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Strategy Saturday
SS14: Should You Allow Pets in Your Rental Property?
March 22, 2021
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Charles explains the pros and cons of allowing your tenants to have pets in your rental property.

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Transcript:

Charles:
Welcome to Strategy Saturday, I’m Charles Carillo. And today we’re going to be discussing, should you allow pets in your rental property? Now this is a question we get all the time. I personally will accept pets into my rental properties that I own a hundred percent. Some of our joint venture deals we accept pets into. And most of our syndication deals buildings that we own. We will accept pets. It really just differs on exactly what the building was before we purchased it. But pet fees are something that are really not maximized with landlords. So when you’re accepting pets, you’re going to make more money. You’re going to increase your renewals and you’re going to widen your tenant base. And these are all great things. So I’m gonna give you a little facts that we dug up from the insurance information Institute. I will put the link to this in our show notes, 42.7 million households own a cap 63.4 million households own a dog 94.2 million us cats that are licensed in the States.

Charles:
An 89.7 million us dogs that are licensed. A recent survey search on Zillow showed us that 27% of rentals stayed at pets are okay versus 73% that said, pets are no pets are allowed. I also read another stat saying that only 55% of landlords accept pets. Now, obviously these Zillow stats will differ from market to market. I just picked a market at random and random those numbers. So you can see if you’re accepting pets. The deck is stacked in your favor. Now why drastically opening up your tenant base? And you can also charge for your pets. Now, how you charge for them is all over the board. Are you going to charge an additional deposit? Maybe it’s just a, it’s a, a fee possibly a non-refundable fee, maybe $250 for a cleaning fee paid at the beginning before they move in, it could be like a hybrid approach where maybe they get some of it back is going to be a pet rent monthly.

Charles:
I definitely just this 10 to $15 per month per pet. And that’s for your wear and tear. And that’s actually a lot of, that’s going to go to probably back into your pocket while the additional fee deposit fee from the beginning will probably go to additional cleaning the property might need. So you can kind of figure it out there, which you figure out in the beginning. What do you think we’re actually going to be paying for additional cleaning once the tenant moves out or maybe additional repairs and monthly, maybe that’s something that’s just going straight to our bottom line. Our NOI their lease needs to clearly state fees deposits. Are they refundable or not types of pets and make sure you have your attorney review any agreement, any lease agreement, any contract, correct. Before you have it signed. So how are you going to enforce the policy?

Charles:
This is, this is a huge problem that I found when I started becoming a landlord decades ago. And it was people would always like they would sneak in a boyfriend. They would sneak in their pet dog and their new dog that you didn’t know about. And you’re walking the property one day and you see them walking, walking the dog back to their unit, and now an awkward conversation happens. So this is very important that if you’re self managing and if you’re having a property management company, you want to talk to them upfront and ask them what happens if someone brings a dog in, when you’re doing your inspections, monthly, your janitorial cleanings through the hallways and whatnot, are you going to enforce this? Or how are you going to do that? And that’s something important that you have to know upfront. So annual inspection prior to renewing a lease.

Charles:
This is another good thing that you could do. You walk though, you walk your units before you’re renewing it. And you could say if it’s just, if they had a pet or maybe if they brought a pet in what I’m saying, if they had a pet or if they didn’t have a pet, when they moved in, it’s something where you want to make sure that they’re aware when moving in, what’s going to happen. If they do bring a pet in and say, if you do bring a pet in, you don’t have one on the lease. Now we’re going to have to sign an amendment or something like this. And this is a very important kind of laying the foundation. So if they try to get sneaky, they’re aware of it from the beginning that they know that they’re going to have to sign this.

Charles:
And that would be something that I would enforce. Now, you gotta be very careful over the last decade or so service animals, emotional support, animals and therapy, animals are protected by the ADA, the American disabilities act. You’re required to provide a reasonable accommodation for these renters and their animals. And as anybody’s ever been on an airline, they know that this is abused greatly. Not saying it’s always every person that has one is abusing it, but I’m saying it’s abused. So something that you have to be very careful, you have to be very careful and your property management or anybody that you have that speaking with the tenants has to be knowledgeable knowledgeable about this. They are going to be exempt from additional fees, deposits, or additional rent and whatever those other fees are that we just talked about, charging them. It’s something that you’re not going to be able to do if they’re protected by the ADA.

Charles:
Now the next next kind of part that you have to look at is the types of pets you’re going to accept. I know with my smaller rentals that I own a hundred percent, my insurance companies don’t want pit bulls or rottweilers, and they’re usually restricted for most property insurance policies. So this is a very important when you’re getting insurance, make sure they tell you, they give you a list of breeds or animals that are restricted and make sure you then put this into your lease. Now, when you get new insurance, I highly doubt it will differ much, but it’s a, it’s always good to be a little stricter when you’re doing this because it just minimize issues. If you change policies, insurance policies, halfway through someone’s lease, that might have one of those tricks as animals. You’re gonna be happy that you put it as a restricted animal in the lease.

