First, I believe renting to people with pet cats or dogs can be good business. Approximately, eighty percent of the people applying to rent a single-family home own a cat or dog (“pets”). This discussion is limited to these two types of pets. I do not recommend accepting renters with Parrots, but that is another story for another time. In my thirty years experience, the risk and the cost of small-unsupervised children causing property damage above the security deposit is higher than the risk and the cost of dog and cat damage. This risk is harder to screen, as Fair Housing Laws do not allow most landlords to discriminate against families with small children. Pet risk is also much easier to manage, and when managed correctly, pet damage rarely exceeds the security deposit.
The pet owning renter demographic provides a favorable supply and demand curve for landlords. I would define a low risk renter as: a single professional with no children or pets that also has perfect credit, a spotless background check, plays well with neighbors, and has plenty of income to cover the rent. Unfortunately, for single-family rental homes this renter is scarce. They often prefer the no maintenance, amenity laden, high-end apartment over a single family home. Further, they need to be looking for your rental home when it just happens to be vacant. Since, vacancy is normally the landlord’s biggest expense, occupancy percentages favor renters with pets.
When landlords allow pets their gross rental income is higher. Renters are usually willing to compensate the owner for allowing their pets. The common term in our area for this compensation is pet rent. I recommend pet rent over collecting a separate pet deposit. In the Albuquerque and Rio Rancho metro areas the landlord must pay interest if combined security deposits and pet deposits exceed one month’s rent. Pet rent is simply a higher rent for the privilege of renting with a pet. Be sure you treat everyone the same as to pet rent. Further, a pet deposit can only be used to cover pet damage, while a security deposit can be used for rent and other charges the resident may owe, including pet damage. The extra pet rent is is not refundable.
To manage the risk, I recommend my clients accept pets on a person-by-person, pet-by-pet basis. I believe that three should always be the most pets allowed in a rental home. We find that when pets are well screened, pet damage, if any, rarely exceeds the security deposit.