Inherited Tenant With Small Dog & No Pet Policy

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Inherited Tenant With Small Dog & No Pet Policy

Ted Klein
Investor · Redmond, WA · Member since 2016 · 169 posts · 58 votes

Hello BP, I just closed on a duplex in Marysville WA. One unit is vacant and the other has an inherited tenant with a small dog. There is a $200 non-refundable pet deposit in place. When we purchased the property we were planning on a no pet policy. However, the tenant has been there for 7 1/2 years and keeps the place very clean and supposedly always pays on time. However, his rent is about $400 below average market.

Initially while we are rehabbing the other unit we have decided to leave his rent as is for 60 days at which time we are planning on raising his rent. I am looking for some advice on how we should raise the rent and if we can enforce a no pet policy.

How should I go about raising the rent. I am pretty sure that at market rate, that the unit would rent fairly quickly given the state of the current rental market in and around the Puget Sound area. My agent says that we should raise his rent the full $400 within 60 days.

Can I still have a no pet policy on the rehabbed unit given that the inherited tenant has a dog? We don't want to appear to be discriminatory towards tenants with dogs, however, I have personally experienced my dog destroying the carpet by the door and damage the trim around the door and we don't want this to happen in a newly rehabbed unit.

Any advice would be greatly appreciated.

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Jeff Sprunger
Lockport , NY · Member since 2014 · 265 posts · 124 votes
9y

if the guy pays on time and is a responsible pet owner, let him stay! even with his rent under market value, I'd rather have someone who pays on time and is clean, versus risk him moving because you jacked his rent by $400 in 60 days. 

have a very frank discussion with him.  explain that his rent is way under market and that you will be gently nudging in up over the next several years.  maybe, raise it by $25 in the first 60 days.  then maybe another $25 every 6 months after, until it reaches the appropriate level.

OR, raise it up $400 bucks, prepare for an eviction and have 2 units vacant at the same time.  sounds like fun!

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  • Jeff Sprunger
    Lockport , NY · Member since 2014 · 265 posts · 124 votes
    9y

    if the guy pays on time and is a responsible pet owner, let him stay! even with his rent under market value, I'd rather have someone who pays on time and is clean, versus risk him moving because you jacked his rent by $400 in 60 days. 

    have a very frank discussion with him.  explain that his rent is way under market and that you will be gently nudging in up over the next several years.  maybe, raise it by $25 in the first 60 days.  then maybe another $25 every 6 months after, until it reaches the appropriate level.

    OR, raise it up $400 bucks, prepare for an eviction and have 2 units vacant at the same time.  sounds like fun!

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Ted Klein always retaining a good tenant is just good and sensible business. If you are really hurting for the money and cash flow is bad at their current rent, let them k one that the unit next door rent will be xxx and so will theirs in 60 days. This way they can decide if they want to stay or go. 

    On the other hand, personally I would raise $100 and then go up ever year until you get to market rate. Very simple to explain to a new tenant that the tenant was there prior to you purchasing, and was grandfathered in. 

    You may want to rethink a no pet policy. In my market, over 60% of our market had pets. I just increase the pet fee

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  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    9y

    I inherited pets and low rent. In NJ I have no choice with current tenants- they keep their pets. I was always a little mixed on the policy until I renovated pet apartments. Absolutely disgusting and filthy. But you definitely forego a large portion of the tenant pool. Of course I recognize that soon I will be forced to take in pets because people are simply having their cats, gerbils and dogs certified as service animals...

    Hiking the rent by $400? Are you trying to assist the implementation/expansion of rent control and anti-landlord sentiment? This plays right into the hands of tenant groups.

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  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    You can set pet policy from day you took ownership for new incoming tenants. So prior tenants will not be affected and new ones will know because your new lease will state no pets.. the only hiccup is service animals so you'd have to permit that and maybe this guys dog is a service animal.. ya don't know...

    What to do with current pet guy about rent. 

    I'd give him notice that in 60 days his rent will raise $150.00 bucks,, and he'd probably stay.. if you raise it $200.00 he'll probably go.. so you choose.. either way I'd keep him on month to month so you have an option to consider giving notice in the future if the dog becomes a issue.. 

    I'd raise rent at least 50 bucks every 8 months until at market with a generous 60 day notice.. 

    I worked for large complex it changed owners and rents went crazy,, 100 increase for studios, 150 for 1brs and 200 for 2brs.. we had some changes and the new rents stuck new incoming people paid.. of course we did upgrades with the turn overs and also did work in units that stayed,, just saying the new owner saw the potential and couldn't afford not to push. 

