As a landlord, allowing pets will have pros and cons. Allowing pets can increase your bottom-line profit and help your rental stick out in a competitive market.
This article will explain the difference between pet deposit, pet fees and pet rent. By the end, you will have clarity about the best-and-legal policy for your rental properties.
But first! Who’s a good boy/girl?
Sorry, too good of an opportunity not to.
Why Even Consider Allowing Pets
Pets are another tenant in your rental property that could cause damage. Like humans, every pet has their own personality. Some are hyper and take their energy out by chewing. Or bark all day and annoy the neighbors.
Others are chill and cause no harm.
While pets are a potential risk, like their unconditional love, they can bring great rewards to landlords.
According to FIREPAW, Inc., 72% of apartment renters had a pet in 2014. Tenants with pets also stayed 2.5 times longer: 46 months on average vs 18 months with no pets. Allowing pets increases your pool of candidates with likely less turnover.
If you are not entirely open to all pets, consider a restriction by pet type. This will allow certain pets while reducing your risks.
Apartments.com released a survey in 2014 for most popular pets. It indicated the following:
- Small dogs
- Medium / large dogs
- Fish / birds / small mammals
Service and companion animals are exceptions and protected. Landlords cannot refuse an applicant because they have either pet. Refusing applicants could result in a lawsuit.
Pet Deposit vs. Pet Fee
What’s the difference between pet deposit and pet fees? Simple.
Pet deposit must be refundable. Pet fees are non-refundable.
A pet deposit is like security deposit. Assuming the tenants leave the rental property in good condition, by law they receive their deposit back. Like a security deposit, landlords can withhold funds for damages repairs. Landlords need to itemize all the damages that resulted from the pet.
Pet fees are a one-time non-refundable payment. Often included in their leasing agreement and move-in fees. Although tenants would be responsible if they got a pet during the middle of their lease. Therefore, pet fees are required any time during their occupancy.
Since pet fees are non-refundable, the landlord keeps the fees regardless if pets caused damage or not.
Both pet deposits and pet fees are collected either when the tenants move in or when a new pet moves into the rental property.
What is Pet Rent?
Pet rent is a different model charging for pets. Instead of a large lump sum paid upfront for pet deposits or pet fees, pet rent is a smaller amount added to rent each month.
Landlords and property managers prefer Pet Rent. Deposits and fees are both sunk costs.
No matter how long the tenant occupies the rental, their deposit or fees will never go up. However, since pet rent is charged monthly the landlord will continue to earn income until the tenants move out.
It is best to take your pet fees and divide by 12 months. At the end of the first year, you earned the same amount or more than the one-time pet fees. Longer a tenant stays, more pet rent income you generate.
Suggested Pet Structure
Burbz suggestion is pet rent.
- Security Deposit – follow state law, commonly 1-2x month’s rent and refundable
- Rent – Recurring monthly
- Pet Rent – Recurring monthly; $25-50. Per pet.
Moving is a financial burden for most tenants. Coming up with security deposit plus pet deposit can strain their finances.
Pet deposit limits the max damage the tenants are responsible for. If damage goes over, that obligation is the landlords. Some states do not allow security deposit to cover pet damage if pet deposit was received.
Pet fees are another financial burden. While it is nice to have the fees upfront, more fees can hinder better applicants. These fees are one-time, regardless the duration of leasing.
However, pet rent is more affordable for tenant’s monthly budget. Landlords have an opportunity to earn more income during the long run. Generally considered a win-win for all parties.
What Should I Charge?
Decide which model you prefer best: pet deposit, pet fees or pet rent.
If you proceed with pet deposit, understand your state laws about security and pet deposits. For example, California pet deposit laws are impacted by security deposit rules. Landlords cannot charge more than two-times rent for all deposits combined.
If pet fee, charging between $250 and $500 is typical. Some states have regulations on amount of fees allowed. Also, consider your total asking price for tenants initial first month. It is important not to price yourself out of the market because of the pets.
Pet rent is $25-50 per month. Per pet. Consider a discount since a lot of tenants have more than 1.
Offer a discount!
When landlords have applicants they like, consider a discount. This builds a relationship between both parties and is seen as good will. An important step to becoming a good landlord. Discounts can be used to entice the tenants to make quick decisions. Or, to increase their interest in the property.
Insurance and Pet-Friendly Properties
Prior to allowing pets on the property, landlords need to consult with their insurance company. Your policy will state coverage for any injuries or damages that are a direct result of an animal.
Landlords should require tenants to get renter’s insurance that includes pet-related damages. This needs to include destruction as well as bites or physical harm.
Improve Your Odds
72% of tenants have pets. People love their fur babies!
Capitalize on the pet market by advertising your property as pet-friendly. This is a desirable search term for tenants. Especially tenants with larger dogs that need space to run and play. If you want to truly stand out in the market, allow breeds that are socially deemed ‘aggressive’. These owners have difficulty finding rentals that allow their breeds.
Please educate yourself on dog stereotypes. Pit bulls are extremely kind animals that sadly get a bad rep.
Our suggestions for improving your odds of success with any pet tenants:
- Recommendation letters: Have the previous landlords and neighbors provide recommendations
- Obedience Training: It never hurts to provide proof your dog is trained.
- Renters Insurance: Renters insurance is a good idea. However, with pets, it should be a requirement. Request a copy of their insurance.
- Pet Interview: Meet the pet in-person! This provides reassurance the pet is friendly and you can see their energy in person. If you go to their existing residency, look for any damage.
Know Your State Laws
Stated throughout this blog, always follow your state law!
Service and companion pets are both protected classes. Learn your limitations as landlord to best accommodate these applicants.
Every state has different policies for max deposits. Some times that includes security deposit. Understand your max to avoid getting in trouble.
If you are a pet lover yourself, you will understand the importance of a furry loved one. As a landlord, pets are an incredible opportunity to increase income for rental properties.
Landlords need to consider their tenants up-front expenses as well as long-term opportunities. Pet rent reduces the cash required for move-in and will increase their monthly rent for the entire duration.
Keep it affordable. Meet the pet. Know a standard security deposit often covers pet damage.
Now, catch the ball!