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HIGHLIGHTS FROM THE PODCAST: 2:56 - Supply & demand 4:53 - How do you account for damages when you accept pets into your home? 8:46 - Is there room to compromise (size, breed restrictions, etc)? 10:03 - Service animals & emotional support animals FULL TRANSCRIPT OF THE PODCAST AUDIO:
Spencer Sutton: Yeah. Topic today is near and dear to my heart because I love my dog. I have a black lab, his name is Jet. He's been with our family about almost seven years. What we're going to talk about today is something that when we're talking to people in real estate who are renting out their property, this is one of the questions that usually comes up, should I allow pets in my property or not? That's what we're going to talk about today because there's pros and cons. There's people on both sides of this, and we've rented houses. It doesn't matter. I mean, we rented houses without pets. We rented houses with pets. Spencer Sutton: Matthew, let's kick it off. I mean, this is something that you've probably heard, over your career, you've heard hundreds and hundreds of times people asking this question. Matthew Whitaker: Yeah, I was going to jokingly say once or twice, but yeah, there's no doubt people want to know about pet. The problem is pretty easy. If I'm a homeowner, it's not like I have something against pets. It's just, I don't want pets to tear up my house, and to put any more stress on the house. Even good pets is an additional living being in the house, so the house gets more wear and tear. It is a problem that is very easily understood from a landlord's perspective. Even dogs will scratch up hardwood floors, maybe scratch doors. Again, good pets. We're not talking about even... No telling what bad pets do. I mean, they do all sorts of horrible things. The problem is very simple. Spencer Sutton: I learned this the hard way. One of my first rentals that I was managing was a house here in Birmingham. I said no pets on the lease, moved the resident in, I was managing it myself. I think probably the first month that they didn't pay rent on time, which was four months into the lease, I went to the house, knocked on the door, and probably about seven small chihuahuas came tearing across my hardwood floors barking at me. They didn't answer. Anyway, went through the entire eviction process. The only full eviction I've ever had to do. Sure enough, hard wood's completely destroyed. That was just a house I had to... I wasn't planning on budgeting $1,500 to $2,000 for hardwood refinishing, but had to. Matthew Whitaker: If you're in this any period of time, you're going to deal with some bad pet news, and obviously you did that. I think, let's look at it from the renter's perspective. One of the things that's interesting from a supply and demand is, you think about the demand, which is your renter. Who's renting these houses? You have probably about 2/3 of the population has a pet. Matthew Whitaker: If you think about it from our perspective as renting homes, if we say no pets, then we're eliminating 2/3 of the population immediately, which makes it harder to rent a house. Either that means it's going to stay on the market longer, which people may be okay with, or it means it may rent for less because you've taken the full supply of people and just shrunk it down to 1/3. I think it's important to know that about 2/3, I mean, there's different numbers out there of number of people that have pets, but just know that you're going to be shrinking the number of people, the number of opportunities, you have to rent that house. Spencer Sutton: That's right. Which typically means, like Matthew said, I mean, your days on market are going to be longer. I think going into that, you just have to be okay with that. You just have to realize, "Hey, I'm not going to allow any kind of pets. That's my policy." I'm okay if, for us, for instance, Matthew, if our days on market, 25 days, for a typical house, if that means it's going to be out to 60 days or 80 days, then you just have to be okay with that. Matthew Whitaker: Yeah, you don't know. I mean, you could have the first person come along and they don't have a pet and it rents in two days. I mean, it's just, again, shrinking the number of rental opportunities you're going to have. Renting a home is a numbers game. We think of it as like a pipeline, the more conversations we can have, the more people we can push through that house, the more applications we can get, the easier it is to rent it to a really good person. When people are making phone calls or they're on your website and saying, "Oh, this house doesn't allow pets, they're just not even going to go see that, so immediately it shrinks the people going through the pipeline." Matthew Whitaker: The next thing I think we need to talk about is let's say you do allow pets, how do you account for the damage or how do you prepare for the possibility of damage? I think there's really three ways, and I'll tell you the psychology behind it. Number one is a pet fee, which means essentially when they move in, they're going to pay a fee to have a pet. Spencer Sutton: That's nonrefundable. Matthew Whitaker: It's non-refundable, it's going to the owner as reimbursement for the fact that they've got a pet, and that pet is going to cause some wear and tear. And that's essentially paying them back for some or all of that wear and tear. The psychology is I don't even know what that pet's going to do, but I want to make sure that I get reimbursed for the fact that the house is going to take on more wear and tear. Matthew Whitaker: Wear and tear. Matthew Whitaker: Yep. Spencer Sutton: So what's a typical amount, do you have any idea what a typical amount for a pet fee is? Matthew Whitaker: Yeah. I've seen anything from $250 to $500. Spencer Sutton: Probably depends on the size of the house, the rent amount, that type of thing. Spencer Sutton: It could be per pet, right? Spencer Sutton: Mm-hmm. Matthew Whitaker: There's a lot of people have two or three pets. So just think through that in terms of a per pet thing. Now, the opposite of that, or I guess the close cousin of that, not the opposite, but is the pet deposit. The psychology behind