Charles:
The size of pets allowed, is there a weight limit? This is a very normal thing to 40 pounds. A lot of condos will say 40 pounds. A lot of apartments, we’ll say 40 pounds 50, 60, 70 pound, whatever it might be, you might say no weight limit. You might charge per it. Someone has a $10 dog. You might say $10. Someone has a 50 pound dog. You might say it’s $50 a month for that fee. So make sure when you’re pricing this out and you’re figuring out the terms that you’ve done, some comp shopping in your area, call some people off the different websites, apartments.com, Zillow. When you’re a, when you’re checking things out, and this should be something, especially when you’re buying a property, you should be doing your comp searching anyway. So make sure you add this as another question about pets and if they don’t allow them fantastic, this is another bonus for you.

Charles:
And now you can start charging more for them. You want to include all this in the lease, all the number of pets what they can do. It’s all included in the lease. Obviously speak to your attorney. One finalizing that you want to speak to your insurance company before designing your pet program. Very, very important. So you want to bring all this information to your attorney, have them draft it for you. This is probably going to be some sort of amendment. Even people without pets can sign. It shouldn’t be any type of problem. Speak to your attorney first liability. This is a huge thing. And it’s, it’s even growing more than when I started doing research on this. I was kind of amazed. There are I’ve heard of it before, like dog bite liability policies, and it’s a, it’s a big business and it’s very expensive to get that insurance.

Charles:
If you have one of these high risk breeds as are considered, but tenants with pets must have renter’s insurance. Possibly a canine liability policy, which is what it’s called in 2019. The average cost for a dog bite insurance claim was $44,760. That’s up 14% from previous year and 17,802 dog by claims in 2019, which is up nearly 3% since 2018. So this is very important. This is something that’s ever increasing in the U S culture. Having an attorney review, any lease you have prior to having a tenant sign it very important prepping your property for pets. So once you’ve made the decision of accepting pets, how are you going to prep your property for it? Limit carpeting in your properties pet-friendly floors. Those are going to be laminate tiles using semi-gloss paint, satin, and eggshell are easy to clean. So it’s gonna be something very important that you’re going to want to start incorporating into these properties into these units that have you been sanctioned as a pet friendly vetting potential tenants with pets.

Charles:
Now, a lot of pets you’re and get, especially when you’re getting into the C class properties they’re not trained. And it’s something that you’ve got to be careful when you’re allowing these pets in. This is also something too that you’re going to have to, if you’re the person that’s going to be renting, you’re going to be, have to be knowledgeable about it. If you have a property management third party, they’re going to have to be knowledgeable about it. And also if you have someone in in-between, they’re going to have to be knowledgeable about what you want and how to vet this. So how many pets you own obvious question was the pets breed in size? A lot of these questions can be done over the phone. How old is the, how long have you owned the pet? Have you ever, I’ve been in a situation where your animal has acted out of aggression towards anyone or any other animal?

Charles:
You’re probably not going to get a good answer on that. If if it’s not recorded, I believe they record all these dog bites if the, if the dog’s licensed, but that may be some some language that you can put into your contract, speak to your attorney about that. Are you solely responsible for the pet? Right? Are they, is it actually their pet? Are they holding it for someone else? Are they watching it for someone else? Right. It’s my cousin’s pet or someone else’s pet or someone’s gone. And I’m, you know, it shows you what their past is with this pet and what, what they know about it is the pet trained is the pet updated on their vaccines, pet, get along with other people or other animals and children. Obviously you’re not going to be bringing in like a test child for them to play with the pet, but it’s something that asks these questions, see how they react to them.

Charles:
If you meet the pet, that’s going to be one thing. I think the number one thing is making sure, first of all, your insurance is not going to be limited by having a restricted breed off your insurance policy. That’s gonna be number one. And then I would also maybe put some of these questions is a questionnaire when you’re doing your lease agreement or maybe the amendment to it meet the animal before signing any leases, have them bring the animal animal to the property, showing maybe just seeing how they act, if they’re barking. I mean, you’re going to know a dog is going to be barking up front. It’s not just going to be something that happens on months down the road. So if you find it all, if you person has a dog and they bring to the property you’re going to see how they’re acting.

Charles:
You’re going to see all their trained, no matter what was told on the phone. And you can then make your decision. So that’s a great thing as well, seeing how they act see how they act, how the animals act inside as well. If you, they bring it to the apartment for the showing. So you want to explain the expectations of a pet owner. And this is very important. A lot of these leases are for apartments are 20 twenty-five pages, right? Maybe 30 pages people don’t know. I read these for the most part. Okay. That’s why, whenever you’re doing this, you have to be very oral verbal with the person and tell them the expectations of a pet owner. You also want to tell them that maybe having a cover sheet, which I always suggest that you put on your leases, and that really spells out all the key points when, when the trash goes out, how to deal with trash, who you call for issues you know what to do when there’s snow and all these different things you are going to put in bullet point very easy when you’re explaining it to them face to face, you’re going to highlight and all these types of things and make sure they understand it because they probably won’t read the lease.

Charles:
And this is going to be another, what you have to do clean up after your pet. If you don’t clean up after your pet, this is what happens and make it very, very stern about this. You don’t want to have this because if you’re upsetting other tenants that are good, solid paying tenants at your property, then the extra money you’re making 10, 20, $30 a month, it goes out the window because it doesn’t matter. This is only a benefit. If you’re able to keep good tenants in the property and also keep the property rented while also allowing and accepting these extra pets. So I appreciate you listening. Please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com and look forward to two more episodes next week. Thanks.

Speaker 3:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.

Links Mentioned In The Episode:

  • https://www.iii.org/
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