For some landlords, the prevailing instinct is to take on as little risk as possible. This means unless they are legally required, a majority of landlords won’t allow their tenants to have pets. While taking on fewer risks is generally a wise real estate investment decision, avoiding some risks can be short-sighted. Most households, roughly 68%, in America are pet owners. If a landlord decides not to allow pets, this means out of the gate, they are eliminating a vast number of potential tenants. In the long run, a landlord could lose out on far more revenue from rent than it could lose from the cost of damages caused by pets. Allowing tenants to have their furry friends has its advantages.

And yet, only about half of landlords allow for pets which means potential homes for tenants with pets come at a premium. The demand for pet-friendly rentals is always high. Not only does this increase the demand through a larger pool of potential tenants, but tenants with pets are also willing to pay a premium because of their limited options. There are ways to reduce risks as well beyond increased rent. You can charge tenants with pets a pet deposit and pet fees.

Know the Law: Illegal to Charge for Service Animals or Emotional Support Animals

Navigating the labyrinth of federal, state, and municipal laws can be a difficult task which is why some landlords opt for property management services companies. The laws around pets and pet fees will vary city by city and state by state, so before deciding on a policy, read up on all your local and state laws. For example, federal fair housing act laws ban all pet fees and deposits for all service dogs and animals. Service animals aren’t just limited to those with physical disabilities. They also include those with emotional disabilities like anxiety or PTSD. For this reason, pet fees and deposits aren’t allowed for emotional support animals either.

Allowing Pets: Pros and cons

PROS:

More potential tenants: More simply put, supply and demand. The more renters compete for your rental property, the more you can charge for rent, and the lower your vacancy rate will be. You can shorten the time your unit sits vacant when turning it over and increase your annual revenue.

HONESTY IS THE BEST POLICY

Because of the limited number of rental units available to tenants with pets, tenants will sometimes just end up hiding the fact they have a pet. This can be solved by evicting a tenant for violating their lease, but you’ll need to turn over the rental property again and let it sit vacant. Like anything prohibited, some will break the rules for their convenience or gain, so sometimes the best thing to do is just allow it and charge fees upfront.

LONG-TERM TENANTS

The longer a tenant stays in a rental property, the fewer days that unit sits unoccupied on the market. If tenants move out after their lease is up every year, you’ll likely, at best, have a unit that misses out on a month of revenue annually. That missed revenue compounds over time. Since options are limited for renters with pets, they tend to stay in their rentals longer than tenants without pets.

CONS:

NOISE POLLUTION

Keeping other tenants or neighbors happy is part of being a successful landlord. If one tenant is causing a lot of noise and disturbing others in the building or nearby, that can be an issue. At best, you’ll need to resolve the matter with angry neighbors, and at worst, a noising unit may cause other tenants to leave. If a pet is regularly barking whenever a person walks by or whines and cries at all hours of the day, it can have a negative impact on your business.

DAMAGE

The size of the pet doesn’t determine the amount of damage that can be caused, and there can be a lot of damage. It can be anything from scratched floors, shredded screens, stained carpets, chewed-up moldings, etc. Even with an increased security deposit and pet fees, this may not cover the total damage caused by a pet.

POTENTIAL HUMAN HARM

While it is unlikely, there is always the possibility that a pet may attack another tenant, neighbor, or worker who is on the property. This risk can be mitigated by good communication with your tenants, but it can never eliminate all risks or unforeseen circumstances.

FLEA INFESTATION

No, I’m not talking about the bass player from Red Hot Chili Peppers crashing on the couch. I’m talking about the flea that drives you and your dog crazy. A pet with fleas spreading the bugs all over your building can have a costly impact on your business which is one reason it should be considered when making your pet policy.

What is a Pet Policy?

A pet policy is a comprehensive policy for landlords regarding allowing pets on their properties. A good pet policy weighs all of the pros and cons of tenants with pets, along with all of the potential damage costs and financial gains, and makes it reasonable for tenants to afford. There are a few options regarding pet fees for your pet policy.

When choosing a pet policy, you must first know what is legally allowed in your city and state. Some cities and states do not allow any non-refundable fees or deposits when it comes to rental units. For example, California does not allow non-refundable pet fees. Upon moving out, a landlord can only use the funds from a security deposit based on actual damages caused by the tenant or their pet.

Pet deposits may also be illegal or limited in certain states. For example, in California, they are legal, but they can’t exceed more than the sum of two months of rent or three months if the unit is fully furnished. Again, the laws are different wherever you go, so the best advice is to seek advice from local experts.

Pet Deposits, Pet Fees, and Pet Rent: What’s the Difference?

Pet deposits, fees, and rent all accomplish the same thing differently. Depending on your local laws, your options can be limited, but you’ll be able to address your needs regardless of where you are. Here is how they work:

PET DEPOSIT VS. SECURITY DEPOSIT:

A security deposit is typically used to cover potential costs from damages with an average tenant. In contrast, a pet deposit is traditionally used to cover the specific costs related to damages caused by pets.

WHAT IS A PET DEPOSIT?

A pet deposit is a separate one-time, refundable fee in addition to a regular deposit. The amount in the deposit is then used to cover some of the damage that may be caused by the tenant’s pet. If the damage caused by the pet doesn’t exceed the deposit, the landlord must return the rest of the pet deposit along with any of the regular deposit left over.

PET DEPOSIT PROS:

The significant advantage of the pet deposit is a tenant will pay the money upfront. If the tenant leaves the property for any reason before the lease is over or they leave after just one year, you should have enough money to cover any possible damages.

PET DEPOSIT CONS:

If the tenant ends up being a long-term tenant, the pet deposit may not be enough to cover all of the damage. It also may cause damage to portions of the home that would’ve required repairs over time which means a landlord might be unable to charge the tenant.

