Pets Can Be a Ca$h Flow Generator

It has been my experience that about two thirds of landlords do not accept pets because they had one bad experience and said never again. They put their head in the sand and every time a prospective tenant asks if they will consider a pet, they say absolutely not, end of subject.  What they are really saying is, ‘I don’t want to increase my cash flow because I’m too lazy to screen the pet along with the prospective tenant.’
    My philosophy has always been to take a negative experience, learn from it, and turn it into a positive. I must admit I was having trouble seeing this while I had a mask over my face removing carpet, padding and yes, the saturated plywood in a unit that had a dog who was “the best pet alive!”  My pet cash flow generator concepts have evolved over the years, but I’m so glad I got my head out of the sand and took a negative and made it into a cash flow positive.
    Let me start with some statistics that I found to very accurate over my 30+ years as a landlord.  50% of pet owners are responsible people who take care of their pet.  The secret is not accepting the 50% who have a pet because they want to “teach the kids responsibility.”   40% of tenants will have a pet so if you are not accepting pets, be aware you are losing 40% of your rental market.  Two thirds of landlords do not accept pets.  The ones that do allow pets have less tenant turnover.  This makes sense since the supply of landlords who accept pets is so limited they don’t move as often.  Last, but definitely not least, 99% of landlords who are considering a pet, never visit the residency of the pet!
     Knowing these facts let’s explore how to use this information to our advantage.  First and foremost – screen the pet while screening the prospective tenant.  I don’t mean take a rental application with a paw print, but I do mean drive by their current residence even before processing the application!
 Look over  the fence into the backyard while taking a deep breath through your nose.  If the back yard is a mine field and it smells as bad as it looks, get back in the car and go home.  If the back yard is well maintained go knock on the door and explain you were in the area and stopped in to say hi.  (Do this unannounced – we don’t want to give them time to clean!)  Ask for a drink of water or to go to the bathroom if they don’t offer you to step inside because that is your main reason for being there.   What you will see inside is what you will see in your clean unit if they are accepted.  Another little hint.  Always do these inspections when you don’t have a cold because you must let your nose do the walking inside too!
   Remember to visit the neighbors on either side before or after visiting the tenant (you should be doing this even if they don’t have a pet) and ask about the prospective tenant and the pet.  It will be either a real positive or a real negative listening experience but that is exactly what you need to hear.  Who knows your prospective tenant better than the neighbors?  My rental application does not tell me if the dog barks 23 hours a day but that neighbor sure knows that information.
    How much additional rent should I charge per pet?  The  answer is as much as you can and still keep units filled. The average seems to be around $20 – $30 a month but I have heard of landlords getting $75 or more per month for a pet and not having any trouble getting it.  Supply and demand tells me the more landlords in your area that don’t accept pets is to your advantage in getting the higher monthly fee.
    But what if I have new carpet and the prospective tenant has a pet?  Figure out how much the carpet, padding and labor will cost and divide by 12 months.  That is how much additional rent they pay to have the pet move in on your new carpet.  If the carpet cost $1200 then you want $100/month in additional rent.  If they move out in a year and the carpet has to be replaced,  you have the money to replace it.  This rarely happens when you take a few minutes to visit the back yard, neighbors, and inside the tenant current residence.  Think about the additional cash flow you have generated with a good pet and the tenant stays for four years.  You will have enough additional cash flow to do three other units with the pet rent!
    What if the carpet is acceptable for one more tenant before replacing?  Now this is the time to put in the pet for as much as the market will accept.  I have found the average tenant stays 3 to 4 years so even charging an additional $20 a month in rent gives you additional $240 the first year, an extra $720 in 3 years and $960 in 4 years.  Talk about increasing cash flow.
     Do I collect additional security deposit or call it a pet deposit?   I like charging additional security deposit because now if the pet does no damage but the people do, I can use the pet deposit to cover the damage.  If classified as a refundable pet deposit and they owe money for damage but not caused by the dog, you must give it back because it was classified as a “pet deposit.”
    Another way I have found to stay in control with dogs is to buy a dog whistle and leave it in the glove compartment of your car.  Before knocking on an existing tenant’s door, give a toot on the whistle before knocking.  You will know right away if they lied to you about not having a pet or if one has moved in!
    It is imperative that you stay in control of tenants with pets by frequently inspecting the property, using pet clauses that gives the right to end the lease if certain conditions are not followed, and by using the dog whistle when they least expect it.

Article written by Donald Beck, REIN March 2011 Featured Presenter