How much is a deck worth in extra rent?

[wylie]

How much is a full width covered deck across a queenslander house worth in extra rent per week?

We are considering adding a 4.2m x approx 10m roofed deck across the whole back of a queenslander with french doors from living area. Ballpark figure to do this is $20K.

Rent is currently $440 per week and tenant has just moved in. She is a "keeper". She has said she will pay more for the deck but we haven't discussed figures.

Now we have a ballpark $20K and we guess that with fees, electrics and french doors, it will more than likely end up more. Working on $22K, we would need to get $30 per week just to break even on our interest costs.

Is $30 per week too much for a big deck? The ball is in her court, but I'm curious to hear others' opinions before I start throwing figure around for her decision.

 

[Propertunity]

Perhaps a better question to be asking is: How much will this $20K spend add to the value of my IP?
If $20K then find something else to do with your money wylie. You hardly want to be repaid @ $30pw for 15 years! The deck will need replacing by then.

 

[Tin Tin]

i guess it depends on how much similar properties are renting for then you could always justify it this way and also tell them what you have told us about covering the cost. It is a tough one though, - especially if they are a good tenant.

30 does seem like a lot but you could try and see what happens. it could go either way, the worse they can do is move out. More likely though that if they are unhappy they will come back to you first to renegotiate the price.

My dad negotiates a price before hand - he did this with aircond. i think he negotiated a 15 p wk increase before installing. something to keep up the sleeve.

 

[wylie]

Perhaps a better question to be asking is: How much will this $20K spend add to the value of my IP?
If $20K then find something else to do with your money wylie. You hardly want to be repaid @ $30pw for 15 years! The deck will need replacing by then.

I agree. I didn't go into more detail but if we build this deck, when this tenant leaves, we will turn up to half of it into a new kitchen, turn current kitchen into a bedroom, and that makes it four bedder.

We would have it drawn up to easily build it in. Apart from the deck, the other issue with this house is that the current third bedroom is tiny and people see the house as two bedroom, one study. That is silly because it is big enough for a bed and wardrobe, but for three sharing, I wouldn't want the small bedroom

So this would be step 1 towards adding an extra bedroom and a deck.

I believe paying $22K for the deck would add at least that much, increase its appeal for new tenants and once this tenant leaves and we install a new kitchen, it would add even more. This tenant is happy to negotiate on the deck, but wasn't interested in us moving the kitchen.

i guess it depends on how much similar properties are renting for then you could always justify it this way and also tell them what you have told us about covering the cost. It is a tough one though, - especially if they are a good tenant.

30 does seem like a lot but you could try and see what happens. it could go either way, the worse they can do is move out. More likely though that if they are unhappy they will come back to you first to renegotiate the price.

My dad negotiates a price before hand - he did this with aircond. i think he negotiated a 15 p wk increase before installing. something to keep up the sleeve.

Thanks. We would definitely negotiate beforehand. If she changes her mind about paying more rent, she could move at the end of the lease. I will not spend anything "hoping" she will pay more next lease.

If she doesn't want to pay the $30 per week this will cost us, we will still have the plans drawn so that we can move quickly when she gives us notice. Hardest part of that is finding a builder who can move quickly. Doing it whilst she is in there has a lot of appeal.

Thanks for both comments.

 

[Kristine..]

Hi Wylie

If you have a new tenant with a new fixed term lease you cannot increase the rent until the end of the fixed term unless a rent review is written into the lease from the beginning

I had the same situation with a new tenant who requested more kitchen cupboards and air conditioning. They did agree to 'pay more' but as they has just signed a twelve month lease we couldn't increase the rent until the commencement of the next letting period, which meant giving them notice of the agreed $10 per week rent increase at the 90 day from end of lease mark, at which point they said that they couldn't afford it and wouldn't be continuing

The next new tenants came in on $50 per week extra, so it was all good, but just be alert that agreeing to pay and being able to legally charge the extra are two different things in property law

Cheers
Kristine

 

[Ed Barton]

How much is a full width covered deck across a queenslander house worth in extra rent per week?