PET DEPOSIT VS. PET FEE

A pet deposit is a refundable deposit, while a pet fee is a one-time, non-refundable fee. What does a non-refundable pet deposit cover? Whatever the landlord wants, since it is a one-time fee, the tenant can’t get back.

WHAT IS PET RENT?

Pet rent is simple to understand. It’s just charging rent for the specific pet. You can charge whatever amount for a monthly fee that seems fair as long as tenants are willing to pay. The amount gets included in their rent, and they pay it along with their monthly rent. So, what does pet rent cover? It’s included as part of the rent, which means it can cover any costs over time.

PET RENT PROS:

If you tend to have low turnover with your tenants, this may be the best option. It allows you to collect more revenue over time than you could with a pet deposit or pet fee. This is also money that doesn’t need to be refunded and can be used to make all necessary repairs if and when you need to turn over the unit to a new tenant.

PET RENT CONS:

If the tenant leaves after a short period, you may not be able to college enough to cover any damages caused by the tenant’s pet. The shorter your tenant stays, combined with the amount of damage caused by the pet, means a landlord could lose money.

WHAT ARE PET FEES?

What is a pet fee? A pet fee is a simple one-time fee that is non-refundable. A landlord can collect the money and use it for repairs regardless if the pet causes any damage or not. For this reason, some states and cities have banned this kind of fee in favor of the refundable pet deposit.

PET FEE PROS

You get a one-time payment up front and never have to worry about collecting more or proving the costs of repairs from the pet. It’s a simple fee and hassle-free, not requiring any extra effort or thought once collected. Like the pet deposit, this will cover any costs of repairs from damages caused by pets if the tenant doesn’t stay long.

PET FEE CONS

It’s not legal in some places, which makes it a pretty big con as it would leave you open to litigation. Beyond the legal issues, it isn’t very enticing for potential tenants. You may be able to get by with this kind of policy in a housing shortage, but if there is a good supply of housing, tenants will simply choose better options.

Pet Fee vs. Pet Deposit

A pet fee is a one-time fee that is typically non-refundable. It is illegal in states like California, which makes the refundable pet deposit the more traditional type of pet fee.

WHAT SHOULD I CHARGE?

Start with whatever the market rate is for rent in your area. This should be in line with what you can charge based on similar units, and hopefully, that will be able to cover all other expenses. Regarding additional pet fees, you’ll need to consult your local laws, which will determine if there are any limits on what you’re allowed to charge. As mentioned before, states like California limit how much you can charge for a security deposit. As far as pet fees and pet rent go, you’ll want to charge a reasonable amount; otherwise, you may scare off potential tenants and ultimately limit the amount of rent you can charge.

CAN I USE A SECURITY DEPOSIT TO COVER PET DAMAGE?

You can use a security deposit to cover any damages that require repairs that wouldn’t need to have been made through normal wear and tear. This means if a rabbit chewed up the corner of a wall which requires you to replace the drywall, that could be taken out of a security deposit. If a tenant stays in the unit for a decade and a pet scratches some of the paint on the walls, you may not be able to use the security deposit because you would need to repaint the walls anyway.

Every state has different laws, and some won’t allow you to use security deposit funds to pay for damage from pets. This is on top of laws that limit what kind of repairs security deposits can be used for. Regardless of which pet policy you choose, you’ll set yourself up for success as a landlord by protecting yourself from any financial risks.

FAQs About Pet Fees

CAN A LANDLORD DENY A PET?

Yes, a landlord can choose not only the kind of pets they allow their tenants to have, but they can also choose specific breeds. For example, some landlords ban specific breeds like Pitbulls because they see them as more aggressive than other breeds. This excludes any service or emotional support animals. Landlords are required by fair housing laws to allow all service and emotional support animals.

ISN’T PET RENT NORMAL? SHOULDN’T IT BE FREE TO HAVE PETS IN RENTALS?

Typically there is some fee for tenants who have pets. This can be implemented in several ways, but it is standard industry practice. Because pets create higher costs and risks, landlords typically want to cover those risks.

WHAT HAPPENS IF YOUR TENANT IS HIDING A PET?

This is up to the landlord. Typically, most leases state clearly that if a tenant violates the lease agreement, they can be evicted, but evictions can be costly and time-consuming. This means a landlord may want to allow the tenant to find a new home for their pet or ask them to find a new place before eviction.

ARE EMOTIONAL SUPPORT ANIMALS EXCLUDED FROM PET FEES AND DEPOSITS?

Yes. Service and emotional support animals are excluded from any pet fees or deposits. Fair housing laws make them an extension of the tenant which means landlords can’t deny them even if they don’t allow pets at all.

WHAT DO MOST LANDLORDS CHARGE FOR PETS?

This depends on your local market and which option you choose. For example, pet rent may be as low as an extra 10 dollars a month and as high as an extra 50 a month. The best option is to look around and see what other landlords are charging.

CAN A LANDLORD CHARGE EXTRA FOR A PET?

This is the function of all pet fees. The reason is to charge extra to cover the additional damages pets typically cause over time.

WHAT IS THE REFUND POLICY FOR PET DEPOSITS?

Consult your local laws, but typically any money not used to cover damages should be refunded.

CAN PET DEPOSITS BE USED FOR DAMAGES?

This all depends on your local laws and what you’re able to use security deposits and pet deposits for. Typically, the two deposits are separate and reserved to cover specific types of damages. Pet deposits are used for pet-related damages, and security deposits are used for the rest.

Owning a rental property can be a financially rewarding experience, helping you build true wealth over time with an income generating
asset. Financial gain aside, it’s also an opportunity to learn new skills as a
landlord. If buying a rental property is firmly in your sights, here are ten
key benefits to consider.

