BiggerPockets

I'm not very creative, but we make extra money 3 ways:

1. We charge extra for pets. I typically charge $25 extra per month for a cat or small dog and $50 per month for a medium size dog or multiple pets. In addition, we charge $100 to $200 extra for the security deposit.

2. We charge a $25 application fee to do the background check. I can usually do the criminal background check for free on the computer.

3. We charge a $50 late fee for anyone paying the rent after the due date but before the 3 day eviction notice has expired. That's usually good for an extra $100 or so each month.

Again, not very creative, but it's a little extra.

Mike

Thanks for the input. It helped. i'll have to check on AK's laws on app. fees. All good ideas though.

Some other ideas for generating revenues:

-Lease to own, aka option to buy
-Refer them renter's insurance
-partner with moving company for discounts for tenants + % to you
-resell internet access (getting harder with more competition and cheaper rates)
-pool monthly cash flows into sweeps account, i.e. play wth the " float" on the money
-allow tenants to customize rental prior to move in; 52" flat screen TV = $39/month, additional ceiling fan - $5/month, new paint color = $79/month...
-security " fee" instead of deposit for renter's with excellent credit and references, e.g. if they check out fine, then give option to pay $100 fee instead of the security deposit. You still retain rights to collect for damages and they lower their move-in cost.

Amazingly, there is very little literature or centralized resources for answering your question. Contemplating a new book deal...

As the law is written currently, it would appear true. But, case law and what's really happening in the market place suggest differently. In addition, several states are changing this very element of the law.

California has pending legislation right now to allow surety bonds in lieu of a security deposit, which is essentially an insurance fee protecting the full amount of the deposit instead of charging the larger deposit amount.

www.SureDeposit.com out of New York is leading this charge and I expect that other states will follow shortly--I chatted with their CFO over the weekend about this very topic. Rents are increasing and move-in costs are quite high, urging lawmakers to allow reasonable alternatives. It remains to be seen in the final written version of that law whether the surety deposit must be issued by a licensed insurance company of if an individual (or PM company) can provide one themselves.

So, while the laws read that way (no fee, just a deposit), there are large companies in every state managing properties using the fee to help tenants with good credit backgrounds, which suggests that case law would support this kind of fee.

What the written law is meant to protect is having landlords charge an amount equivalent to a full security deposit up front and then not reimbursing it when a tenant moves out, essentially screwing them out of their deposit. If written as a much smaller fee amount explicitly in lieu of a deposit, it appears that case law supports that approach.

-Jeff
p.s. I'm not a lawyer. This is an issue I follow closely because it benefits all parties involved and is a logical solution.

Well, good deal, bad deal...it all depends on whether or not you have the cash on hand. In San Diego where you might rent a 1 bedroom on the beach for $2,500/month, you could face needing first, last, plus security to move in...that's $7,500 in cash, PLUS your last deposit that you have to wait up to 30 days after the end of tenancy to recoup, which means a $10,000 cash spread just to move. That's huge and the demand for alternative products is large.

And, while I think your point is valid, the concept is that the legislators appear to support a security fee (whether in the form of insurance or otherwise) as long as it is reasonable and doesn't screw the tenant. Frankly, if it costs a landlord $25/month to get the protection they need, then there's really no justification for charging more so yes I agree that charging $50/mo in that case would probably get you into hot water.

But, surety bonds and security fees are not banned across the board. The difference right now is between legislative law and case law. Legislative law reads pretty strict, but case law supports a looser interpretation of those rules. In California, they're just trying to make legislative law reflect the case law reality. So, in effect, it's not an absolute ban on fees.

Just my two cents.
-Jeff

If you own a plex.... bring in high speed internet for $30-60 month. Share it to all of the units and allow tenants to use your " High Speed" connection for $25 or $30 / month.

Or include " high speed" free to tenants who have been on time with their rents for 3 months or more (inexpensive incentive to keep vacancy down).

I've enjoyed everyones ideas and thoughts.

That is true. You may have to bump to a business connection. Excellent point.

I have heard that " sub-metering" is a very smart move with apt complexes.

a1propertyclean

I am tied in with a number of angels and angel groups in Boston, as well as with Babson College and Harvard University and think the idea of surety deposits for smaller landlords may have legs. If you're interested in talking a little further at some point PM me and let me know. We may have the resources to flush the idea out a little better but would want/need someone in the insurance industry with some solid experience to chime in.

Cheers,
Jeff

John,

Yes I've talked with them on several occasions. They're also behind the pending legislation in California to clarify and legitimize it as a sec deposit alternative. Part of this is education for public, judges, all. SureDeposit won't underwrite/work with anyone who's managing fewer than about 10,000 units because of the lack of the landlord's substantiated details, e.g. vacancy rates, average security deposits, average damages at move out, timeliness, many years of data, etc. It's too much work on their part to come up with the " risk" numbers (the percentage due for the bond) for too little reward otherwise.

By inference then, working with smaller landlords is much more uncertain, therefore higher risk, therefore higher price on the bond per thousand dollars of coverage. I suppose you could just take a SureDeposit example, add 50% more, and try it out. Less scientific but you would know in 2-3 years if it was worth it or not. It's also less certain how the courts will react if individual landlords attempt this, instead of a licensed insurance organization or bank.

Jeff