reduce some compliance burdens, such as escrow management and interest reporting in certain states, but you should confirm your specific obligations with a legal professional and use any compliance resources your provider offers. Requirements vary by location, so check with a legal professional in your area.

How Do You Explain Deposit Alternatives to Owners Who Want Cash in Escrow?

Lead the conversation with risk protection. With Obligo, coverage is guaranteed up to the original deposit amount and is backed by a letter of credit. Follow this up by explaining how the program can help reduce vacancy days and speed up the leasing process.

Do Deposit Alternatives Only Work for Affordable Housing or Lower-Income Renters?

Deposit alternatives may appeal to a broad range of renters by lowering move-in cash requirements, including tenants who simply prefer to keep their cash available rather than tie it up in an escrow account for the duration of their lease.

How Do Renters Qualify for Deposit Alternatives?

Some deposit-alternative providers use open banking as the primary qualification method, where the tenant connects a bank account through a service such as Plaid. If a tenant does not qualify on the first attempt, providers may offer alternate qualification paths such as adding a credit card or completing a credit check.