*A small disclaimer before we begin. Many of the benefits listed below require the owner to meet specific standards, such as
having excellent credit, financial stability, choosing the right property, and
your ability as a landlord to manage this investment properly. Ziprent is also
not claiming to be a tax expert or offering financial advice with the below.
Always consult a professional that can analyze your individual situation.

Key Takeaways: 

• Understanding the various ways a rental property can benefit an owner. 
• Understanding the financial implications of owning a rental property. 
• Understanding the drawbacks and time-constraints of ownership. 

Passive Income

The primary benefit of owning a rental property seems clear:
passive income. Passive income is money earned without actively working for it,
in this case in the form of monthly rent payments from tenants. While owning a rental
property still requires real work, such as finding tenants and managing the
property, it does provide a steady stream of income that can help supplement
your other income sources.

To generate actual profit from your rental property, you’ll
need to manage your expenses correctly to ensure the rental income exceeds your
overall expenses. You’ll want to consider things like your monthly mortgage,
utility costs, any future repairs and more. Once you have these things
settled, you’ll be ready for some serious cash flow.

Property Appreciation

Another benefit of owning a rental property is the
possibility of asset appreciation, which is the increase in property value over
time. Should the value of the property go up over time, you may consider
eventually selling for profit. There are many factors that can influence whether
your property appreciates including the local real estate market, the condition
of the property, and any renovations or improvements that are made to your rental
property during your ownership. It’s rare for an asset like a property to
suffer depreciation, assuming you were able to purchase at a fair price.

Another important point regarding appreciation is the idea
that as the home appreciates, you are building equity. Typically, you are able
to take out 80% of your equity in the home.

For an example, let’s assume you buy a $100,000 home
and then spend another $50,000 in renovations.

You’ve now spent a total of $150,000.

Now that the property has been renovated, it’ll typically be
valued at a higher price which represents appreciation. For the sake of this
example, we’ll assume the property value has now increased by $50,000 to
$200,000 total to align with the renovation costs.

That $50,000 increase would be considered equity, which we
discussed above. You would now be able to take out 80% of that equity as a loan
against the property. In this example, that would represent $40,000 you can
take out as a loan, typically not counted as income and therefore not taxed as
income.* This loan could be used to purchase another property, quickly building
your portfolio of real estate investments.

Tax Benefits

Rental properties often qualify the owner with different
opportunities for tax deductions. Owning a rental property can also provide tax
benefits, as an owner may be able to claim deductions for expenses related to
ownership of the property. Some of these investment property opportunities may
include mortgage interest, property taxes, and maintenance costs.

These deductions can help an owner reduce their overall tax
liability, thus increasing their return on investment.  While Ziprent
provides award-winning property management services, you should ultimately
consult a tax professional to understand the tax implications of owning a rental
property. Nobody wants that dreaded letter from the IRS, so be sure to
enlist the necessary expertise to take advantage of these tax benefits
properly.

Diversification of Investment Portfolio 

While the word diversification might be something you’re
more used to hearing from Jim Cramer talking about the stock market, it’s just
as important when it comes to buying a rental property. Diversification at its
core is about reducing risk to your overall investment portfolio. High level
and amateur investors alike have used real estate to diversify for generations.
By investing in a variety of asset classes, such as stocks, bonds and of course
real estate, an investor can spread their risk and help mitigate the impact of
any poorly performing investment. Diversification is even more important for
those nearing retirement, as it can help ensure a more stable source of
income.

Forced Savings

Owning a rental property can often end up being an
unintended savings plan.  A smart owner will be saving monthly for
emergency expenditures like repairs and maintenance. Ensuring that safety net
will keep the property well-maintained, thus attracting and retaining tenants
for your rental property. Being prepared for the unexpected expenses that can
arise in the short-term is crucial for rental property owners.

Control Over Property 

As the owner of your investment property, you have ultimate
control over how it is maintained, any renovations or improvements, and in some
states, who can rent the property. This can be particularly appealing to those
who want a say in how their investment is managed and maintained. When it comes
to selecting tenants and the various local laws that decide how much control
you have over the process, using a property management service like Ziprent
might be wise to help avoid violating any relevant fair housing laws.

Leverage 

Depending on your personal finances, you may be able to use
leverage such as a mortgage to purchase a rental property. By using a mortgage
to purchase real estate, an owner can possibly earn a higher return on their
investment than they would after paying cash for the property. However, it’s
important to note that leverage such as a mortgage can also increase the
owner’s risk. If the property does not generate enough income to cover the
overall cost, the mortgage still needs to be paid. Factors like the interest
rate on the mortgage, down payment cost and maintenance costs need to be
considered carefully.

Potential to Generate Retirement Income 

You may remember in our 4th reason on diversification that
having a stable source of income during retirement is important. Supplementing
your social security, pension, and personal savings with a rental property
could be the key to enjoying retirement without financial headaches. Even if
retirement isn’t necessarily right around the corner for you, it’s important to
consider your future now.

Opportunity to Learn New Skills

While some of our previous listed benefits may have focused
on the financial side, it’s also important to note the benefits owning a rental
property can provide when it comes to acquiring new skill sets. By managing a rental
property, an owner can gain practical experience in key areas such as property
maintenance, people skills and property management skills in general. Not
everyone enjoys these types of experiences however, which is why you may want
to consider a service like Ziprent to handle the complexities of owning and
maintaining a rental property.

Build Long-Lasting Wealth

With careful planning and management, owning rental
properties can be a way to build generational wealth. We’ve covered the
opportunity to earn a steady stream of passive income and to benefit from
appreciation, while also enjoying the tax benefits of owning a rental property.
Additionally, owning a rental home offers the opportunity to leverage your
investment, increasing your return. You may also consider keeping your rental
home in the family, giving you the ability to pass down an asset with
long-lasting cash flow.

