What happens when demand exceeds supply? The value/price of the supply goes up. The supply of pet-friendly rental units is less than half the rental market demand by pet owners. The current market pet-friendly rent premium vastly overcompensates for the actual risk/cost of renters with pets.
The average pet owner earns significantly more that non-pet owners. On average, they spend about $1,550 annually on a dog and $950 on a cat. Renters with pets are ready, willing and able to pay more rent for their pets. This represents a significant profit opportunity for rental owners.
Nationwide Study on Pet-Friendly Rental Units*
- 70% of Renters Have Pets. Approximately half of all rental housing is pet-friendly (allowing some pets); but only 9% of housing allowed pets without significant limitations on size or type and only 11% allowed larger dogs.
- Higher Base Rent and Pet Premium. The average base rent (advertised “street” rent) for pet-friendly apartment communities is 10% to 15% greater than comparable no-pet rentals. The typical “pet rent” premium is 5% above this higher base rent.
- Increased Security Deposit. The typical additional security deposit for a pet-friendly lease is 50% to 100% of the security deposit on leases without pets.
- Less Vacancy. The vacancy rate for pets prohibited rentals is 150% of the pet-friendly rental vacancy rate.
- Less Marketing. Pet friendly units average half the marketing time and costs. The national average is a two-week rental time for pet-friendly units versus four weeks for units prohibiting pets.
- Longer Occupancy. Tenants stayed an average of 46 months in pet-friendly rentals compared to 18 months for residents in pet-prohibiting rentals.
- 20% of Tenants Break No-Pets Rules. A very significant number of tenants keep pets illegally. This means that the owners suffer all the potential costs without receiving the mitigating financial benefit or control (screening & rules).
- Insignificant Actual Pet Damages. The survey found that 50% of landlords returned the full security deposit for both pet and no-pet rentals. Units with damage deductions average $323 without pets and $362 with pets (only $40 more with pets). The single worst-case reported pet-owner damages averaged $430 (about half a month rent). The absolute worst damage case was 2.5 month’s rent.
- Size Does Not Matter. There was no reported difference in damage costs between smaller and larger dogs. Smaller dogs generate more resident noise complaints than larger dogs. A resident breaking the feces clean up rules makes a more noticeable mess with a large dog.
* Study commissioned in 2017 by FIREPAW, Inc. surveying renters and owners.
The rental market offers substantial financial benefits to pet-friendly landlords.
Higher Rent + Lower Vacancy + Longer Occupancy Terms = Every Owner’s Dream!
So, why do 82% of renters with pets report substantial difficulty finding a rental unit? FEAR of damage to their property is the primary concern of pet-prohibiting owners. The story of a landlord who spent $3,000 to replace all the carpeting seems to overshadow the stories of landlords who average an extra $4,000 in pet fees from every pet-owner lease.
Dollars and Sense
The current market pet-friendly rental pricing structure allows every occupant to incur a $3,000 damage charge and still provide the owner with a $3,000 net profit from the pet-friendly premium over the average 46-month pet-friendly occupancy term.
Let’s look at the numbers for an 8-unit apartment building consisting of 950 square foot 2-bedroom units renting for $950 per month.
From the study results above, we only apply the three most objective factors:
(3) pet rent at 5% premium;
(4) double security deposit;
(7) 46-month pet owner occupancy term versus 18 months for tenants without pets.
Total and compare the rental revenue from No-Pets against Pet-Friendly over the average pet owner occupancy term (46-months):
No-Pets Revenue = $334,400
$950 x 8 units x 44 months (2 turnover months with 18-month occupancy term)
Pet-Friendly Revenue = $367,080
$950 rent + $47.50 (5% pet rent) x 8 units x 46 months
Pet-Friendly Revenue is $32,680 ($4,085 per unit) greater than No-Pets.
The pet-friendly double security deposit gives the owner $1,900 against potential damages. A $3,000 carpet replacement still puts the owner $2,985 ahead on that tenant.
If all eight pet-friendly leases incurred $3,000 in damages over the occupancy team, the owner will still be almost $24,000 ahead of a no-pet policy. And that profit is calculated without considering the (2) pet-friendly base rent premium, (5) lower vacancy rate, and (6) faster marketing time.