We are considering adding a 4.2m x approx 10m roofed deck across the whole back of a queenslander with french doors from living area. Ballpark figure to do this is $20K.

Rent is currently $440 per week and tenant has just moved in. She is a "keeper". She has said she will pay more for the deck but we haven't discussed figures.

Now we have a ballpark $20K and we guess that with fees, electrics and french doors, it will more than likely end up more. Working on $22K, we would need to get $30 per week just to break even on our interest costs.

Is $30 per week too much for a big deck? The ball is in her court, but I'm curious to hear others' opinions before I start throwing figure around for her decision.

is there any outdoor area atm?

i would pay at least another $50 pw for a good size deck. but i'm not a renter so you might like to discount my opinion.

 

[wylie]

If you have a new tenant with a new fixed term lease you cannot increase the rent until the end of the fixed term unless a rent review is written into the lease from the beginning.

Thanks. Trying to keep this concise meant I probably didn't make it clear that she is happy to pay more rent when this initial six month lease ends, and we would write a new lease at the higher amount. We would be hard pressed to get this built before February 2012 and her lease finishes at the end of March. That is when we would increase the rent, if she agrees to pay more. If she doesn't, we will not go ahead.

is there any outdoor area atm?

i would pay at least another $50 pw for a good size deck. but i'm not a renter so you might like to discount my opinion.

Thank you for that comment. There is a cement slab at the bottom of the stairs where her table and chairs are, but it has no cover and cops a whack of western sun, so a deck at living area level would be a huge improvement for her and anybody else into the future.

I think she might go with the $30 but I would be wary of asking more and "making money from her". She is paying market now. If we did this and were looking for a tenant, we would certainly be trying for a little more.

 

[Ed Barton]

Hi Wylie

If you have a new tenant with a new fixed term lease you cannot increase the rent until the end of the fixed term unless a rent review is written into the lease from the beginning

I had the same situation with a new tenant who requested more kitchen cupboards and air conditioning. They did agree to 'pay more' but as they has just signed a twelve month lease we couldn't increase the rent until the commencement of the next letting period, which meant giving them notice of the agreed $10 per week rent increase at the 90 day from end of lease mark, at which point they said that they couldn't afford it and wouldn't be continuing

The next new tenants came in on $50 per week extra, so it was all good, but just be alert that agreeing to pay and being able to legally charge the extra are two different things in property law

Cheers
Kristine

assuming the modifications were going to get more rent in the future i would have just written a new lease and done the improvements. there would be a very small chance that the tenant would have got litigious as soon as the ink dried on the contract. what's the worst that could happen in that case? you miss out on ten bucks a week and turf them out at the end of the lease and find someone who will pay for the improvements.

edit - moot point given wylie's subsequent post

 

[Ed Barton]

Thank you for that comment. There is a cement slab at the bottom of the stairs where her table and chairs are, but it has no cover and cops a whack of western sun, so a deck at living area level would be a huge improvement for her and anybody else into the future.

I think she might go with the $30 but I would be wary of asking more and "making money from her". She is paying market now. If we did this and were looking for a tenant, we would certainly be trying for a little more.

so basically no outdoor area (unless the tenant's one of those very well tanned women that looks 70 at 40.). is it a sloppy block? will the deck get views and decent breezes? - that would be worth more in the future too.

why wouldn't you want to make money from her? you make money from her on the rest of the house.

i see your moral dilemma. you're building her a deck she wants and pays for, but you are building it with the intention of turning half of it into a kitchen in the future (which she doesn't want) which may result in her leaving. did you rip her off? don't know. i guess your timing intentions of the deck to kitchen conversion is important. if you only intend to do the conversion once she leaves, or wants it then i can see no moral issue.

don't forget about depreciation in your calculations.

 

[wylie]

is it a sloppy block? will the deck get views and decent breezes? - that would be worth more in the future too.

It will not get great views but the back yard runs for about 35 metres and is treed. She would look either side into neighbouring decks, but these have privacy screens and we are thinking we would enclose this deck with weatherboard (instead of railings) to window sill height on the side that will become a kitchen, so that we are half way to enclosing it.

why wouldn't you want to make money from her? you make money from her on the rest of the house.

