My recent trip to the mechanic for some work on my car started me thinking about what tenant charges are normal and which are not.
What do tenant charges have to do with fixing a car?
Here’s how my mind started wandering about what’s normal to charge a tenant and what might be a little too creative.
Good News And Bad News
My repair tab at the garage ran about 3X more than what I’d anticipated, although fortunately I’m able to spread the needed repairs out over a couple of.
The good news was that the garage did a few simple repairs for me for free.
Granted, what they did do at no charge wasn’t all that expensive, but they could easily have nickel-and-dimed me or factored the freebies into the cost of the repairs I did pay for.
But they didn’t.
And that’s the whole point in having a list of reliable suppliers, something that good investment property management will teach you how to do.
Creative Tenant Charges
If you’ve invested in any type of investment rental property management courses you already know that it’s always a good idea to do periodic market research on the rents that you’re charging.
A reality check, if you will.
If you don’t do it, your tenants will, and who wants to be caught off guard by a tenant?
Over the weekend I was doing just that, some on-line research, and there was one house for rent listing that caught my eye, offered by a property management company.
What got my attention was that in addition to the monthly rent the tenant was required to pay the monthly management fee was well.
I don’t mean the HOA, or utilities, but the monthly fee customarily paid in this market by the owner of the house for rent.
This extra fee to the tenant was kind of disclosed in the ad. It was called the ‘monthly administrative fee paid to XYZ Management Company’.
Surprising Charges To The Tenant
Now I’m not sure how many prospects that want to rent that house would catch the fee mentioned in the ad, and I’m also sure the fee is going to be itemized in the lease.
The problem is that it’s not a customary fee charged to a tenant – yet – so after the prospects get all excited about the house for rent, have had their rental application approved, and sit down to sign the lease, they’ll see this fee.
Some may question this administrative fee, but most probably will not. After all, finding a house to rent, just like buying a house, has a lot of emotion attached to it.
If you’re the owner of this property you might say, “Bravo, I just improved my cash flow by 8% a month!”
True, in the short term.
But when the tenant discovers they’re paying an above-market rent, and trust me they always do, you’ll likely have to go through the time, trouble and expense of finding another tenant to rent your house.
Unusual Tenant Fees With An International Twist
In London the market demand for rentals is extremely strong which allows owner of rental property to charge some pretty unique fees to tenants.
Among them:
- Administration fees
- Deposit administration fees
- Credit reference fees
- Check in fees
- Check out fees
- Lease renewal fees
Apparently tenants are starting to push back but with the amazingly low vacancy rate that London has it remains to be seen how successful the tenant complaints will be.
Tenant And Landlord Beware
If the charges to the tenant are customary in the market, or if there’s enough demand where as an owner of investment real estate you can get away with charging the fees and passing through to the tenant, I say fantastic!
If on the other hand you’re pushing the envelope on tenant charges and doing a little too much thinking outside of the box, a short-term gain of a few dollars a month will likely lead to a higher turnover rate and higher re-leasing costs a year down the road.
Jeffrey Roark
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