DRAWBACKS TO OWNING A RENTAL PROPERTY

It’s important to note that owning a rental home is not
without its challenges. Being a landlord to tenants can be time-consuming. An
owner will need to find renters and manage them, as well as handling any
maintenance or repair issues that may arise. Additionally, there is always the
risk that the property may not generate enough income to cover the costs of
ownership. It’s important for owners to carefully consider these risks and do
the necessary due diligence before making such a large investment.

To summarize, here are some of the main drawbacks:

• Time investment
• Managing tenants
• Dealing with repair issues
• Ensuring profitability 
• Financial risk
• Operating Expenses

TWO IDEAS TO HELP MANAGE DRAWBACKS

1. Work With a Property Management Company 

One way to considerably manage your risk is working with a property
management company like Ziprent. We’ve managed thousands of rental properties
across multiple states, offering the expertise that only comes with time and
experience. Ziprent can handle the day-to-day tasks that can take time away
from an owner while offering expert consultation on financial decisions like
rent price, operating expenses, maintenance and repair vendors, and more. With
one of the lowest monthly service costs in the industry, we can help ensure you
rental home nets positive cash flow.

2. Own Multiple Properties

If finances allow, owning multiple rental properties may
help lower your risk. Although that sounds counterintuitive, different
properties represent varied rental income potential, costs and appreciation.
For example, you may have one property that has unexpected maintenance costs
during a certain month that makes it unprofitable. While another property may
be maintenance free and profitable that month. An owner can shift the profits
from one investment property to the unprofitable property to cover the
unexpected costs.

However, just like the drawbacks we mentioned above,
multiple properties mean all those possible drawbacks are multiplied. Real
estate investors will need to carefully consider whether they can manage those
drawbacks or if outside help will be needed.

Conclusion: 

Ultimately, the decision to buy a rental property is a
personal one that depends on an individual’s financial goals, risk tolerance,
and other factors. However, for those that are willing to put in the time and
effort, the benefits of owning rental property is clear to see.

Like most great investment opportunities, there is no reward
without risk. While some of the drawbacks listed above may seem scary, they’re
also easily managed with proper planning. A owner may also consider the support
system they have around them. Whether that’s a partner (spouse or business),
family member or trusted friend that’s ready to pitch in on the day-to-day
responsibilities, or a partner like Ziprent that will shoulder the bulk of the
landlord task on your behalf. Identifying these partnerships ahead of time may
go a long way to easing the fear associated with real estate investing.

Simplify the Property Management Experience

Ziprent removes the uncertainty of managing your rental property.
Contact us today for a free consultation.

Get Started

In an ideal world, there is no need to compromise. For property owners and property management, this might mean no applicants have pets, and every landlord allows pets for tenants. Unfortunately, businesses operate in reality, which means companies and customers need to find suitable accommodations and compromises to get what they are looking for.

Roughly 90 million American households own household pets which means for landlords to fill vacancies quickly, they likely can’t hold out for pet-free tenants. While households with pets may not be the most desirable for landlords, security deposits and pet screenings can mitigate the risks associated with pet ownership for landlords. 

There are several reasons landlords could be hesitant to rent a unit to tenants with pets. Depending on the type of pet, they can cause various problems. For example, dogs may chew up walls and scratch wood floors. They may go to the bathroom or vomit on the carpet, leaving odors and stains that are difficult to get out. Cats may scratch and claw at various surfaces and ruin window screens. Birds and dogs may be loud and disturb neighbors. There’s also the risk that a pet can harm another tenant or neighbor, which creates liability issues. 

These issues are why some landlords choose not to rent to renters with pets. Finding a place to live in a desired location can already be tricky and finding a place when you have pets can be even more difficult. This isn’t only because tenants can choose to ban pets altogether, but because some landlords will limit the kind of pets that are allowed. For example, they may not allow specific breeds of dogs like Rottweilers or Pitbulls. They may not allow pets over a specific size or weight. Some pets can make finding a place to live uniquely difficult. 

What Is Pet Screening?

Pet screening is similar to a background check used when screening human tenants. It is a way to mitigate risks for landlords and simplify the process for tenants is to use a pet screening process as part of the rental application. There are several reasons why this can benefit both landlords and tenants. It can streamline the process, create clear standards for both parties, and create some level of comfort for landlords to broaden the pets they allow in their rental units. This is all done through a pet profile. 

What Is A Pet Profile?

A pet profile is a digital record of pets that can be accessed by both owners and landlords. This allows landlords to access some information about the area of concerns they have regarding allowing tenants to have pets. For example, it’ll contain photos, vet history, vaccination records, and behavioral traits. This will allow landlords to accurately assess the risks and determine not just the kind of pet a tenant has but how responsible the pet owner is. 

Why Pet Screening Is Important To Landlords and Tenants

For landlords, most of the business is assessing risks and managing costs. There are expected costs when turning over an apartment for a new tenant. This can be as simple as repairing walls and deep cleaning a carpet. Landlords want to avoid additional costs that may exceed a security deposit and pets have the potential to create that kind of damage. For example, a dog or a cat may chew on the wall creating drywall damage. They may claw at a window screen that requires screens to be replaced. They may scratch wood floors and need them to be refinished or replaced. 

This leads some landlords to refuse to allow pets altogether. Unfortunately, this limits the number of potential tenants for landlords,decreasing the demand and possibly the amount they can charge for rent. Pet screening allows landlords to increase the pool of prospective tenants by allowing pets they believe are unlikely to cause excessive damage to the rental property. It also decreases the likelihood of a tenant keeping a pet secretly to rent the unit or avoid any extra security deposit.

