As pet ownership in the United States continues to become more and more popular, the opportunity to increase your income as a landlord increases. How can this be? One reason is that allowing pets will give your property an edge over units that aren't pet-friendly.
A way you can benefit from allowing pets in units you own is by collecting pet charges, which allow you to increase your rental income without raising the rent itself. These charges can come in the form of pet deposits, pet fees, and pet rent. It’s important to establish clear definitions of how these terms differ from one another.
What Are Pet Deposits?
Pet deposits are refundable amounts that you collect from your tenants. A pet deposit is a fixed amount that's used as a safeguard against any pet-related damages that may occur in the rental unit. Once the tenancy expires, the landlord can then inspect for any pet-related damages and deduct expenses from the pet deposit.
It's not always possible to prevent tenant damages, but you can mitigate the risk by collecting a pet deposit. Absent of damages, the landlord will be responsible for returning the entire pet deposit. The pet deposit functions like a security deposit for the tenant, but it focuses on the pet instead. That way, you're protected from the possibility of destructive pets.
What Are Pet Fees?
Pet fees are a one-time fee that tenants pay to be permitted to bring in a pet to the rental unit. In contrast to pet deposits, landlords are not required to return pet fees at the end of a lease. If a pet causes damage, such as scratches on a wooden floor, the pet fee would not be used for the repair of the flooring, as this would be covered using the pet deposit. The purpose of a pet fee is to give an incentive for landlords to accept tenants with pets, when they otherwise would not.
What Are Pet Rents?
Pet rents are additional monthly fixed amounts that tenants must pay to a landlord in exchange for being allowed to keep a pet. These amounts typically range from around $50 at the lower end to around $100 at the higher end, depending on the agreement between the landlord and the tenant. The amount should be clearly detailed in the leasing agreement. It’s also highly dependent on the type of pet a tenant has, and the breed.
The benefit of collecting a pet rent is that it provides consistent returns, unlike pet deposits and pet fees, which are paid one time only.
Should You Charge a Pet Deposit?
Making the distinction between a pet deposit and a security deposit can lead to confusion. In addition to documenting any property damages found in the rental unit, a landlord is also responsible for noting damage done by pets. Some landlords opt to combine the pet deposit and the security deposit, to avoid the confusion of distinguishing between the two.
However, in some States, the collection of a pet deposit is strictly monitored. In these states, a landlord isn’t permitted to deduct pet-related damages from the security deposit when a pet deposit has been collected prior.
Other states totally ban the collection of pet fees, stipulating that tenants must be refunded when it comes to deposits. In states where pet fees are permitted, limits are established to how much landlords can collect. Some assign a range of $200 to $500 as a fair amount for collection of a pet fee.
What Pet Charges Can You Collect From Your Tenant?
Landlords can collect any of the following charges from their tenants who are pet owners:
- Pet fee
- Monthly pet rent
- Pet deposit
Tenants are used to shelling out extra expenses for keeping a pet in the rental unit. Since there’s an additional maintenance and risk in welcoming pets, tenants are typically open to paying for these additional charges. Also, it takes time to find pet-friendly rental properties. When tenants find one, they are often accepting of the idea of paying a higher amount than tenants without pets would.
What Is the Recommended Pet Charge?
If a landlord wants to retain tenants longer, it’s advisable to just collect a monthly pet rent. It’s a regular steady income, compared to one-time charges like pet fees and pet deposits. Monitoring for pet-related damages once tenancy ends is cumbersome, which can make a pet deposit a less attractive option.
On the other hand, a one-time pet fee charge may be a heavy financial load for a new tenant. After all, a tenant will likely already be paying for advanced rent deposits, a security deposit, and move -n expenses. To start the landlord-tenant relationship on a good note, it may be better to focus on collecting a monthly pet rent. The tenant will appreciate the easy arrangement and non-collection of a pet fee.
What Are Pet Policies?
To support pet charges, a pet agreement is necessary between the landlord and tenant. A pet agreement should lay out the conditions and requirements for pet owners. Pet policies normally tackle:
- Type of pets allowed
- Pet restrictions, such as size, breed and weight
- Responsibilities of a pet owner
- Sanitation practices, such as waste removal
- Requirement of liability insurance for pet owners
- Discipline standards for pets
When a landlord carefully outlines what type of discipline and behavior is expected for the pets, it'll be easy to check if a tenant is following the guidelines.
Do Landlords Need Additional Insurance?
Welcoming pets in your rental property is a serious matter. Accidents, injuries, and damages may occur stemming from a pet’s behavior.
Landlords should contact their insurance companies to discuss the coverage of their insurance plan. This will provide protection from unexpected pet-related damages.
Do Tenants Need Additional Insurance?
Tenants with pets may be required to purchase renters insurance to protect from damages resulting from pet bites and other pet-related damages.
Determining how you'll handle tenants with pets is one of the first steps in converting your property into a successful rental unit. When deciding to be a pet friendly rental, it’s best to craft a good lease detailing the pet policies, pet owners’ additional duties and the extra charges renters are required to pay. This helps avoid future conflicts when it comes to what’s allowed and what’s not.
Welcoming pets helps your goal to earn tenant loyalty and grow your property income. It makes ROI quicker and provides you with extra steady returns. It pays to focus on an underserved demographic. You’ll also be encouraging fostering a pet while waiting for adoption. This can lead to reduced animals in shelters. It’s a win-win situation for the tenants, pets and the landlord.