While the national real estate market is in the doldrums, things are looking up somewhat in Chicago, with rental yields predicted to grow at a steady clip throughout 2024.
If you're a property owner wishing to take advantage of this long-overdue upswing in the market, you'll need to get your tenant onboarding process in order today. One of the most important things to understand is the application fee, which can be handled on your behalf by a local property management company.
Application fees can vary depending on the needs of the landlord or owner, as well as local laws governing these. Read this two-minute explainer to find out everything you need to know about application fees.
Why Charge an Application Fee?
Getting a new tenant for your rental property requires a thorough and legally compliant tenant screening process. It also requires your potential tenant to fill out an application to explain why they are a good fit for your property.
This will include information on their lifestyle, job, income, and immigration status. It is your job to process this application and verify the information it contains. All of this costs you time and money. This is what the application fee is supposed to help cover.
Running a background check, spending working hours going through the paperwork, or paying a property manager to process this on your behalf are all valid reasons to charge an application fee.
What Are the Laws in Chicago?
Before you set an application fee, it is essential that you do so in a way that is compliant with Illinois law. You are allowed to charge a fee in Chicago. However, the cost must be deemed as "reasonable" and it must not exceed the cost of processing the application.
You should be able to demonstrate what that cost is and provide a receipt for the application fee for the benefit of the applicant. Getting this right is essential to avoid fines or legal sanctions against yourself and your property.
Transparency is Key
Ensuring a solid passive income stream from your rental properties requires full compliance, good documentation, and a commitment to upholding positive tenant relations. All of this is built on transparency.
You should always include a full cost breakdown of what the application fee covers, ideally somewhere in the application document itself. You should also state your refund policy clearly.
If the property becomes unavailable or the landlord does not process the application, you should issue a full refund, for example. These small steps go a long way toward ensuring good business practice.
How a Property Management Company Can Help
The application fee is a routine part of the rental market. However, it's easy to get wrong. This is where a property management company can help. A local, experienced property manager can take care of the admin for you.
They can draft the application, conduct the tenant screening, set the application fee, and ensure that the process is legally compliant. If this sounds like something you need help with, do not hesitate to get in touch with the team at Chicago Style Management today.