Finding a place to live based on your needs and preferences is hard, especially in a housing shortage, even before you consider the limiting options for pet owners. Pet screening can help expand the number of potential rental units by allowing for more landlords to allow pets as well as helping landlords confidently allow a more broad range of pets and breeds. Responsibly pet owners will have a clear understanding of where they stand when applying for a place to live, especially if they have a breed or type of pet landlords may be reluctant to allow like a Pitbull.

What To Know About The Landlord’s Pet Policy

When it comes to the rights of pets for tenants, there are very few laws. Federal Fair Housing laws (see the fair housing act) require landlords to allow official service animals. This means a service dog that is trained to help a tenant who suffers from seizures must be permitted by law. This doesn’t mean a landlord is required to enable a dog to just because it makes you feel warm and fuzzy inside every time he does a big stretch. Because there aren’t many federal laws, landlords need to consider any state or municipal laws and ordinances when it comes to their pet policies. Mostly, landlords just use common practices when it comes to their pet screening criteria.  

Common pet policies include: 

• Additional security deposit
• Pet fees
• Pet screening
• Limits on weight
• Limits on breeds
• Limits on the type of pet (dog, bird, etc.)

Like tenants, landlords can also evict pets for any behavior that causes problems with neighboring properties as well as other tenants on the property. This means a landlord can evict a pet (at which point a tenant has to decide whether to give the pet to a caretaker or move out) for barking excessively or showing aggressive behavior with people or other pets. For these reasons, pet screening for apartments can be especially important because of the proximity to others and shared walls. 

How To Prepare For A Pet Screening

The first thing you will want to do is gather any necessary documents to help with the process. This will include any vet records, vaccination records, and any training school certificates. You may want to include information like how long you have owned the pet, how old it is, the breed, size, and weight. Before bringing your pet to meet the landlord in person, you may want to run through any basic pet screening test with commands like “sit”, “stay”, and “lay down” in case the landlord wants to test how responsive they are. 

If you have an overly energetic dog, you may want to take it for a long walk before meeting the landlord to make sure it’s a little calmer and more responsive instead of being overly stimulated by a new place. At this point, landlords will also be looking for potential red flags (especially for dog screening).

Red flags include: 

• Baring teeth
• Raised fur on the back
• Excessive barking

Pro tip: Spend time socializing with your dog with other dogs and people regularly. This will increase the likelihood of your dog having a positive response when meeting a potential landlord.

The pet screening checklist

As part of the tenant screening, a landlord will likely have a checklist to answer any additional pet screening questions that may not be included in any vet records. You’ll want to be prepared to answer any of these questions on the spot so be prepared. Some landlords will use a third-party service as a pet screener so ask the landlord about their pet screening policies first. Landlords may use a pet screening application.

Some questions include: 

• What time of pet do you have?
• How long have you owned your pet?
• Are you able to provide the necessary documents from your vet?
• Does your pet have medical conditions?
• Does your pet have behavioral problems?
• If so, are you seeking treatment/training for these problems?
• Do you have caretakers for pets for when you’re on vacation or during a medical procedure?
• Can you pay an additional security deposit?
• Is your pet house-trained?
• How much time does your pet spend alone each day?

Conclusion

Pet screening is a win-win policy for landlords and tenants. When done correctly, it can expand the number of potential homes for tenants and the number of potential tenants for landlords. It also creates clear guidelines for what pet records tenants should keep and what is expected of pet owners by landlords. That’s why it’s sensible for landlords and renters alike to use property management solutions like Autopilot to conduct pet screenings, streamlining the process so tenants no longer have to scramble to gather necessary documents and landlords can confidently rent to responsible pet-owning tenants.

Without any national laws regarding tenants’ rights around pets, everyday practices like pet screenings can do the job and eliminate confusion. Creating clear expectations for landlords and tenants allows for less mess in the application process.

Simplify the Property Management Experience

Ziprent removes the uncertainty of managing your rental property.
Contact us today for a free consultation.

Get Started

One of the first and most important decisions a new landlord or longtime landlord procuring a new investment property needs to determine is how much to charge for rent. Many variables are used to calculate how much to charge for rent each month, but leases don’t always start on the first day or end on the last day of the month. So what do you charge for rent when a tenant doesn’t stay the entire month and a tenant moves in or moves out? In this situation, a landlord needs to prorate the rent. 

What is Prorated Rent?

As stated above, not every single lease lines up exactly with the first and the last of the month. This means at some point, you’re going to need to charge less than the total amount of the monthly rent. This usually happens on the first and last month of a lease. The prorated rate for rent means you are charging for the number of days a tenant will be occupying your property during the calendar month. There are other circumstances beyond partial month occupancy in which you may be required to prorate rent as well, so understanding this simple concept will go a long way in helping you manage the finances of your real estate investment. Also, prorated rent won’t impact how much a renter will pay for a security deposit. So, how is rent prorated?

How do you prorate the rent amount due? 

There are three ways to calculate the prorated rate rent.

1. Days of the Month

The first method is to calculate the daily rent cost based on the number of days in the month. Since not every month has the same number of days, the daily rent amount will differ.

For example….

Let’s say you charge $2,000 dollars a month for rent. To calculate the daily rate for rent in the month of January, you would divide $2,000 by 31. This means the daily rate for rent would be $64.52. Let’s just say the lease starts on the 8th day of the month. To calculate the prorated rent for the remaining portion of the month, you would multiply $64.52 by 7. This would give you $451.64 for the 7 days out of the month the tenant is not occupying the unit. Once you have that number, you subtract it from the total, which leaves you with a total prorated rent of $1,548.36. 

• Step 1: $2,000 / 31 = $64.52
• Step 2: $64.52 x 7 = $451.64
• Step 3: $2,000 – $451.641 = $1,548.36
• Total rent for January: $1,548.36

Now, let’s look at how this same method will impact the prorated rate in the month of February, which has 28 days instead of 31. This obviously adds an extra day to 29 in a leap year.

