Rental application fees are fees you (the landlord) can charge prospective renters just to process their applications. Even when you work with a property management company, no one prescribes what you should charge; you get to decide!
Receiving a few extra dollars to help the application run smoothly is helpful. However, you should always carefully consider what you'll charge. If the application fees are too high, you might scare great tenants away.
This article looks at the typical fees landlords charge. Keep reading to find out what works best for your area.
Typical Rental Application Fees
Until recently, there had been no limit to the rental application fee a landlord was allowed to charge prospective renters in many states. Because rental application fees are non-refundable, some landlords use this mechanism to make extra cash.
Though this wasn't a widespread problem, it did lead to some ridiculous fees in exceptional cases. Application fees are not supposed to be a substitute for rental income. Because of this and the Federal government's focus on affordable housing, a new law made its way through the legislature.
Each state can have its own rules for rental application fees. For example in Connecticut, from July 2024, rental application fees will be capped at $50 per applicant. This is meant to curb exploitative practices, but it puts a lot of pressure on landlords to use the first tenant screening report they can generate.
What Rental Application Fees Are For
In most cases, application fees are collected to pay for tenant screening. Tenant screening is a must-do, especially for first-time landlords.
Tenant screening reports consolidate relevant information on a tenant from various sources. Most contain a summarized credit history, rental history (including evictions), and even criminal background. Every pay wall the screening process hits makes the report cost more.
The looming price cap can make this more difficult for landlords. Hiring a property manager to help speed up marketing, tenant screening, or tenant placement are all viable solutions.
Rental Application Fees Best Practices
Rental application fees can do many things beyond paying for tenant screening. Firstly, the extra price is like a soft buffer that keeps people from wasting your time. Only people who are genuinely interested in your listing will pay the fee.
However, it's essential to keep it low enough so that you don't chase good tenants away. You achieve this by cutting as many costs out of your tenant screening process as possible. Using the first report you pull as your primary reference or working with a property manager are the two best ways of cutting these costs.
Getting a Property Management Company to Help
If you don't want to pay for the tenant screening process out of pocket, you can always charge application fees. These non-refundable fees can help a landlord protect their rental property investment.
Many states are adopting caps to rental application fees in 2024 if they haven't already. If you usually run over the price your state requires, a property management company can help you streamline your process.
At Alexa management, we have quick, efficient tenant screening expertise. Contact us today and learn how to get your tenant screening done for the best price.
