The risks and rewards of Pets in Rental Property
Pets have the potential of being quite destructive – soiling carpets, chewing various surfaces, scratching doors or walls, and digging. While this risk is definitely present, allowing pets also presents a new revenue stream that can make a big difference in your rental cash-flow. At my property management company, we explain the tradeoffs to all clients. In this article, I’ll outline the chargeable fees that can make the risk worthwhile.
A pet fee is an amount payable at the lease signing that compensates the owner for allowing a specific animal to occupy the residence. Knowing that an animal will cause additional wear and tear to the property, this charge covers this depreciating effect. Please note that I called it a fee, and not a deposit. It must be made clear to the prospective tenant that this amount is not refundable like a deposit would be. An average up-front fee is $200 but can range higher or lower depending on the size of the residence and the breed in question. It’s not uncommon for larger dogs to carry a higher fee.
In addition to the fee mentioned above, it’s common to charge rent in addition to the base rate each month for allowing the pet. Monthly surcharges range from $5 to $25. Again, this amount is fully dependent on what you’re comfortable charging.
Risk Management through Security Deposit
Just like renting to a tenant without pets, the security deposit covers the cost of repair to any damages caused while the unit is occupied. Should the unit have signs of abuse or aging beyond “normal wear and tear”, you’re fully in your right to pull the cost of this repair from the security deposit fund. In most cases, one month’s rent is collected at lease signing and held up to 30 days from when the tenant vacates the property.
So if this added revenue and security makes you feel comfortable with the idea of allowing pets, what else can you do to minimize the risk? First, you can place restrictions on breed types and/or weight of the animal. Rentals allowing pets often list “no aggressive breeds” or dogs under 50lbs which ensures you won’t have as big a liability. Another recommendation is to be thorough with tenant screening, being sure to ask the previous landlord about damage caused by the owner or pet. This alone goes a long way in understanding who you’d be renting to.
With the risks understood, allowing pets in your rental unit can create hundreds of dollars of additional revenue. Practicing due diligence in your tenant screening and restricting breeds is the best way to minimize the risk involved, and ensure that the additional money you collect will be maintained as profit instead of spent in repair.
Andrew Payne is a licensed Real Estate Agent and owner of Louisville Property Management LLC. Read more informative articles on his property management blog.