Pet owners could be your solution to increasing rental yield
It’s no secret that property investors hate pets in their investment properties. They can be unpredictable, messy and destructive. It should come as no surprise that internal research conducted by realestate.com.au has shown that approximately only 5% of their rental listings are pet-friendly. However, for property investors concerned with improving their rental yield, reconsidering this preconception could provide thousands of dollars annually in additional rental income.
Doing the math
Property investors often associate pets with higher maintenance and overall costs, but extensive studies conducted in the US have shown differently. ‘Companion Animal Renters and Pet-Friendly housing in the U.S.’ found that pet-friendly properties are typically leased out in nineteen days, compared to the twenty-nine days it takes on average to find a tenant for a pet-unfriendly property. Assuming weekly rent of $450/week, this already leaves the pet-friendly property owner $641 better off once both properties are tenanted.
Australian research has also shown that pet owners are willing to pay between 7-14% more rent for the right to keep their pets. For the purposes of this exercise, this will increase the rent for the pet-friendly property to $500/week. For a twelve month lease, this extra $50 a week will add up to $2,600 in additional income.
Pet owners also stay longer; because it is so difficult to find pet-friendly accommodation, they are usually very reluctant to move on. This means that the properties’ owners have half as many vacancy periods to worry about. With an average vacancy period of twenty-nine days for investment properties that do not allow pets, on average this adds up to another $1,859 in lost income.
In regards to the costs of additional damage caused by pets, research data has defied expectations by showing that there is little, if no, difference in overall maintenance and repair costs for investment properties with and without pets. Given how difficult it is for pet owners to find accommodation, they have a vested interest in ensuring that no harm comes to any rental property they manage to secure. With so few rental properties allowing pets on the market, the overwhelming demand for pet-friendly properties also allows owners to be far more selective, screening potential tenants and their references to ensure that they are not only responsible pet-owners, but responsible tenants as well.
Due to these factors, the total difference in annual damages found in the U.S. research between tenants with and without pets was only $39USD, which was not judged as substantial enough to form a statistical difference, especially considering all the financial benefits received by keeping properties pet friendly.
A much more significant cause of property damage, according to the same data, was children. Families with children were found to cause an additional $150USD damages over childless tenants each year. Fortunately, not many property investors were made aware of these results, sparing us from a lot of angry, homeless parents and some very pleased pets.
Crunching the numbers, the difference in rental yields of properties that allow, and prohibit, pets ends up looking like this:
For investors looking to increase their rental yields, allowing pets on a property is a far more cost effective solution than undertaking a costly bathroom or kitchen renovation. If concerns for damages still weigh on your mind, Pet Agreement Forms are readily available online, allowing investment property owners to more strictly regulate the terms on which pets may be kept on the premises.