She seems a great tenant but has only been there two weeks. She is wanting to plant vege gardens and stay long term because her previous house was one year only, and she wants to "settle". The agent who held opens said this was good rent for a "two bedroom" house. There are three bedrooms but apparently the smallish third bedroom was a deal breaker for some potential tenants.

i see your moral dilemma. you're building her a deck she wants and pays for, but you are building it with the intention of turning half of it into a kitchen in the future (which she doesn't want) which may result in her leaving. did you rip her off? don't know. i guess your timing intentions of the deck to kitchen conversion is important. if you only intend to do the conversion once she leaves, or wants it then i can see no moral issue.

don't forget about depreciation in your calculations.

I'm not sure how we could have "ripped her off" and not sure what you mean by that. We were asking $445, had nobody interested at that price, though agent said that was not too high, dropped to $435, found this tenant ourselves but passed her to the agent so as not to cheat him after the work he had put in.

She was trying to figure out how to bring her old free-standing dishwasher and where it could go. Clearly that was not going to work for her so for $500 we bought a dishwasher and she agreed to pay $440 per week.

We got an extra $5 and she got a dishwasher which is another plus for next vacancy.

My biggest problem is that with these older houses, I find it extremely difficult to gauge what it is worth per week, going by the internet. As we all know, photos don't tell the "real" story but just by the listings on re.com I would say that houses from $400 per week to $600 per week all look pretty much the same. That is why we have decided to have an agent find us a tenant each time. At least we are keeping up with "market rent" which is a little harder to do when we are doing our own appraisals.

Long story short... no we are not ripping her off. She looked at other houses, missed one she loved through being one of several applying, but really loves our house and was happy at the price.

Because she wants a long term house, if she is happy to pay for the cost of us adding the deck, we are no worse off financially, we have the basis of making it four bedrooms when she leaves, and I think it is a win/win.

 

[YPG]

Hey Wylie

Interesting thread, don't take the 'ripping off' comment personally though.

I think the point they were trying to make was that ultimately you want to turn half this deck into a kitchen+4th bedroom, whereas the tenant probably doesn't know this.

Once the 4th bedroom + new kitchen are done then I believe you would expect a significant increase in the rent? Which your tenant may not want and may be happy to pay less for the smaller place.

She may agree to pay the extra $30 as she thinks she will be there long term and would really value a big deck opposed to an extra bedroom + kitchen. Where if she knew the ultimate goal was the latter she may not agree to pay more.

I don't Know, that is just how I understood The comment about ripping her off.

However I think your are on the right track. At the end of the day it is your money and is an investment. And I would want to realize the property in the most profitable way before I was concerned about ripping off a tenant. But hey that is just me.

Let us know wha you end up doing.

Cheers

 

[wylie]

I understand your comment more now. We actually did discuss the long term plan, but she is keen for a deck for more rent but likes the 1930s kitchen and doesn't need an extra bedroom, so is happy to discuss extra rent in exchange for a deck... but not interested in paying even more for a better kitchen and extra bedroom, which she doesn't need.

I plan on checking just what extra BCC fees will be incurred by doing this in two parts and also what we will be paying to a certifier to do it in two parts (as opposed to doing it all at once).

Adding just a deck will be a big improvement even if we never move the kitchen, as this has been an issue each time we have it empty. People really want decks or some outdoor living area and will move on to the next house rather than be cooped inside. I'd hate to not have any outdoor area connected to the house, so I understand it.

Draftsman can draw the deck without going into the house, but if he draws it up in full with the kitchen included, he needs to get inside and draw the whole house.

My dilemma is that the letting agent told us that adding a new kitchen and deck and creating a full third bedroom (plus the small bedroom/study) puts the house into a different category and he suggested that depending on finish, we could get between $550 to $580 for a four bedder, study, new kitchen and deck.

I would hate to spend say $40K doing the whole thing (which would save doubling up of draftsman fees, council fees and certification expenses) but knowing that if this tenant was not there, we could possibly be getting at least $110 per week more for a cost to us of $53 per week interest (using $40K figure).

