What Is a Pet Deposit?

The demand for pet-friendly homes is rising astronomically since more people have started working from home because of the pandemic. Recent studies have shown that inquiries for property owners that accept renters with pets have increased by 55%.

In today's article, we are going to discuss the differences between pet rent, pet fees, and a pet deposit. Then, we are going to explain how making your rental property pet-friendly can help increase property value and attract a wider pool of pet owners and investors.

Three Ways Landlords Charge for Pets

When you make your rental property pet-friendly, there is a risk of pet-related damages, but it can also help to attract a bigger pool of good renters to your home. There are three primary ways landlords can charge pet rent; sometimes, it can be done with these combinations:

• Pet rent
• Pet fees
• Pet deposit

However, before charging pet owners any additional fees, you need to confirm your state landlord-tenant laws to avoid legal issues. It is time to take a closer look at each of these particular pet charges and find out how it adds to monthly rent for tenants and landlords.

Pet Deposits

When collecting from tenants who rent your home, a security deposit and pet deposit are incredibly similar in the collection process. Petfinder did a recent study showing that a separate pet deposit in the United States can range from 35% to 83% of a month's regular rent.

A pet deposit is a one-time refundable fee that cannot be used to cover traditional wear and tear repair costs around the home. A pet deposit can be used to cover damages caused by the animal, such as scratches on the floor, urine stains on the wall, or flea infestations in the carpet.

Pros

• Refundable pet deposits are more attractive to tenants than a non-refundable monthly fee
• Landlords can use a pet deposit to pay for pet-related repairs to the property caused by the animal
• It encourages the pet owner to take care of their pet and your property

Cons

• Landlords must be careful to follow the law governing separate pet deposits
• They can't commingle the tenant security deposit with their pet deposit or security deposit
• Pet deposits can't be used to pay for non-pet-related damages

Pet Fees

Pet fees are non-refundable deposits that come from a one-time payment collected from the tenant and cover pet-related damages or property damage caused by the animal. In most cases, pet fees can range anywhere between $200 to $300 or more depending on the property and potential pet damage risks.

Some landlords can collect a variable pet fee based on the breed and size of the pet, while other pet deposits are a fixed price per pet. A landlord could also charge for multiple pets and include a non-refundable fee for allowing pets, plus it could consist of the animal's cleaning fee.

Pros

• Tenants may like a pet fee because the amount is usually less than paying pet deposits
• Accounting for a pet fee is easier because it is not treated as a pet security deposit
• Pet fees are non-refundable pet deposits for property damages, such as wear and tear

Cons

• Combining a pet fee with a pet deposit can help cover repair costs but might make a pet-friendly rental too pricey for most tenants
• Pet fees may not be enough to cover the costs of repairing potential pet damages
• Tenants may not like a pet fee because the compensation is a non-refundable fee

Pet Rent

Unlike a pet fee and a pet deposit, paying pet rent is a way for the landlord to cover potential property damage caused by the pet and any additional wear that might come from that. In most cases, the pet rent is at an average of $35 per month, but it can also vary greatly depending on the size, certain breeds, and the number of pets the tenant brings.

Generally, the average pet deposit lease term is calculated as a percentage of the monthly installment and could be anywhere between 1% to 2% each month. That means if your rent is $800, you can expect an additional charge between $8 to $12 per month for your pet rent.

Pros

• Additional recurring cash flow can help make the rental property more valuable and increase NOI
• Small monthly pet rent charges and pet deposits may be more affordable and attractive to tenants
• It provides more money to landlords renting to tenants with pets

Cons

• Tenants paying rent for multiple pets may also find a pet-friendly rental less affordable
• Charging pet rent and pet deposits may be unaffordable for tenants on a tight budget
• The pet rent amount is relatively low, although the landlord may also collect a one-time refundable security deposit, a non-refundable pet fee, or non-refundable pet deposits

How to Determine the Right Pet Fee

There are many advantages of renting to tenants who own pets, such as attracting a wider pool of good prospective tenants and increasing your rental property's value.

However, a pet security deposit that is too low or too high could lead to unintended consequences, including paying out of pocket for pet damage if the security deposits are down or increasing vacancy if the pet agreement charges are too much.

Below are some of the best ways to decide on the correct pet charges to help increase property value, reduce potential damage caused by pets, and aid in attracting better tenants with a furry friend.

Know Your Market Rent

There are two good ways to see if your property is fair in market value to another similar home. Once you know the right market, please do your due diligence and research how much is a month's rent on the market, and call a few neighboring apartment rental offices or most landlords to find out what recurring monthly charge is adequate.

Create a Pet Policy

Before making your rental property pet-friendly, it can also help develop a specific pet policy in your lease agreement that can help you determine the correct pet charge. Questions to think about when creating a pet policy for property management include:

• Do you require the tenant to prove their pet is adequately licensed and vaccinated with the local municipality?
• How do you check if the pet is not a nuisance to the neighbors and is well trained?
• Are you going to have certain restrictions, such as the total number of pets, type, breed, or size?
• What kinds of pets are you going to allow?

Prepare Your Property for Pets

Once you have considered the type of pets you are going to allow, the next thing to do is make your property pet-friendly. You can do this by replacing carpets with tiles and ensuring the backyard fence is in good condition. Both of these preparations are an excellent way to ensure your property is secure and appeals to tenants who have pets. This can also help justify including extra security deposits for the tenant, showing them that your home is safe for their animals.

Screen Tenants with Pets Thoroughly

When interviewing potential tenants, ordering a rental history report, conducting a background check, and running a credit report is standard procedure. Even if they don't have pets, tenants need to be thoroughly inspected so you can confirm they are safe to use your rental business.

There are a few additional steps you can take when renting to tenants with pets to make sure both you and your tenants with pets are secure:

• Conduct an in-person interview with the tenant and their pet to see firsthand whether the pet is potentially destructive, overly energetic, or aggressive
• Require the tenant to obtain renters insurance with extra coverage for pet-related liability and damages may justify a slight reduction in pet charges
• Ask the tenant if the pet has completed obedience training and is socialized and well-behaved
• Request recommendation letters from the tenant's previous landlords to find out if the previous rental was left in good condition and the pet was well behaved

When It May Not Be Legal to Charge for Pets

According to experts, landlords charging tenants a pet deposit fee is legal in almost every state in the nation, excluding Hawaii. However, there are some limitations on pet policies, and some states say that the pet deposit should be a reasonable amount, and others say the amount should be a month's rent or less. It is up to you to understand the law and regulations in your states so that you can add the ideal amount of rent for your tenant with a furry friend.

More often than not, many landlords are prohibited from charging a deposit for pets that are emotional support animals or service animals. An emotional support animal offers comfort and emotional support to a tenant with a mental or physical disability. Services animals such as a seeing-eye dog can help lessen the pet owner's mental anguish when dealing with their condition.

Even if the rental property is pet-free, landlords must allow recent tenants to have an emotional support/service animal because the pet falls under reasonable accommodation guidelines.

However, landlords have some exemptions from renting to tenants with assistance animals, such as if the animal is too large for the accommodation or they are renting out a single-family home without a real estate agent.

Final Thoughts

There is always going to be a small number of renters who try to hide their pets from their landlord. That is why landlords need to charge pet deposits, refundable pet fees, or pet rent when allowing tenants with pets to stay with them. It can increase the odds of finding an honest and reliable tenant looking for an ideal rental for themselves and their furry companion.