People love their pets. And renting to people with animals creates a new income stream for income property investors in the form of pet deposits. But in order to avoid the many headaches that can come with pet issues in rental housing, landlords need to know the law – and know their limits.
Not every investor will want to open the doors to animal owners. Some will – but only with limits. With teh exception of service animals, it’s a landlord’s right to have a no pets policy. It’s also legal to establish a policy for renters who bring their animal families along. And getting these things clear from the moment a renter signs your lease or rental agreement is essential for protection down the line.
Pet deposits cover damages and wear inflicted by renters’ animals, whether a dog who rips up a rug or an exotic bird that chews cabinets. Some landlords impose a single deposit upon move-in that covers all animals a renter might have; others itemize with different rates for dogs, cats and their animals. Others place a monthly surcharge on the rent.
Whatever structure you choose, it’s essential to put it in writing up front. A landlord who doesn’t have a policy may end up in trouble if a longtime renter suddenly acquires a new animal companion. It’s too late then to demand a deposit. It’s important too to establish clear restrictions on what kinds of animals you’ll allow – only dogs under a certain size, for example.
Local ordinances also affect a landlord’s decisions about pets. Some animals can’t be kept within city limits, or the city might impose a limit on the number of animals a household can have. Likewise, check your insurance. In some areas, certain kinds of animals can’t be kept for liability reasons, such as pit bull dogs or certain kinds of snakes. Look carefully at your policy with an eye to contingencies such as a renter’s animal creating a neighborhood nuisance or harming someone. If that happens, you may be faced with initiating eviction proceedings, or going to court in a lawsuit.
Careful screening of tenants should help a landlord realize income from pet deposits – but damage does occur. The renter is responsible for those kinds of things – and the pet deposit is intended to cover them.
But expenses can rise, sometimes far exceeding the deposit, from unintended consequences such as a lost mouse or two taking up residence in walls or a rabbit’s habit of chewing electrical cords setting off a fire. You can’t anticipate everything, but looking ahead to potential problems can help to protect you and your investment. And renting to responsible pet owners can open new doors for building wealth from income property, as Jason Hartman advises. (Top image: Flickr/Elsieesq)
Read more from Jason Hartman:
Jason’s 10 Commandments of Successful Investing
“Buy and Hold” Beats Capital Gains Taxes
The Jason Hartman Team
