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Charging Tenants an Application Fee

First—it’s okay! Asking someone to pay to apply for tenancy is not only okay, it’s an established, industry-accepted practice. Every landlord should charge a reasonable, non-refundable application fee to at least cover the costs associated with conducting a sufficient background check. Otherwise, you may find yourself more likely to approve an applicant you would ordinarily think twice about, simply because you’ve passed on all the previous applicants and your pockets are running on empty.

Keep in mind that an average background check usually costs around $30. Application fees collected by landlords, depending upon where the property is located, range from $25 all the way up to $75 (sometimes seen in higher-rent areas, such as San Francisco).

If you’re worried that asking for an application fee will discourage applicants from applying—don’t be! First of all, you may discover this to be a constructive—and, indeed, very valuable—way of weeding out (pre-screening) those that already think they may not qualify. Secondly, you can always consider offering the cost of the application fee as a credit toward the first month’s rent – contingent upon approval of course. This type of gesture is always greatly appreciated and helps establish a good-will landlord-tenant relationship from the get-go.

How much should I charge someone to apply?

The best way to determine anything in real estate is to perform a comparable analysis—which, in this case, means snooping around and checking out the competition. Open up your local newspaper or apartment guide or visit your favorite rental website and just start shopping. See what the competition charges to apply for a lease—and then calculate your own personal screening expenses and base your fee within a comparable range.