the pet deposit is this is a refundable deposit. I'll often hear people say, "If I've got a carpet in a bedroom and a pet pees, and I've taken a pet fee," they're going to say, "Oh, well that essentially accounts for the pet fee. I'm not going to work my tail off to clean it up." Whereas in a pet deposit, they know that there's money at play, and if the pet pees on the carpet, then they are going to be more likely to take care of the house and clean it up. Matthew Whitaker: After almost 20 years of doing this, I don't know the answer to that question. People are very adamant on either side, but I do not know the answer to that question. Spencer Sutton: Well, to me, my question for the landlord, or for you, when I'm thinking about the landlord listening to this podcast, how do you really account for pet damage? Besides a stain, maybe you can attribute to pet urine. I mean, how else do you look at that house and say, "Hey, this is pet damage." Matthew Whitaker: That's a great question. To me, we just need to look at it if a family rents a house and they used the hardwood floors and they start to scuff up a little bit, I mean, that's part of normal wear and tear. But to me, a pet is less normal wear and tear. A Pet is something extra, and so, if a pet scratches up the floor, I think you can charge that on the security deposit. That's the way I've always seen it. Spencer Sutton: As long as you can contribute those scratches to the pet, I'm guessing. Matthew Whitaker: Correct. I mean, unless the children are down there scratching the door, which I guess is entirely possible. That could happen. Spencer Sutton: So we've been on both sides of this. We've charged a pet deposit before, and now I think, currently, we charge a pet fee. Matthew Whitaker: Correct, correct. We've been on both sides. If somebody made me bet on either side, we obviously bet on the pet fee side, but I will tell you, it wouldn't be a super confident bet. I wouldn't bet a lot of money on which side is better. Matthew Whitaker: Well, the last thing which I think makes a lot of sense too, is what's called pet rent. And so, since that pet is living in that house and essentially using up the houses resources, then you charge the pet essentially to have another body in that house. And I think that makes a lot of sense. Obviously the pet is not flushing the toilets, but they are living in the house and essentially using up the useful life of some of its resources. Spencer Sutton: All right. So those are the three ways that you can, as a landlord, charge or make sure that your property is taken care of when you have a pet. Spencer Sutton: Is there any room for compromise with this? Is it always going to be pet or no pet? Matthew Whitaker: We say this, we accept pets on a case by case basis. Mostly the reason we do that is our insurance is very adamant about not putting what they call dangerous breed dogs into our house. So, you can also accept pets on case by case basis. You certainly don't want to let dangerous breed dogs in there because if that dog attacks somebody, the insurance may not cover it, but I've also heard about putting pets in there that are under a certain weight. So, maybe a dog is 25 or 30 pounds, maybe that uses less resources, I don't know. But a lot of people have those hybrid models where they're willing to let certain types of pets in, not others. Spencer Sutton: That's what I think we've seen. We've advised some landlords who come to us with this question. They're like, "I'm not totally against pets being in my house, but I'm just worried about certain things." And we're like, "Okay, well, if you don't want a Mastiff in your house, or if you don't want a big black lab, like my dog is big, he probably weighs 75 pounds, limit the weight size." And then you can also limit the number. You can say no more than one pet, or no cats, only dogs, and the dog can be 25 pounds or less. I think that's one way of a little bit of a compromise. Matthew Whitaker: I think the last thing we ought to talk about, though, is what constitutes a pet. So there's this big thing out there, service animals, and emotional support animals. It's gotten a lot of press. A lot of people, especially if you're first getting into it, you don't really understand these. And honestly, it seems like it's ever changing. So I don't understand them super well, either. Matthew Whitaker: I do know that it's gotten more clear lately. When they first started service animals and emotional support animals, it was very unclear what constituted those. And I don't want to get into the details because I'm sure I'd screw it up, but here's the point. Service animals and emotional support animals are not considered pets. So, if a dog is an emotional support animal for somebody and they can prove it through certain ways, you have to allow that dog into the house. And you can't consider it a pet. So you can't charge any of the things we talked about in the past. Matthew Whitaker: But what you can do is you can account for whatever that emotional support animal does to the house against the security deposit deposit. Spencer Sutton: Secuirty deposit. Matthew Whitaker: I think it's a pretty fair way to look at it. If this animal is required by this person to live there, and the animal does do some sort of damage, then it's okay to charge that against the security deposit. But I think it's really important, you don't want to get in trouble by trying to charge somebody with a service animal, or an emotional support animal. You could get in a lot of trouble from a governmental standpoint, if you try to do that. Spencer Sutton: Well, this has been good, Matthew. I think this gives people who are listening to this podcast some great things to think about when considering pets. Should you, or should you not? The latest statistic I read, recently, was like 67%, so you were saying 2/3, like 67% of households have pets. So just think about it. Again, there's pros, there's cons, and there's ways that you can mitigate some of your risks if you're just careful about it with the lease. Spencer Sutton: All right. So that's it for this episode of the Atlanta Real Estate Investor podcast. 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