Pet Rent and Pet Fees in Apartment Underwriting: How to Count Them

On this page

1. What counts as pet income?
2. What costs come with pets?
3. Hypothetical example
4. What should you check before you commit?
5. How DoorRaise fits in
6. FAQ

Pet rent and pet fees are part of an apartment building's other income. A resident who keeps a pet may pay a monthly pet rent, a one-time pet deposit or a non-refundable pet fee, depending on the lease and the local rules. The income is real when it is collected, but it is smaller than many sponsors assume, and it carries costs: more wear on the units, more turnover, more noise complaints and sometimes a higher insurance cost. A fair underwriting counts the income the building actually collects and nets out the costs the pets create.

This guide explains how to count pet income in a deal, how to net out its costs and how to show the number to investors with a lower case.

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What counts as pet income?

• Monthly pet rent: a recurring charge per pet, which is usually the most reliable part.
• Pet deposit: money held against damage. It is refundable and is not income until the owner keeps part of it.
• Non-refundable pet fee: a one-time charge at move-in that the owner keeps. It is income when collected.
• Pet-related services: a pet waste service or a pet wash, if the owner offers them and charges separately. These need their own contracts.

Do not count the pet income of residents who moved out, or pets the building is not allowed to keep under the lease. Check the rent roll and the resident ledger, and count only what the building has collected.

What costs come with pets?

Pets add costs that a sponsor must net out:

• Extra cleaning and repairs for flooring, doors, screens and paint.
• Longer turnover in units with pet damage, which means more vacant days.
• Noise and complaint handling, which takes management time.
• Insurance, if the policy has a pet or dog-breed exclusion or a higher premium for pet-friendly units.
• Pet waste and grounds costs in common areas, if the building has a dog run or a pet area.

Add these to the operating budget as their own lines, so the pet income is not hidden in a larger number.

Hypothetical example

These figures are made up for illustration. Use the property's own rent roll and ledger.

A 72-unit building has 30 residents with pets. Pet rent is $35 a month per pet, and 30 pets pay it, which is $12,600 a year. The owner collects a $400 non-refundable pet fee from new residents, and expects 10 move-ins a year with a pet, or $4,000 a year. The pet deposit is refundable and is not counted as income.

The base case nets to $12,600 a year. A lower case with 20 pets paying pet rent and only 6 new pet fees gives about $6,800 a year after the same costs. The plan shows investors both, and does not assume the higher number will hold when the local market or the lease changes.

What should you check before you commit?

• The lease language on pets, the rent, the deposit, the fee and the pet limit.
• The local rules on pet deposits and fees, and the rules for assistance animals, which are not pets for fee purposes under federal fair housing law.
• The insurance policy's pet exclusions and any breed rules.
• The rent roll's pet data, checked against the leases and a unit walk.
• The turnover records for pet damage, so the cost estimate has a basis.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units under Rule 506(b) or 506(c). The deal's model shows pet income as part of other income, with its costs and a lower case, so investors see the assumption. DoorRaise does not set pet policies or give fair housing advice. Setup is $1,500 (non-refundable), and the administration fee is $5,000 a year from closing.

Start with a sponsor page or see the fees.

FAQ

Is pet rent counted when a building is valued?

Usually it is part of other income, and buyers and lenders often look at it separately. Use only the collected amounts from the seller's records.

Can I charge pet rent for an assistance animal?

Generally not as a pet fee. Federal fair housing rules treat assistance animals differently from pets. Ask a fair housing specialist or attorney before you set the policy.

Is a pet deposit income?

Not until the owner keeps part of it for damage. Show it as a liability while it is held.

How do I raise pet rent?

Follow the lease and the local notice rules. Test the change with the market rate for pet rent in comparable buildings.

Sources

• Other income underwriting for apartment buildings, for how pet income fits with the rest of other income.
• Apartment lease audit and rent roll verification, for checking the pet data against the leases.
• Apartment turnover cost underwriting, for the cost of pet damage at turnover.
• Example figures are hypothetical. No local pet rent, fee rule or insurance premium is cited here.

This article is general information, not legal, tax or investment advice. Talk to a securities attorney and a CPA about your deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.