When you first read this article, you might assume we want you to nickel and dime your tenants and customers. That’s not our intention. Over the years, we’ve learned that certain fees can help you better manage buildings. Some of these fees punish bad tenants; others provide additional services for your customers. As a landlord, you should treat your rental property as a business. If you allow tenants to violate their lease agreements by paying rent late or in any other way, they will end up taking full advantage of you. Let me share the 13 Fees you should be charging as a landlord to maximize your revenue!
1) Application Submission Fee
This fee is for processing an application to rent a property. This covers the cost of performing credit and criminal screenings on potential tenants, and some of your time reviewing rental applications. The fee usually falls within $50 – $100 per applicant, depending on your area, and how much it costs to screen applicants.
You can expect to see fewer applications when you uphold this fee, but the ones you receive are usually the people who know they are qualified to rent the property. This can be thought of as a way to automatically screen out bad tenants. This also helps to ensure that applicants fill out all of their information correctly, which could save you time later on in the process.
2) Transaction Service Fee
In your house rules and tenant move in packet you need to specify all the ways that they are able to pay rent; whether it be cash, personal check, money order, or through online systems. You will want to specify that some specific payment options will include this Transaction Service Fee. In the past this fee was commonly associated with online payments, but the trend recently from most landlords is to have all rental payments go through an online system. Now the trend is reversed in favor of online payments as they are easier to process and save time.
3) Emergency Network Service Fee
This is a monthly charge added to every lease that covers the cost of outsourcing your 24-hour emergency calls to a call center. Whether or not you pass this cost on to tenants, it’s a good idea to outsource your emergency calls in order to reduce your stress levels. When you explain this fee in advance to tenants, most of them are happy to pay it because they understand why you need it. If you decide to go this route, be sure to add this information to the lease agreement as a monthly charge that will be added to the total rent.
4) Late Rent Payment Fees
There are a number of different methods for charging late fees. Most leases include late fees. The most common are an initial charge after the due date; a per-day fee after that; or a percentage of the rent after the due date. Be sure to find out what your local state laws are for this fee, as many states have enacted limits on how much you may charge.
Landlords are often dismayed by late fees, but judges tend to dismiss charges levied on a per-day basis. In response, landlords should institute simple and strict late fees that must be paid immediately upon the due date’s passing.
5) Lease Buy-Out Fee
When a tenant wants to get out of a lease early, it is good to have a buy-out provision in the lease. Buy-outs are typically used when a tenant gets a job transfer or just wants out and has money to pay and walk away. The normal amount that can be charged for this can be between 1 to 3 months rent.
Essentially, the other terms of the lease will remain the same. However, the tenant can change the end date of the lease and move out at an earlier date than originally scheduled. The move-out process will remain unchanged, and the deposit will be returned based on the usual deposit refund policy.
6) Lease Initiation Fee
This fee, also known as a move-in charge or an upfront charge, is basically a nonrefundable portion of the security deposit. If you classify this as a fee and not a deposit, you’ll gain some advantages—you can keep this money and use it for whatever you want, but if you classify it as part of the deposit, you may be restricted on what exactly you can use this money on.
Your lease should clearly state whether a security deposit or additional move-in charges are required. If a move-in packet is provided, this fee should be included in it. Typically, the amount charged for this fee is approximately a couple hundred dollars.
7) Lease Renewal Fee
In high-demand areas, you can ask for a lease renewal fee. This will cost a couple hundred dollars or a percentage of the monthly lease amount. In some cases, you can offer the option to keep the rent stable for another year at the current price. This fee can be a great option to reduce potential vacancies as it will retain good tenants in high demand areas.
8) Violation of Lease Fee
You may charge a lease violation fee to tenants who violate the terms of their lease. This fee can be in addition to any other fees associated with the specific violation. Typically, you should try to warn tenants the first or second time they are violating a clause of their lease before charging them a fee, but if it is a serious issue, you may not have time to wait for a warning.
9) Missed Appointment Fee
This fee can be assessed against a tenant who does not show up for an appointment at which he or she could have completed a maintenance request. As a good landlord, you should keep all your maintenance requests in writing so that there is no question about what fees are due or who owes them. You need to include this type of clause in the lease agreement and require it as a prerequisite to the submission of any maintenance request.
Landlords should not expect professional vendors to make free service calls, and neither should tenants. If a tenant misses an appointment, the charge is applied and the appointment rescheduled.
10) Pet Application Fee
Additional information can be requested from potential tenants with pets. A landlord may choose to ask for a pet application to supplement the regular rental application if pets are permitted on the property. The pet application may request information such as the type of pet, name, color, breed, weight, previous landlord references—and any vaccination records. Typically the amount you can charge for this is small, but enough to compensate for the additional time needed to process the application.
11) Pet Rent
A pet fee is an additional charge applied each month for the use of the landlord’s property. The fee can be adjusted based on the size or type of pets the tenant has, and in most cases, good people with good pets are willing to pay for the privilege of having them. With so many landlords choosing not to allow pets, it is acceptable for a landlord to charge for this accommodation.
12) Utility Processing Fee
The service cuts the costs and creates income for a building owner who does not have separate meters for each unit, or in areas where the utility company will not allow tenants to put utility accounts in their name. Instead of the owner providing utilities to the tenant at no cost, the landlord charges the tenant for those utilities and pays the bills themselves.
For flat-rate utilities such as water, sewer, and garbage, this is easy. For services that are not flat rate, the easiest way to calculate bills is to keep an average from the previous year and charge that average on a monthly basis to tenants. Tenants who don’t pay for utilities are the same ones who have the windows open and the heat turned all the way up in the winter.
13) Weekend Move in Service Fee
When a tenant wants to move in on the weekend or during times when you are not normally available, you may charge for the convenience of this service. For example, if a tenant wants to move in late at night and needs a copy of the key, you may charge for providing that key immediately rather than waiting until your regular business hours. To avoid having to work all nights and weekends, you could put a lockbox on the property and give the tenant the code to it once they have paid for this service and satisfied all other requirements related to moving into their new home.
In the end, what it all boils down to is that you need to find a solution that works best for you, and your properties. After all, there’s no one-size-fits-all approach charging and upholding fees. You need to figure out an effective method that will work in your rental property and with your existing tenants. As you gain more experience managing properties, however, you’ll be able to figure out which ones work best for you. Get started now, and make your rental property more profitable and increase its revenue streams.
