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Apartment application fees.

neo 7

neo 7

The bass player doesn't get a sandwich
Aug 22, 2011
2,747
3,413
Erie, PA
#1
I looked at 2 apartments today. The first apt. is owned by a property management company and their application fee is $30. Two other guys showed up when I was viewing the apt. Three potential tenants X $30 = $90. If this apt. is shown to three people per day, five days a week that's $450 per week: almost as much as the monthly rent of said apt.

The second apt is owned by an old lady who also lives in one of the units. She charged me $7 for the application fee. I talked to her about the $30 charge from the first apt. and she said it was total B.S. since the credit check and criminal background check cost her $7, hence her charge to prospective applicants.

I did a quick Google search and didn't find much about the laws in my state (admittedly I didn't look very hard though).

Since I had to leave three voicemails to the property management company I don't think they are trying to make a profit from just showing the apt. But I can definitely see the potential for abuse.

Does anyone know if these companies are making money from the application fees?
 
#3
That's fairly normal around here. I had to pay $50 for my last apartment, but that was being shown by a realtor, so that would explain the elevated fee. But my current apartment has a $25 fee. Background checks might vary from state by state, though I can see some places charging extra as a "convenience fee".
 
#4
Based on my experiences in over 20 years of managing various properties, the actual cost of a background check may vary depending on how many credit agencies are accessed and which reports the manger would choose to use.

Sometimes property managers go through their property association to provide reports which may add to the cost.

Also, like shipping and handling cost for goods, service providers may add their own additional processing costs.

Alternatively, sometimes owner's will charge more because they want to limit the number of people that apply and prefer potential residents can afford their fee.

As for as "making" money on the deal, I've never run into that and, as for myself, it always cost more in my time and the on-site managers time than we ever collected in application fees.

Btw, for the person/family that was chosen to rent the apartment, I always deducted the application fee from their move-in costs. In addition, I was always very upfront with applicants prior to them coming out as to what I considered financially acceptable to rent the apartment, thus keeping some people from wasting both time and money. I also worked with many people in attempt to assist them when their work record was good but where they may have credit problems in the past.
 
#6
MJ5150, I never said they were not allowed to make money. I was wondering if any of these agencies make a profit from the fees. Or to take it even a step further: making money by selling false hope ie: charging application fees when they have no intention of renting the property, or by prolonging the process when they have already found a suitable tenant.

Stumbo, thanks for your reply.
 
#7
i don't think you could really count on a consistent 3 applicants per day (60 people per month is a lot!), so the potential for turning a profit (especially when you factor in the opportunity cost like Stumbo mentioned of time spent showing/maintaining/processing applications) is pretty slim
 
#8
First, $450 a week is not a lot of money. And that is assuming they take applications from everyone who walks in the door.

Second, if you have to have an employee run the background check, review the data, and then make a recommendation or prepare additional paperwork - $30 is exceptionally reasonable.

If the employee has health benefits as a result of their employment with the property management, their actual cost to the company is larger than their salary, typically up to 1.5 to 2X their hourly rate.

And the background check done by the company may be more thorough, and cost more.

The old lady doesn't have her salary built into the fees, and significantly lower overhead. $7 is also reasonable, especially if the quality of the check is lower.
 
#11
fourstringdrums said:
I take paypal and personal check for that 450 :-)

How is 1800 a month not considered a lot? Though thats more than my income so I'm biased
Click to expand...

First off, it is not a sustainable $450/week. Everyone who walks in the door does not apply to the property. This is assuming 3 applications per day

There are only a finite amount of apartments available at any given time, so there are only a finite amount of applicants that will be considered.

If the rent is $1000/month/unit (not unreasonable for a decent 2 bedroom apartment in a decent area), most leases will require a one year contract. The total income to the property management is $12,000/year. If the property has 10 units, this is $120,000/year. While there are operating and maintenance expenses, as well as mortgage amortization, property taxes, other land-lord fees, etc., this is a nontrivial sum.

$1800/month = $21.6K/year; which is only 18% of $120,000.

It is not $1800/month profit either - there are costs to run the background checks, pay the person to analyze the data, etc.

While this is a heuristic set of numbers - I am just trying to make the point that it is not such a scam as the OP insinuated. On larger properties with more units - the percentage of income due to application fees is even reduced further.
 
#16
MatticusMania said:
Well, no, nor do I. 450/mo is a substantial amount of extra income.
I have temporarily come into an extra 750/mo due to no longer paying rent on the previously mentioned condo. Pretty freakin sweet!
Click to expand...

You missed the point completely. The question was addressing whether a profit is made on apartment application fees, not whether the money is a decent sum for an individual to make. To a property management company, the money is small change (see Stumbo's post for more explanation).
 
#17
Chebass88 said:
You missed the point completely. The question was addressing whether a profit is made on apartment application fees, not whether the money is a decent sum for an individual to make. To a property management company, the money is small change (see Stumbo's post for more explanation).
Click to expand...

I think you misinterpreted my post as something other than it was. My comment in regards to 450 a month being a substantial amount of extra money had nothing to do in regards to the article. fourstringdrums and I went off on an unrelated tangent. We were no longer commenting on the OP.
 
#19
iamlowsound said:
I have never paid anything when applying for an apartment.

lowsound
Click to expand...

In Canada, or at least ON and NB, a landlord is not permitted to charge an "Application" fee. The Lessor adds the credit check charges into the expenses column, and makes it up later in the rent.
Any accepted apps are put in the apartments file, and any rejects are shredded. I have, on occasion, taken last months rent as a deposit, but if the app gets rejected for whatever reason, the cheque is returned or destroyed.
Charging to make an application is just wrong, unless the amount is applied to first or last months rent, or "damage deposit" depending on provincial regs. I have heard of some supers/lessors trying this and getting caught, fired and charged with theft.
It all depends on provincal/state regs, I guess.
 

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