Operators fear visa turmoil could trigger international student housing vacancies

Recent changes to immigration policy are having a trickledown effect on multifamily owner-operators’ bottom lines.

Intensified visa application procedures for international students have made it more difficult for these students to receive approval to study in the US, putting multifamily operators who rent to this market segment in a tough position.

As a leading guarantor of residential leases, TheGuarantors helps operators manage this increased risk. We sat down with TheGuarantors team for a closer look at how these changes are affecting their partners and what their company is doing to help mitigate no-show and vacancy loss.

A moment of chaos

In the recent past, TheGuarantors has heard from a growing number of operators who feel less comfortable renting to international students than before.

“Landlords are getting very concerned, because it’s going to affect their bottom line in the next couple of months,” says Doris Yau, VP of Partner Success at TheGuarantors. “There is a general heightened sense of fear and unpredictability around this.”

Because these changes to visa application procedures happened nearly overnight, it’s taking time for operators to understand the new system and get a hold on how they might need to adapt. In the meantime, what had mostly been a smooth process for both renters and landlords is currently fraught with uncertainty.

Qualifying international student renters has become even more challenging

In the past, operators might review an international student’s I-20 form as a way to assess their ability to pay the rent. This immigration document shows the student’s budgeted living expenses, but doesn’t include enough information to predict whether they will be a responsible resident.

“International students that are coming to the US typically have no US credit history or FICO score, which makes it really difficult for operators to assess credit worthiness and the ability to make timely rent payments,” says Yau. “Students also have no active income, so they’re often financially dependent on their parents overseas.”

The risks of renting to international students don’t end once a lease is signed. As immigration policies continue to evolve, even students who are already living in the United States may find themselves facing revoked visas, university suspensions, or deportations. From an operator’s perspective, this could result in sudden lease terminations and unexpected move-outs.

“If one of their residents who’s a student suddenly leaves the country, they often have no recourse, and it’s very expensive for them to try to recoup losses,” explains Yau. “It’s very time-consuming and often proves to be fruitless.”

Mitigating risk is the name of the game

Because international students don’t have US credit histories or US-based guarantors, renting to them means taking on additional risk. That’s where TheGuarantors’ solutions come into play. With the Rent and Deposit Coverage, TheGuarantors acts as a cosigner, giving international students access to homes they may not otherwise qualify for, while protecting operators from defaults, damages, vacancies, no-shows, and more.

“In the event that there is a default, we make sure that ownership is covered, protected, and made whole,” says Yau. “Once the landlord is in possession of the apartment or the lease ends, they can file a claim with us.”

These policies are a win-win for renters, who use them in lieu of application requirements that they cannot meet due to no fault of their own, and for operators, who can minimize bad debt risk without any out-of-pocket expense.

Adding value for operators

TheGuarantors works in 49 states, including markets which are home to well known universities such as in New York City, Boston, Chicago, Los Angeles and San Francisco.

“This is our bread and butter. We’ve been doing this for 10 years and are very familiar with this demographic,” says Yau. “In fact, we guarantee 1 student renter about every 10 minutes.”

Because this is an existing business for TheGuarantors, the company has established lines of communication with overseas students. Rita Yin, Partner Success Director at TheGuarantors, speaks Mandarin and connects with students through WeChat to answer questions and provide guidance. TheGuarantors’ WeChat team is on-call 7 days a week to field questions and provide guidance to international students and their parents as they embark on the complex process of studying in the United States.

International students have always presented a challenge when it comes time for landlords to evaluate and approve their applications given their lack of U.S. credit profiles and incomes. Added visa uncertainty has only added risk exposure.

That’s why TheGuarantors has not only created products to help protect operators against potential financial risk and bad debt, but also, through their work with international students, has also built relationships with international brokerages that send students to rental buildings in the US and help them get leases signed.

“Oftentimes, owners and operators rely on our relationships with these international brokerages to help fill vacancies,” says Yau. “We’re able to widen their pool of applicants and qualify more international students while minimizing bad debt and securing their rent roll.”