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  • Ted Klein
    OP
    Investor · Redmond, WA · Member since 2016 · 169 posts · 58 votes
    9y

    @Jeff Sprunger @Kim Meredith Hampton @Patrick M. @Deanna McCormick

    All good comments. I definitely want to retain the tenant, however, leaving a large amount of money on the table, currently $4800 per year doesn't make sense. I like the idea of gradually increasing it and I think your right Deanna, that over $150 and they will probably move. Any less and it would take a long time to get to market rate. Given the current market demand I'm not seeing many options in a 20 mile area. I might add, the unit has a garage and the tenant has a lot of tools in the garage so he would likely need to find somewhere else that has a garage. Currently in my area, there are a few, but they are all renting for market rate and above.

    I wasn't comfortable giving him a 60 notice and raising the rent $400 despite what my agent recommended. I did have a conversation with him and told him that his rent was below market and that there was an increase coming. I offered to do some of the repairs identified in the inspection and to replace the kitchen flooring so hopefully he will see some value in that.

    We will definitely be researching the market for how the competition is applying a pet policy. This is a B class neighborhood and the property should rent quickly. I just not sure about allowing pets given my past experience with pet damage and the disgusting filth @Patrick M. mentioned. If a tenant is claiming that a pet is a service or companion animal, do they need to furnish any proof of this or is it just their claim?

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  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    @Ted Klein  Ya the service, companion animal thing is a total bag of issues for landlords., So look at some posts to figure that out for yourself,, It's much to much involved for me to reply on that, when it's been covered in posts before that are good. 

    You Can ask that the dog has proper proof of vaccinations,, and you could ask that they carry additional insurance for their pet and proof of that.. 

    But I would highly recommend that you go NO pets for the property it's simply not worth the expense, and damages that they cause,, you won't regret it and their are plenty of people that rent that don't have pets.. The pet rent is a hassle, can be a money maker, but rarely will cover costs of damages and issues pets cause. 

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  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    9y

    @Ted Klein They will need to provide proof that the animal is indeed qualified as a service animal. Unfortunately this documentation is getting easier and easier to come by.

    Also, I was sure to let any prospective tenants know that the facility was not pet friendly, and though you may see a neighboring tenant with a dog it is because he was here when you took over the building. That way they don't get any ideas later.

    I find that if a tenant sees you repairing/bettering the property they are going to see the rent increase as justified. They know what the going rents are, every time they talk with a friend your tenant probably hears, "you pay what! and you have a garage! You lucky stiff." And they also know landlords who engage in deferred maintenance... What we used to call slumlords. Good luck!

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  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    Hi @Ted Klein,

    Congratulations on your purchase! I will address the issues separate as they sort of are in my eyes.

    1) The newly remodeled apartment can be pet free even if across the hall has one. He is just grandfathered in, the new tenant will not be.

    2) The rent for his unit does have to go up ($400 is a chunk of cabbage to be leaving on the table every month). If you are planning on making his unit pet free, he will most likely move anyway. I would bet the odds of someone staying over a $1000 a month increase before having them stay if they have to get rid of Fido. 

    3) Keeping that tenant does have value, not $400 a month value but some value. So either I would look at getting rid of him and putting it at market and pet free or moving it up to market with him and Fido staying. $100 increase every 6 months for 18 months at least gets you close sooner and he knows it is coming. This allows him to decide on leaving in 6 months/next year whatever works but you can't take 4 years to get there.

    Good Luck!

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    @Ted Klein , lots of good advice and comments here. 

    You say he's $400 under market, but what is market? $400 under a $500 market rent is a HUGE deal, but $400 under a $3000 market rent isn't nearly so much.

    What can he afford to pay? I like the gradual rent increase. The renovated side is market, the other guy is Market-$300 for 6 months, then market-$200 for 6 months, then market-$100 for 6 months, then market. If he chooses to move, then renovate and raise to market immediately. 

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  • Ted Klein
    OP
    Investor · Redmond, WA · Member since 2016 · 169 posts · 58 votes
    9y

    @Mindy Jensen @Mike Cumbie @Patrick M.@Deanna McCormick

    Mindy, the market rate is $1400 for a 2/2 with a garage. He has a good job, so, I'd hope he could afford it. Tenant is currently paying $1000. I'd like to increase quickly and Mike, I agree with your approach but even at a $100 increase every 6 months for 1 1/2 years there is still $4100 in lost rent over just raising to $1400 and getting a new tenant. Either way, he may move before it ever gets to the $1400 so trying to make decision on whether to raise and move on, or gradually increasing over time. If I were to take the gradual approach and take the $150 increase as Deanna suggested, the lost rent is reduced to $2300 which makes the loss easier to take, but the likelihood of an early departure even greater.

    Any other suggestions??

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  • Patrisha Leybovich
    Real Estate Agent · Chandler, AZ · Member since 2016 · 53 posts · 34 votes
    9y

    Rehab the one next door and offer to move him over to market rent, plus a monthly pet fee. People are willing to pay for their pets.  People who aren't willing to pay monthly for their pets usually don't take care of them, so they weed themselves out naturally in the application process. 

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