Bubba Grimsley founded his rent guarantee company because he had a passion to help people with bad credit get into apartments and homes, while guaranteeing the landlords and property managers get a good tenant. Above, Bubba Grimsley founder of Liberty Rent Guarantee
In a recent interview with Rental Housing Journal, Bubba Grimsley who has been a trial lawyer for 20 years, talked about how and why he got started in the business with Liberty Rent Guarantee and how it continues to expand to help both tenants and property managers.
By John Triplett
“During the housing crisis in 2007, I got mixed up with a crowd of trial lawyers that were all fighting to defend people who had been in bad foreclosures. From all the evidence in all of our cases we were finding that these people weren’t legitimately being foreclosed on. There’s a point, you can probably find it on the internet, where I was interviewed on MSNBC about the legal work that we were doing.
“We ended up doing a lot of work out in Las Vegas representing the State of Nevada in the housing crisis. There were just thousands of bad foreclosures where people couldn’t understand why they were being foreclosed on or why their house was being taken away.
“What you quickly find out when you deal with people in a foreclosure is that the foreclosure happens first and then typically there’s a deficiency judgment that’s filed and a lawsuit against the person who just lost their house. That’s basically a large debt. Then that typically is followed by bankruptcy by the person who was foreclosed on.
“All of that tends to destroy someone’s credit and then the next question is, once they move out of their home, where do we go now?”
After foreclosure and bankruptcy: How to find housing
“What happens in the rental world is the first thing that you find out when you walk into an apartment community and say, ‘I want to rent a house,’ or ‘I want to rent an apartment,’ is ‘Please fill out this application. We’re going to take a look at your credit.’
“When they see a foreclosure or a bankruptcy or a giant deficiency judgment against someone, that’s a giant red flag that says ‘don’t rent to this person.’
“That was the biggest crisis we were dealing with in Nevada, besides the fact that our customers, our clients were losing their homes. Their next question is, ‘Where do I go? I’ve got two kids. I’ve got a wife. My kids are in school here. We all work. We still have a job. We can’t find a place to live.’ ”
A start-up business and a failure
“We started with this idea and we kicked it off in Nevada about 2010. We made a good hard run at it for about 18 months but the company failed. I was just an investor back then. We just went at it the wrong way,” he said.
Early in 2014, Grimsley and two colleagues started talking about the failed start up and decided to try it again with a different approach to rent guarantee.
“We launched Liberty Rent Guarantee with a different approach and found the right recipe. We’re in our fourth year now. We’ve had 300 percent growth per year since we started the company. We have zero debt. We’ve had a lot of success and we continue to grow in leaps and bounds. We’ve got thousands of families that we’ve helped find a place to live even though they have less-than-perfect credit.”
How does rent guarantee work for the tenant and property manager?
Typically this type of tenant shows up on paper first as a problem when the tenant screening report comes back.
“The credit reporting agencies, Equifax and Experian and TransUnion all love to preach about the ill effects of bad credit and what a giant risk it is,” he said.
But his company has “taken a good, hard look. We’ve studied the patterns. We have a risk profile that we think we understand risk a little bit more than people who just look at a rating in credit reports.
“What we like to say in our business is that you’re not just a number on a FICO score.
“What it means is that property owners who obviously have a vested interest in whether or not the contract performs, can keep their standards high as far as their credit screening goes. Then, if they find somebody who comes in who needs a place to live and doesn’t pass a credit screening, they can still put that tenant in if we underwrite them with a co-signing guarantee.
“They don’t have to bear the burden of that risk. That burden is now on us. If the tenant fails anytime during the contract, then we’ll make the property whole a maximum of six months or until they turn the unit. Most properties are going to turn the unit in less than six months,” he said.
Johnny Mims, Bubba Grimsley and Sharp Gillespy company partners.
How does rent guarantee work with a typical lease?
“We send a co-sign attachment that gets added to the lease,” Grimsley said.
“It’s just like an addendum to any contract and it’s a limited agreement that says we’re going to stand here as the co-signer. It is just like you would do if you co-signed for your child who’s buying their first car.
“We’re going to step in and be a co-signer on this lease and if they default, if they skip, or if you have to evict them, any time during the contract, then we’ll step up and pay the rent for a maximum of six months or until you turn the unit, whichever is less.
“We don’t get involved in the deposit, just the rent. Our experience has been that our tenants that have problems and default typically are not a problem tenant that’s going to go in and destroy the place or cause a lot of problems for the apartment community. Typically, they just fail for the standard reasons that you would expect. They move out and the property has to turn the unit and we make them whole on the rent until they do.
“We can’t fix criminal and we don’t get involved in criminal. Most all properties these days that we deal with screen for criminal on the front end and if a tenant fails because they’ve got a felony conviction or a drug conviction or a sex conviction, we can’t help you. That’s not what we do. That’s not our business plan,” he said.
How many customers do you have?