• Step 1: $2,000 / 28 = $71.43
• Step 2: $71.43 x 7 = $500.01
• Step 3: $2,000 – 500.01 = $1,499.99
• Total rent for February: $1,499.99

As you can see, using this method, even though the tenant isn’t moving in for the same number of days, the prorated rent rate changes due to the total number of days in the month. Every additional day a tenant doesn’t occupy the unit, you would subtract the daily amount from the total amount of monthly rent due for that month.

2. Days of the Year 

The other option when it comes to calculating prorated rent is to use the total number of days in the year instead of the month. The way to do this is to add up the total amount of monthly rent for the entire year.  For example….
Using the same amount as the previous example, the total yearly rent ($2,000 x 12) would be $24,000. In order to calculate the per day amount for rent, you would just divide the total amount of annual rent and divide by the number of days in the year.  Then, you would divide $24,000 by 365 which would come out to $65.75 per day. Using this method, you would then multiply the per day amount by the days the tenant isn’t occupying the rental unit. Using the same number of days in the prior example (7 x $65.75) the total would come out to $460.25 for the seven days. Subtract this from the monthly rent amount of $2,000 and the total amount for the prorated rate of rent would be $1,539.75. This amount wouldn’t change between months like the first method.  

• Step 1: $2,000 x 12 = $24,000
• Step 2: $24,000 / 365 = $65.75
• Step 3: $65.75 x 7 = $460.25
• Step 4: $2,000 – $460.25 = $1,539.75

3. Flat Monthly Rate

Used exclusively in California, the flat monthly rate is the third method to calculate prorated rent.

To calculate the prorated rent by a monthly flat rate, simply dividing your monthly rent charge by 30 days (no matter the month), then multiply the total number of days the tenant isn’t occupying the rental unit. Using the average month of 30 days simplifies the process for both tenant and the landlord.

For example…

• Step 1: $2,000 / 30 = $66.66
• Step 2: $66.66 x 7 = $466.62
• Step 3: $2,000 – 466.62 = $1,533.38
• Total rent charged for the month: $1,533.38

Pro Rate Tips

1. Tip 1: Using a spreadsheet can allow you to build these equations and automatically calculate the prorated rate by just plugging in the numbers.
2. Tip 2: While the practice of prorating rent is standard across the country, the rules that govern property management vary by both state and municipal laws and ordinances. In order to make sure you’re acting in accordance with the local laws, you can consult a local lawyer or conduct your own research. 

Real estate laws are a labyrinth of municipal, state, and federal laws that are difficult to navigate even for those with extensive knowledge of the industry. Expertise doesn’t always transfer from location to location and there’s often a learning curve for those entering new markets. It’s always best to seek professional assistance when entertaining a new market. 

Pro Rate Examples

When else does rent need to be prorated?

1. Moving in and Moving Out

The most frequent situations when a landlord will pro-rate the rental is on the month when a tenant moves in or moves out.

2. Repair Work

If substantial repairs to the rental unit are required that will inconvenience the tenant for a few days, you may need to prorate rent for the number of days work takes place. Substantial repairs and renovations would be things like remodeling a bathroom or kitchen, repairing the floors, and repairing pipes. Anything that would give your tenant limited use of their rental unit during the construction. 

3. Rent Credit

You can also use the daily rate as a guide for rent credit for how much of the property is affected by work done or what the tenant is unable to use for x amount of days. If the daily rate is $66.66 and the tenant is unable to use 10% of the property due to malfunction you can use 10% of the daily rate, which the credit issued could then be offered as $6.66 a day. Sometimes it is easier with a rent credit to round up to a whole number that seems fair. Say this tenant was affected for 11 days instead of crediting $73.26 an even $75 rent credit would likely seem fair. 

Ziprent Prorated Rent Calculator

Managing a rental property can be time-consuming. Newcomers to the real estate industry often assume managing a property is just as simple as finding a tenant, renting out the property, and forgetting about it until it’s time to find a new tenant. If you don’t want to spend too much time on tasks like prorating rent, there are other options. You can hire a property management company like Ziprent to handle time-consuming jobs like figuring out how to prorate your incoming tenants’ rent correctly.

Owning a rental property requires hundreds of tasks occupying your time every day of the year. There is no day off when managing a business that is open 24 hours a day. Prorating rent is just one of many tasks that will take up a percentage of your workday and hiring a company like Ziprent will allow you to complete these tasks more efficiently.

The Pros and Cons for Prorating Rent

As long as you are primarily working with long-term leases, the method you choose to use shouldn’t have too much impact on your bottom line. Using a daily rate based on the total number of days in the year instead of monthly means you would charge less in January, but more in February than if you were to use the monthly method. That is something to consider if you’re doing mostly short-term leases. With short-term leases, there tend to be more move-in dates in the middle of the month making a prorated rent necessary for both the first month’s rent and the last month’s rent. Short-term rentals tend to have more vacancies than long-term. This means you won’t always be collecting a full month’s rent. 

The Challenges with Tenant Relations

Whichever method you decide to use, you will want to communicate the amount and the method to your tenants in the lease. This will protect you against any claims in a lawsuit in regard to how much you are owed. Once you have picked one method and included it in your lease, you should stick to that method with the tenant. Decreasing confusion can help protect you and your business from potential liability and help you collect any disputed charges. 

Conclusion

Managing a rental property is a long-term investment and every day a rental unit is vacant is lost revenue that cannot be recovered. Every month a unit is rented under the market rate is a month of lost revenue you will never be able to recover. Using a property management company will give you access to the tools and the data as well as professional assistance that will help ensure you can maximize the profits from your long-term investment and allow you to invest in the future growth of your own business.