Screening for Good Pet Owners
“There are no bad pets, only bad pet owners” should be your primary screening philosophy. Since the pet-friendly rental market demand is overwhelmingly weighted in the landlord’s favor, the owner has the opportunity to select good responsible pet owners (who are also likely to be good responsible renters). You want to minimize the expense and risk in order to maximize your pet-friendly profits.
The three phases for great pet owner selection are: (1) Pre-Screening Pet Application, (2) Rules and Regulations, and (3) Physical Mitigation and Enhancement. Suggestions for each phase are detailed below:
Pre-Screening Pet Application. A pet, like a resident, should provide basic application information. Your rental advertising should be clear that only “approved” pets are allowed (and that such approval is in the landlord’s discretion).
Pet Resume: The renter should prepare their pet’s resume with photo, name, age, breed, weight & size, sex, spay/neuter status, veterinary name and contact information, and information about any training or certifications.
Pet References: Letters from previous landlords specifically regarding their experience with your pet as a resident in their unit, letters from any dog day care or paid professional dog walkers or sitters.
Pet Meeting: You should arrange to meet the pet before accepting them. This gives you a chance to observe the pet’s behavior. The prospective renter can bring their pet to you, or (better yet) you can stop at the renter’s current home and have the chance to conduct your own “smell test”.
Rules and Regulations. Set up clear up-front expectations regarding pet behavior and health. All required documentation must be submitted before acceptance and annually upon in advance of lease renewal.
Government Licensing: Proof of compliance with all local governmental pet licensing regulations.
Annual Wellness Exam: Annual Wellness exams are required from a licensed veterinarian with documentation of proper health care protocols including current rabies vaccination, kennel cough vaccine, other veterinarian recommended immunizations, and finding of no worms, ticks or fleas.
Annual Parasite Prevention: Receipts for the purchase of an annual quantify of flea, tick and worm protection.
Renter’s Insurance: Current renter insurance policy with specific acknowledgement of liability coverage for the pet.
Confinement and Leashing: Pet shall be confined to the Owner’s rental unit and must not be allowed to roam free or to be tethered without appropriate supervision. When outside pets must be leashed with leash not exceeding 6 feet.
Food and Water: Pet Owners shall provide adequate food and water that is accessible to their pets in their unit. Tenant agrees not to leave any pet food or water outside of the unit.
Noise – Meowing, Barking, Howling: All pets shall be adequately trained to minimize noise impact on other residents. This means that any incessant (lasting more than 3 minutes) animal noise that can be heard in the building common areas or adjacent units is prohibited.
Aggression: Any animal that displays aggression (growling or leash lunging) toward another resident or their pet is prohibited.
Pet Waste: Pet Owners shall diligently clean up and appropriately dispose of animal waste. Pet Owners who walk their pet are responsible for immediately cleaning up after their pet and discarding securely bagged pet waste. Litter boxes must be changed on a regular basis to prevent odor in the apartment. Tenant agrees they can be fined $50.00 plus the cost of cleanup if they fail to pick up animal feces on the property premises, or if they fail to keep their litter box clean and odor free.
Carpet Cleaning: Tenant is required to have all carpeting professionally cleaned and with pet odor enzyme cleaning solutions and submit a receipt for such before each annual lease renewal and before tendering possession to landlord upon termination.
Unit Inspections: Pet owning tenants must acknowledge that landlord may conduct periodic (quarterly) inspections to check for cleanliness, order control, and pet damage.
Physical Mitigation and Enhancement. Many landlords over time make physical changes to their properties to make them more pet-friendly.
Flooring Replacement: Instead of re-carpeting units, many owners are installing vinyl plank flooring. The cost is roughly the same as for carpet, but it lasts longer, and many pet owners prefer it to carpet. Also, the catastrophic pet damage potential is greatly reduced.
Pet Areas on Grounds: Owners can designate separate sections of the grounds for pet walking. A 3-foot-wide by 20 to 40-foot-long area of wood chips or mulch along the property line is great for residents to walk their dogs to relieve themselves. Some larger apartment communities fence in a mini dog park on the property perimeter.
The rental market overcompensates landlords for the risks of allowing pets. Even with no screening and an absolute worst-case pet damages assumption, the landlord can still pocket at least 50% of the pet friendly market compensation. With good rules and common sense screening a landlord can expect to keep the entire pet rent premium to effectively increase property cash flow profit by at least 5% of gross rent.