The company does business with more than 100 property management companies.
“The companies vary in size from the single-property owner who has one apartment complex with 150 doors on up. “We do a little bit of business with Greystar in Tennessee. Stonemark in Atlanta is a big customer of ours. They have 44 properties. We do business with Lincoln. We do business with SPM and SMP. We just have a lot of the larger, or I guess, medium sized management companies. Throughout the Southeast is primarily where our footprint is.”
In terms of customers, individual customers, “we’ve done a couple thousand. We’re now to the point where we’re doing a couple of thousand contracts a year.”
Liberty charges one month’s rent in order to co-sign a lease.
“We also charge a one-time application fee of $35, but that is AFTER the potential resident has gone through our “DO I QUALIFY” test, which is on our website and is free of charge,” he said. “The results of the test is revealed to the tenant in a score 0-100 percent chance that we will approve and co-sign their lease. We forward an application to every applicant with better than an 80% chance,” he said.
How long does the rent guarantee last?
That’s really a question for the property manager.
“The way we work it is that we guarantee the one-year lease and then when the lease expires, that’s the end of our contract agreement with the property.
“Our experience has been if we move a tenant in and we guarantee the lease, and the tenant performs per the contract without any hiccups and they want to stay, typically the property’s more than happy to renew their lease for another year without our guarantee.
“Conversely, obviously if the tenant fails and we have to pay the guarantee, then we don’t guarantee them a second time and the property isn’t interested in renewing their lease,” he said.
Additional help for the tenant to repair credit
“Let me just add we do have tenants who kind of fall in between those two categories of a failure and perfection.
“To help those middle-of-the-road tenants we have a strategic partnership with GreenPath Financial Wellness , a non-profit company based in Detroit. GreenPath is about a 60-year-old charity that was founded by all the credit unions in the Detroit area. What they were finding 60 years ago was that the typical automobile factory worker didn’t have a whole lot of financial literacy. The credit unions put together this organization to kind of teach financial literacy.
“What we’ve done is we’ve partnered with GreenPath and we’ve made a large contribution to GreenPath. We now have the ability for any tenant who we do business with to connect with GreenPath. The tenant can access all of GreenPath’s financial literacy educational tools. GreenPath has an Apple iPhone app that will help you with your budgeting process. Figure out where your money’s going. They also have 24-hour, seven-day-a-week crisis managers so if you do get into a financial pickle, you can call somebody who can help you work it out and figure it out.
“For those folks who fall in between perfection and abject failure, they can get on the phone with GreenPath as a resource that we provide to teach financial literacy and help our clients get to a place in their life where they don’t need us any longer.
Summary: 3 Questions on how this helps property managers
The company helps tenants with poor credit, but how does this help property managers who need to rent apartments?
No. 1 – How can property managers help tenants with weak credit into properties with less worry about payment?
“They can refer a potential resident with “less than perfect credit” to Liberty Rent Guarantee. It’s as easy as putting them on the website at www.Libertyrent.com and having them click the “DO I QUALIFY” button. If the company approves the resident, they will guarantee or co-sign the lease and if they default, skip or get evicted anytime during the lease, the company will make the property whole on lost rents. Some restrictions apply.”
No. 2 – How does this help with occupancy for property managers?
“Properties today are spending a fortune on marketing to get a potential resident just to walk into the door. It is discouraging to have to turn folks away for not achieving the screening level that the property demands. Liberty can turn most of those turn-downs into residents, and with great results. Our contract gives the property the ability to fill the unit today, rather than leave it vacant waiting for a more qualified tenant, without the down side risk of a potential default.”
No. 3 – What happens when tenants don’t pay the rent even though Liberty guaranteed it?
“If a resident breaches their contract with the property, the property just needs to take affirmative steps to evict the tenant. Once the property is “rent ready” or back on the market “for rent” Liberty will make the property whole on all lost rents from the guaranteed resident. Liberty will make a property whole until the unit is rented, or six months, whichever comes first.”
About Liberty Rent Guarantee:
Liberty Rent Guarantee helps property owners fill units without risk of default, while simultaneously helping consumers find a good home and re-build their credit. Operating nationwide, Liberty Rent Guarantee has helped secure homes for thousands of families by serving as a limited co-signer on every lease it agrees to guarantee. To learn how it works, please visit www.libertyrent.com
About GreenPath Financial Wellness:
GreenPath Financial Wellness is a Michigan-based 501c3 with a 50-year history of teaching financial literacy to consumers. It offers live, certified financial analysts who can help tenants during times of financial crisis. Last year, GreenPath helped more than 200,000 people in all 50 states. The company delivers licensed services throughout the United States over the Internet and telephone. They also offer in-person services at about 60 branch offices in 16 states, including Michigan, New York, New Hampshire, Colorado, Florida, Texas, Illinois, Indiana, Wisconsin, Nebraska, Georgia, Ohio, Tennessee, Arizona and Wyoming.