Simplify the Property Management Experience

Ziprent removes the uncertainty of managing your rental property. For landlords who want to streamline operations and protect long-term revenue, tools like TurboTenant Autopilot can help automate key property management tasks.
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The daily and weekly cleaning of heavily trafficked surfaces like floors, countertops, and tables can give your home the feeling of cleanliness but there is one portion that is often overlooked. The baseboards can collect a lot of dirt and dust and over time it’ll start to show. To keep cleaning your baseboards from being a long task, you should wipe them down regularly. Here are some tips for cleaning your baseboards: 

Vacuum with brush

When you’re vacuuming your floors, it’s a good time to hook up the brush attachment and run them all along your baseboards throughout your home. This will help to remove all the dust and dirt that has collected on the baseboards, especially in all the cracks and crevices. If you don’t want to use a vacuum, you can use a small whisk broom. 

Wipe them down

Once the dust and dirt are removed from the baseboard they are ready to be wiped down. This is especially important with the baseboards in the kitchen which will often college a lot of food and grease. Prepare yourself for this because you’ll need to spend some time on your hands and knees. 

Fill a bucket of soap and warm water up and use a sponge. If you don’t have a sponge or you don’t want to waste one on the baseboards, you can use a damp cloth instead. Soak your sponge or cloth in your soapy water, and wring out as much water as you can to avoid water collecting around the baseboard. Next, wipe down your baseboard. If you want to get in all the grooves and crevices, you can use a toothbrush to scrub the baseboards as well. 

Clean the edges

To properly clean the top and bottom of the baseboards where they are connected to the floor and the wall, you’ll want to use a cotton swab with the cleaning solution. This is a more gentle way to clean these areas where you also don’t want to risk any extra water seeping through any cracks or holes. 

Clean regularly

You can use your vacuum to clean your baseboards regularly, especially the areas of the baseboards that aren’t covered up by furniture. Another trick is to use dryer sheets to rub along the baseboards which will help collect all the dust. By doing this regularly, you can go longer between deep cleanings.

Becoming a landlord is more work than just buying a home and then renting it out. For example, buying a home because it’s cheap doesn’t guarantee a good investment. There are concerns beyond the quality of the structure. If you buy a home in a city that is seeing local industries on the decline and as well as the population, the likelihood of turning a profit isn’t good. Here are a few things to consider when looking for an investment property: 

Zoning laws

Zoning laws can tell you a lot about the local housing supply and the ability to accommodate increased demand in the future. It’ll also tell you about the potential to add more units to your land. If a neighborhood is primarily single-family zoning, it isn’t likely to see a large influx of new housing units that could depress the rent you can collect. 

Beyond just the number of homes allowed on each lot, some other restrictions and regulations can effectively limit the number of homes built in a neighborhood. For example, construction height limits can restrict the number of apartments or condos built on a parcel. Parking minimums, setbacks, lot size requirements, and all these local regulations can significantly restrict the support of housing. If the supply remains low as the population increases, you will see rapid growth in revenue from rent. 

Local amenities 

People want to live nearby local entertainment districts. This doesn’t just mean nightlife. It means areas with public parks, restaurants, shops, coffee shops, museums, and theaters. Housing in and around neighborhoods rich in amenities is always in high demand. The popularity of some neighborhoods can change quickly depending on city planning, so keep an eye out for any plans that could change the desirability of a neighborhood. This can be as simple as a neighborhood building a new town square that will have food stands, restaurants, and shops. 

Local job market

Buying an investment property in a city or area that is heavily dependent on a handful of employers can be a risky endeavor. A city with a diversity of employers and industries will leave you less reliant on the success of a handful of employers or industries. You’ll also want to consider how volatile the industries are going to be in the future. You’ll be much better off investing in a property near a growing biotech industry as opposed to cryptocurrency. 

Crime

The lower the crime rate, the more you can charge for rent. That’s a pretty simple rule, but that doesn’t tell the complete story. Neighborhoods that attract tourists and locals because of the nightlife may see high crime rates as far as raw numbers go, but most of those can be due to alcohol and over-policing on weekends as opposed to crimes like breaking and entering or theft. Don’t just look at the raw numbers, instead, look into the types of crimes being reported. 

The home

Not everyone requires the same size home. Some tenants are single adults and only want one bedroom, while families may require three or four bedrooms. The supply of three-bedroom homes could exceed the local demand, while the supply of one-bedrooms could be lower than the demand. You can look to see local rent trends to see which type of home is seeing faster rates of rent increase as well as look into any municipal data that can tell you about the supply of homes in the area.

Being a landlord is more than just paying a mortgage and collecting rent. You’re operating a business and you’ll want to protect yourself the same way any other business protects itself from potential liability. It’s a cost to consider when deciding how much you need to charge for rent so plan accordingly. Here are some tips when looking for landlord insurance: 

Why landlord insurance is required

So you decided to become a landlord but your current home insurance isn’t enough. Why is that? This is because your homeowner’s insurance only covers the home when you are living in it. It won’t cover your tenants and many municipalities and states require landlord insurance in order to do business. If there’s damage to the property or someone were to get injured on your property, you want to make sure you are covered for any potential liabilities that may put your entire investment at risk. 

What does landlord insurance do?

What exactly does landlord insurance cover? First, you need to remember that when you become a landlord, you are becoming a business. Just like any other business, you want to protect yourself from any unforeseen misfortunes. This includes property damage. Landlord insurance covers all kinds of damage. It can be natural or accidental damage. It can be from vandalism. Any kind of damage you can think of. 

There’s also a loss of income/rental default insurance. This can help protect you in the unfortunate circumstance where your rental property becomes uninhabitable for any reason. This feature will cover any rent you cannot collect over a short period of time because of the damage to the property.

