One of the toughest decisions a landlord has to make is whether to allow or forbid pets in an investment property. Allowing pets can come with considerable risk but great income. Banning pets will keep an investment property more stable, but at the expense of extra returns. So, should you allow a tenant’s furry friends in your best real estate investments? We’ll present to you the rewards and risks associated with pets, and you see which outweighs the other in your case. If you do plan to allow pets, we’ve listed some tips to help you minimize any risk.
Con #1: Pets Can Damage Income Property Investments
This is the most obvious risk of allowing pets in income property investments. Whether the pet is as small as a baby hedgehog or as big as a German Shepherd, all pets have the potential to damage a real estate investment. Damage can come in many destructive forms. Common forms of damage include chewing and clawing carpets, doors, and walls, shedding or spitting hair, and, the most unpleasant of all, urinating in the investment property. Damage is a significant risk for any house investor. The possibility of damage alone makes some investors ban pets from income property investments.
Pro #1: Landlord Can Charge More in Rent and Security Deposit
Because allowing pets in a real estate investment carries risk, a house investor can justifiably charge more in rent and in the security deposit. More often than not, a higher security deposit will cover damage (if any) caused by a pet. Tenants will be willing to accept more rent and a larger security deposit, since they can take their beloved pets with them in the property.
The increased rent is an obvious benefit for a house investor, as it leads to higher positive cash flow, cash on cash return, and cap rate. To learn more about CoC return and cap rate, be sure to read our blog post titled “Cap Rate vs. Cash on Cash Return”!
Con #2: Pets Can Potentially Disturb Neighbors
Not only can cats and dogs disturb a real estate investor, they can also disturb neighbors! This is especially true if the investment property is a multifamily property. Barking dogs, trespassing cats, and dealing with aggressive animals in general are typically not tolerated by neighboring tenants. If the investment property is a single-family home, however, these risks are somewhat reduced.
Pro #2: Larger Pool of Tenants
Allowing pets in your real estate investment, regardless of investment strategies, significantly broadens your potential tenant pool. Roughly one third to half of all tenants have at least one pet. By banning pets, you could lose out on many great tenants! The key to finding great tenants with well-behaved pets is to be actively screening potential tenants.
Con #3: Smell and Health Hazards
In a way, this con piggybacks onto the last one. Some tenants, or even you, the real estate investor, may have allergies to certain types of pets. People are more likely to be allergic to cats rather than dogs.
Smell hazards, such as from urine or waste, will also ruffle some feathers. This is particularly worse for the real estate investor than it is for neighboring tenants, since you will be held responsible. Even after removal of the waste, it can take a lot of cleaning to eliminate the reeking smell.
Pro #3: Tenants with Pets Occupy an Investment Property Longer and Are Happier
One of the purposes of buying property for investment purposes is to minimize vacancy rates and maximize occupancy rates. By allowing pets in a property, you could easily achieve this real estate investing goal. Tenants with pets are more likely to stay in an investment property for the long term. If you are properly screening potential tenants with pets, you can land great tenants with disciplined pets and earn high returns and occupancy rates!
Occupancy rates and high returns are all part of an investment property analysis, which is vital for anyone considering getting an investment property. An investment property analysis requires a real estate investing calculator. If you want to learn more about the calculator, and why you should use Mashvisor’s rental property calculator, be sure to read “Investment Property Calculator for Analyzing Real Estate Investments”!
Tips for Allowing Pets in Your Investment Property
We’ve covered the main risks and rewards of allowing pets in a rental property. There is no clear standard on this real estate investing topic. What a house investor needs to do is analyze his/her particular case. Does allowing pets make sense considering your investment strategies? Would it make your property the best residential investment property? If the rewards of allowing pets trump the risks, then it’d be a good idea to rent out to tenants with pets.
If you plan on renting out to tenants with pets, use these helpful tips to mitigate the risks!
- Get a Pet Reference from a Previous Landlord
Screening pets is much like screening potential tenants, you need references for the screening to be complete. Ask the tenant’s previous landlords how the pet behaved. While a landlord reference can be helpful, it can also be misleading, in the odds that the landlord is trying to get rid of the tenant and pet. Therefore, be sure to have the tenants show you their current residences to see how the pet acts.
- Charge Higher Rent and Security Deposit
As previously mentioned, one of the benefits of renting to tenants with pets is more rent. Having a larger security deposit is also helpful, as it will cover any damage the pet causes. You obviously also want to screen the tenant and pet, but demanding a larger security deposit serves as great backup in the chance that anything goes awry.
- Include a Pet Clause in the Lease
Having specific clauses in the lease agreement regarding pets will also reduce risk. Include specific clauses regarding the number of pets, types, age, breeds (some breeds are deemed too aggressive and are thus illegal), and the tenant’s responsibilities with regards to cleanliness, pet standards (neutered, spayed, etc.), and more. With a clear lease agreement, you can have the best residential investment property out there!
Having a pet-friendly policy is one of the many vital decisions a real estate investor must make. If you want to learn more about the investing experience, read this post, titled “Owning a Rental Property: Hearing from an Investor”!
All in all, the best real estate investments may or may not allow canine and feline friends. The issue should be analyzed on a case-by-case basis. For more on leasing an investment property, visit Mashvisor! To learn more about how we will help you make faster and smarter real estate investment decisions, click here!