Dismissing the Value of Pets
Pets! The thought brings varied reactions from different people. Tenants think of their pet as part of their family. A pet is something to be loved, enjoyed, and cared for. Many cannot think of parting with a family pet with which they have shared numerous fond memories. As the property owner, though, you may have a far different opinion. Your main thoughts will focus on pet-induced property damage, such as urine, vomit, and feces in the carpet along with scratches and bite marks on doors, walls, wood floors, and cabinets.In addition, you may worry about neighbor complaints regarding barking dogs, citations from the city because pet feces litter neighborhood lawns, or possibly ruined grass resulting from an animal’s digging or running patterns. How can an animal bring out such varied reactions in people? It is a simple matter of risk vs. reward.
When pets are allowed into a rental property, your risks most definitely increase. The question is, does the reward also increase? We must remember that, as with any investment, owning rental property contains risk. Without risk, there is no reward. So, the key is not to avoid risk, but to manage it. We do this frequently with insurance. Holding a fire insurance policy does not mean our house won’t burn down, but it does mean that if the house burns down, we will not be ruined financially. The same applies to renting to tenants with pets. All the precautions in the world will not keep tenants and pets from damaging a property, but the proper risk management will help pay for the damage if it occurs.
Even though there are risks associated with accepting pets, did you know that there is also risk in not accepting pets? After all, a large percentage of tenants own pets. If you, the property owner, are determined not to have pets in the property, you cut your property off from many otherwise qualified tenants. How does this affect you financially?
For argument’s sake, let’s assume that out of 100 applicants, 75 of them would qualify for your home based on credit, criminal, and previous landlord background checks. Let’s further assume that 50 of the 75 qualified tenants have pets and 25 do not have pets. If you have a strict “No Pet” policy, you will be competing with other no pet properties for the 25 non pet owning qualified tenants, while properties that accept pets will have 75 qualified tenants to choose from.
Remember that pet-friendly properties will accept tenants who do not own pets as well. If your property remains vacant for one month, you have lost real money that you will never be able to recover. That is the risk of not accepting pets. But, let’s assume that you were able to rent your property to one of the 25 non pet owning tenants. Wonderful! But, why were you able to attract one of the 25 non pet owning tenants? In a free market, you must compete with others who are also in the market place. In order to compete and win, you have to offer a better product, with more benefits, at a lower cost to the customer. In rental terms, that means offering a more expensive property or one that includes more utilities in the rent for less rent than other similar properties that will and will not accept pets.
What about the properties that accept pets? They are also competing for tenants, but they have a larger pool of tenants to choose from and fewer properties competing for those tenants. Pet-friendly properties have access to all 75 qualified tenants. This means that the pet-friendly properties in our example are 3 times more likely to rent to a qualified tenant. Because they will accept pets, the pet-friendly properties have increased pet risk but less vacancy risk. If you are still unsure about the value of accepting pets and the amount of pet risk you are willing to assume, consider the following fundamental actions you can take to protect yourself.
Pet-Friendly Homes Are 3 Times More Likely To Be Rented
Pet-Friendly Homes = 75 Qualified Tenants
Non-Pet Homes = 25 Qualified Tenants
Let’s assume the worst happens and a pet(s) damages your $1,000/month rental property. How much is really at risk? Because you accepted pets, you lowered your vacancy risk by a minimum of one month, which is equivalent to at least $1,000. There were two pets in this property, and you collected $25/month per pet, which equals$600/year. In addition, you collected a $1,000 damage security deposit (not related to pets). Thus, you will have $2,600 to help pay for pet damage. However, if there is no damage, you will have made an extra $1,600 over the course of a year by renting to a tenant with pets.
You have increased your annual return by 13% by accepting pets if they do not damage the property. If the damage is $2,600, you will have a zero net gain. If the damage is more than $2,600, you will have a loss. However, you will only suffer that loss if your property insurance does not cover the damage and you cannot get the tenant to pay for the damage. You will need to decide if the risk of accepting pets is worth the reward of accepting pets.
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