Landlord insurance will also cover any injuries that happen on your property. This will protect you if a tenant gets injured on the property or even a guest they may have over. This will protect you if these injuries are caused by any maintenance issues, for example, if something collapses on the property. 

Options to consider

When it comes to picking the policy that is best for you, you’ll also want to look into any add-ons that may address any additional coverage you need. One example is guaranteed income insurance. This can help protect your cash flow by making up for rent if a tenant comes up short. 

Flood insurance is one that ultimately may be required depending on where you live. If you live in a floodplain or an area where there are severe storms, you might want to consider getting flood insurance. 

Additional construction expenses are a great option if you are renting out an older property that may need to be brought up to code. While plenty of older properties are covered by a grandfather clause, that may not always be the case, especially if it comes to health and safety issues.  

What are the costs?

There’s no way to know how much landlord insurance is going to cost when it comes to your specific property. There are a variety of factors that come into play when calculating the cost. Some of these factors are the location and the age of the property. When you are budgeting or considering becoming a landlord, this will be a cost you want to consider to make sure leasing your property will be profitable.

Managing a rental property, especially if it isn’t your primary source of income, can be difficult and complex. Over time, you’ll learn more tricks of the trade, and some of those that are important to learn how to properly file your taxes as a landlord. This isn’t professional advice, and it is recommended to seek out professional help to assist you with the process. Here are a few tips on filing your taxes: 

Don’t forget your home office

Even if being a landlord isn’t your primary source of income, it is still a business and should be treated as such. This means that your home office space where your work can be used as a tax write-off. There are some rules in regards to how much office space you can write off, but the space must be a dedicated space for working. How much you write off can be based on the number of rooms or the square footage of your office space. 

Keep track of your mileage 

Managing and owning a rental property can require a lot of driving. You’re constantly needing to pick up supplies, show the property to potential tenants, pick up rent checks, and resolve any other issues on site. Make sure you keep track of all your mileage used on your personal vehicle when working because that can be deducted against the rental revenue from your property.

Be careful of recapture

If your rental property is in an area with increasing property values, you should be mindful of recapture. The tax code allows you to expense the cost of purchasing your rental property building but not the land over a number of years through depreciation.  This expense can help lower your taxable rental income significantly. What you need to be aware of is that if you sell the property for more than the depreciated value, you might need to pay some or all of that back after the sale. 

Repairs and improvements

Repairs are anything that returns the property to its original condition. This means that you put in new doorknobs or repair a broken window and any other routine maintenance that keeps the property in the same state. Maintenance costs can be expensed for the calendar year. 

Improvements are a little different and more complex. Improvements are anything that improves the value of your property over the long term. This is anything from adding an additional room to solar panels, or a new roof. These improvements can be capitalized and expensed over a number of years through depreciation. 

Legal and professional fees

When it comes to running a business, you want to make sure you’re doing everything the right way in order to protect yourself from any liability. This means you may consider hiring a lawyer to draft your rental leases or assist with any evictions. It would also be wise to hire an accountant to handle any financial issues like long-term financial planning and filing taxes. The cost of hiring these professionals can be expensed.

The state of Texas as a whole is one of the fastest-growing states in the country. While the state grows as a whole, various cities are growing at different paces. The growth depends on a variety of factors. It could be due to economic opportunity, location, and affordability. As these cities grow and the demand for housing increases, the rent increases as well. The rent increases depend on both the current housing supply as well as housing construction. Here are 5 cities in Texas where rent is increasing the fastest: 

Austin

Austin has long been one of the fastest-growing cities in Texas as well as one of the most popular tourist destinations in the state. Demand for housing has always been high in part because of the number of college students throughout the city. The growing start-up industry has generated a lot of high-paying jobs which has contributed to the rapid rise in rent. 

The year-to-year increase in the city for a one-bedroom is 32% while the year-to-year for a two-bedroom has increased by 17%. One reason for the increase in rent is the population growing from 709k to just over a million residents since 2010. The supply of housing has been unable to keep pace with the demand and unless construction of new housing increases, the trend will continue. 

El Paso

Since 2010 the population of El Paso has gone from 649k thousand residents all the way up to 679 thousand. Because of the population growth, the city has seen rents increase year over year dramatically. While it isn’t one of the fastest-growing cities in the state, the low supply of housing has contributed to the rapid increase in average rent. The year-over-year rent increase for a one-bedroom home is 23% while the increase for a two-bedroom is 15.5%. Without any changes in housing construction, expect rent increases to move in the same direction. 

Arlington

According to the census in 2020, the population of Arlington is 394 thousand. That’s up from 265 thousand residents in 2010. The increase in the population has also increased the demand for housing which has pushed the average rent up 13.8% for a one-bedroom over the last few years. It has also seen the average rent for a two-bedroom home increase at about the same pace at 13.1%. As demand for housing increases statewide, residents will continue to go where the homes are available making cities like Arlington popular places to move. 

Plano

While the largest cities in Texas grab all the headlines when it comes to growth, it’s the midsize cities like Plano that have been increasing their populations and rents at a faster pace. Since 2010, the population has increased by 28 thousand residents going from 260 thousand, up to 286 thousand. The year-over-year rent increases have shot up as well, especially for one-bedroom homes where the average rent has increased 24%. Two-bedroom rents have increased rapidly as well, though not as much as one bedroom. Two bedrooms increased by 14.7% in the same time frame. 

Irving

Similar to Plano, Irving is another midsize city that has seen a large population increase. Since 2010 the population went up by 41 thousand residents from 216 thousand to 257 thousand. Also similar to Plano, the rent for a one-bedroom in Irving has gone up dramatically year over year by 24.5%.  Two bedrooms on the other hand have increased their average rent at a slower pace by 11.8% year over year. 

As rents continue to rise across Texas, tools like TurboTenant Autopilot can help landlords manage properties more efficiently and keep up with growing demand.