How much money have I lost??

I've heard about the lease origination fee a little bit, but never gave it much mind until this last convention and it actually made it to my to-do list.

I threw it out there today through text when someone was asking about the total to move in. I told them the security and deposit and the $100 lease origination fee.

He asked me through text about 1/2 hr later why the fee was so high and that he's never had one that high.

Ok. 2 things.

One, the first feedback came that it was too high. 2, HE'S HAD THEM BEFORE!!!

So my dumpiest unit has an interested party that has HAD origination fees in the past on apartments and just thought mine was high.

Retired landlord here, was a tenant long ago. So you want me to pay a fee to you in order to arrange to pay you more regularly in the future to live in your property?

This was a test run for sure. Other folks are doing it and this person applying has seen it before.

Actually, my tenant screening service does it to me. Annual "membership" fee. Not much different.

I'm sure credit cards do it too.

One of my banks does it monthly. $2 a month for the "privilege" of having an account there.

My hunch is that nearly all fees in the house rental biz started with property management companies. As I see it, the property owners would not get a cut of application fees, document fees, etc. from the property management company.

Couple of things: As a conscientious consumer, I go out of my way to not do business with companies and organizations who I feel are just squeezing me for every nickel.

I bank at a credit union to avoid checking and other fees.

I fly Southwest to avoid checked baggage fees. I shop at the dollar store to purchase whatever I might need when possible. And on it goes.

You may get the tenants who are poor shoppers. You may get the tenants who're too lazy to look elsewhere. Maybe you get the tenants with more money than sense. You might get the tenants who will crash and burn when the crap hits the fan.

I will continue to encourage landlords to get out of their own little "do-it-all-youself" landlording world and visit apartment communities or even professional property management companies who manage single family rentals in your area.

Go and actually witness their leasing process and the fees they charge. If you take time to do this one simple exercise, many of you will be utterly amazed at the amount of additional money they collect as simply standard operating procedure.

Am I saying you need to charge all the same fees. Not necessarily, but at least know what your competition is charging and then intelligently consider your options. That's just smart business; instead of simply saying in theory how "you" would respond. Stop looking at things only through your limited landlord lenses and truly see what others are doing and how their customers respond.

As soon as I read the subject line with "Lease Origination Fee" in the Newsletter, alarm bells went off.

See, here in the tenant-is-always-right state of Massachusetts, it's illegal to charge anything except a change of lock fee (and we even pass on that because of the potential of the below).

There's a consumer protection law in MA (MGL 93A) and predatory law firms within the Commonwealth who commonly troll the housing courts looking for violators. That law allows a lawsuit for triple damages PLUS all applicable attorney's fees.

Let's say unsuspecting Mr. & Mrs. Momanpop have 10 apartments and read your little article. Over the course of 5 years, they have 20 families move in and out. Also, lets say over 100 apply with the same paperwork stating the same lease origination fee. That's a total potential class of 120 people at, say $50 each (even if they never paid it, it's still considered damages--we've been down this road. Just saying you may charge something illegal is considered a violation.) That totals $150 per person X 120 people.

But wait, there's more! That's actually a drop in the bucket. In the meantime, Duey, Cheetum, and How, the class's law firm, are racking up 200 hours of legwork trying to track all of these people down, file motions, discovery, yada yada yada. Let's say they charge a modest $250/hr. OUCH!

I would always encourage other's to run any proposed fees by your lawyer. In the above example, those lawyer's fees upfront is cheap insurance. For further reading: massrealestatelawblog.com/tag/massachusetts-illegal-move-in-fee/

nickel and diming them makes them happy to poke back.

My son applied for an apartment in a complex in Michigan. They charged $25 a month to have an accent wall painted a different color. They only painted the wall one time but charged a monthly fee. They had another charge per month for updated lighting. It is what the market will bear.

Charging extra monthly rent for painting a wall by god is just plain wrong and not a customized amenity no nada no way no how. I might agree to a one time charge or fee but not an ongoing rent charge for a painted wall. This is not the same as adding a W/D or Fireplace which are amenities, as always it's just taken to far. I know an extended stay that tries (I said tries) to offer a studio with cheap composition wood floors and charge extra rental fee for what they had to replace old worn out carpet. Disgusting practices. I understand amenities and competition, I have vacation rentals so your talking to someone well versed in this kind of practice. Keeping good tenants starts with the basics, keeping your property in clean well maintained condition, taking care of repairs promptly and fare and reasonable rents. My long term renters have been there for years and I don't jack up rents every year on them.Just one months vacancy takes months to make up with higher rents.

You obviously are a different type landlord much like the fast food industry that charges more and more and you get less and less because the immediate profits are the primary focus. I might expect the big greedy corporation to operate this way but not your independent landlord.

Interesting thread!

I think (know!) there is a dividing line at approx age 35.

Under 35 (33% of the rental market: They'll say "Normal, no big deal." They are NOT penny pinchers like most LLs. They want what they want and they want it now.

Similar to the origination fee - For our last 1000 leases we have been collecting an Non-Refundable Option Fee instead of a deposit and up to $5000 each on the nicer homes. In Indiana the law is clear that this is NOT a deposit and CAN BE non-refundable. We average 50 new leases a year which means 50 "deposits" we do not have to refund.

Side note: 2 speakers at Convention focused on this approach.

For those nay-saying this concept, look around and catch up to the times.

OK That might have been a too tough.

How about this: the way people spend money has changed. Even LLs are now using ACH to pay bills and accepting credit cards for rent.

CONSIDER that the CUSTOMER has also evolved, using different methods and criteria for decisions.

Better? Nicer?

BRAD

PS Traditional LLing is dead. Renters have new, different mindsets.

I'm comfortable with my initial up-front charges. We have the usual non-refundable $25 Prospective Tenant Processing fee, the refundable if you obey our 12 step vacate rules Security Deposit which is equivalent to the monthly rent, and the First month's rent which must be paid for the first 30 days with a cashier's check. The second month can be prorated if necessary.

It's another fee I can't decide on and that is what I call an EARLY TERMINATION FEE.

When the time comes for someone to leave earlier, before the lease is up and they should give me 30 days notice, and of course it's always at a bad time, I want to charge them for the inconvenience. But if I were to put this in the LEASE it may encourage them to actually leave early. Yet, I don't feel I can pronounce that there is (a hidden fee) this administrative fee for their disrupting my schedule. I'd like to hear from anybody who has this "problem", too.