Real Estate Management and Maintenance Tips

Pets Or No Pets... That Is The Question

by Marvin Levin

I doubt very much that I will change any reader’s mind about whether it is a good policy to accept or exclude pets into residential apartments.

If you could rent an apartment and exclude pets, and yet maintain full occupancy and collect approximately the same rent, most apartment managers would argue that it is a good idea to exclude them. I would argue that it is a financial calculation: By getting more rent and achieving higher occupancy, have you been compensated enough for the damage that might be caused by pets?

This argument started between one of my partners and me when we acquired a 40-unit apartment project in Santa Barbara in the late 1970s. There were 15 vacancies, so we huddled to plan a marketing strategy. One of us argued that the print advertising should declare, “pets accepted” and the other argued that the print advertising should either be silent on the matter or declare, “pets not accepted.” To resolve the dispute, we agreed to instruct our on-site manager to charge a “pet rent.”

Well, the idea seemed to work and the building filled up rapidly. However, the pet rent experiment created some rough edges for the on-site management. Some residents snuck in a pet as a way to combat the pet rent. Other residents paid the pet rent, but deeply resented it. Some residents resented that their neighbors had pets, and we wonder if that was a factor in causing them to later move. And, some residents were thrilled with the fact that they could enjoy their pet for a rent increase and security deposit increase that they could afford.

Now, 30 years after the initial experiment, we think we might have a better solution. The reader might pause for a moment to see if he/she does also.

Here is what we might have done with those 15 vacancies back in 1978. We might have segregated five of the vacancies toward one side of the building and declared that pets would be allowed. And, we then might have segregated 10 of the 15 vacancies on the other side of the building and declared that pets would not be allowed. The five units where pets were allowed would be priced for rent that was higher than for the units where pets were not allowed. That excess rent, together with a sufficient security deposit, would probably compensate for any damage that might be done by pets. Therefore, renting those five units to pet owners might have been profitable from two points of view: First, from excess rent; and, second, from renting the vacant apartment earlier.

I believe that the above system moves toward solving the issue set forth above. When a prospect arrives, the rental manager asks whether the prospect plans to have a pet. If the prospect says they do not, they are shown the no-pets units. If the prospect says they do, they are shown the pet units at the higher asking price.

Of course, there is some possibility that the prospect will analyze the asking price for all of the units in the building and conclude that they are, in fact, indirectly paying a “pet rent.” Or, if the prospect asks the question, that fact must be disclosed. However, I would bet that it would not become an issue in most cases. Since every apartment owner establishes different rent schedules based on height, view, parking, along with many other factors, it is certainly fair and reasonable for the same apartment owner to have a rent differentiation for pets.

I would like to hear, by email or otherwise, your experiences and beliefs about the subject matter. And, if you know of a troubled apartment project for sale, please contact me.