It also would tie up more $40K of our funds which is almost double what we would hope to spend for just a deck.

I'm a bit confused today so will sleep on it and wait until we get a rental appraisal (this week) for a house with similar end finish to what this would become, and once we have that figure, we will look at it again.

If we hadn't just accepted this tenant, told her we will not be developing the big yard anytime soon and told her we would be happy with a long term tenant, I would be happy to do the bigger job and get bigger rent from someone who sees the finished house.

I'm equally not prepared to do the bigger job and not get the extra rent it should bring.

If we hadn't been overseas when this happened, we could possibly have decided to quickly get this drawn but with builders coming into Christmas, there is no way we could have had it built without leaving the house empty, or trying to have potential tenants picture how it will be and agree to pay an extra $110 per week over what it is worth now. Just not going to happen....

Once I know the figures for doing the plans and approvals now for the deck and possibly again if we do the kitchen down the track, it will be more clear and we will then make a decision.

Of course, the tenant might think she is getting a deck for an extra $10 per week, which will make our decision easy .

 

[kathryn d]

You mentioned the tenant has only been there for a couple of weeks. They all seem nice at first. Why don't you give it some, like until May 2012..and if she still is a "good tenant" inform her you will consider it, but can only do it for $$$ more per week.

We have tenants who always say they want to settle down, plant a garden..then they start to get behind in their rent..and then it starts.
We have gotten to the point where we never do anything at a tenant's request. If they don't like it..next.

 

[wylie]

I agree about the "I want to build a vege garden" comment. I also have heard it many times, but have actually had tenants do it too, and she is keen to settle down after having had to move after twelve months in the last place.

I'll wait and see what the appraisal for the other house comes in at, because they are similar and take it from there.

My son said he thought a deck could bring in as much as $50 per week extra rent, but that seems a lot to me.

 

[turk]

Hi Wylie

If you have a new tenant with a new fixed term lease you cannot increase the rent until the end of the fixed term unless a rent review is written into the lease from the beginning

Cheers
Kristine

Cannot the existing lease be voided with agreement from both parties then a new lease then entered into?

Cheers

Pete

 

[Ed Barton]

I'm not sure how we could have "ripped her off" and not sure what you mean by that. We were asking $445, had nobody interested at that price, though agent said that was not too high, dropped to $435, found this tenant ourselves but passed her to the agent so as not to cheat him after the work he had put in.

She was trying to figure out how to bring her old free-standing dishwasher and where it could go. Clearly that was not going to work for her so for $500 we bought a dishwasher and she agreed to pay $440 per week.

We got an extra $5 and she got a dishwasher which is another plus for next vacancy.

My biggest problem is that with these older houses, I find it extremely difficult to gauge what it is worth per week, going by the internet. As we all know, photos don't tell the "real" story but just by the listings on re.com I would say that houses from $400 per week to $600 per week all look pretty much the same. That is why we have decided to have an agent find us a tenant each time. At least we are keeping up with "market rent" which is a little harder to do when we are doing our own appraisals.

Long story short... no we are not ripping her off. She looked at other houses, missed one she loved through being one of several applying, but really loves our house and was happy at the price.

Because she wants a long term house, if she is happy to pay for the cost of us adding the deck, we are no worse off financially, we have the basis of making it four bedrooms when she leaves, and I think it is a win/win.

i'm not saying you're currently ripping her off. but i think it would be unfair to agree to a deck for increased rent and an 'in principle' agreement of a long term deal and then boot her out after a short period so you can value ad with your extra bedroom idea. i guess i was asking if that was the plan or you will do the extra room when she leaves.

 

[wylie]

i'm not saying you're currently ripping her off. but i think it would be unfair to agree to a deck for increased rent and an 'in principle' agreement of a long term deal and then boot her out after a short period so you can value ad with your extra bedroom idea. i guess i was asking if that was the plan or you will do the extra room when she leaves.

I also think it would be unfair to boot her out after a short period so we can add value with the extra bedroom idea. We never planned to do this. It was only the ensuing "teasing out" of what happens when she leaves, and how much extra that will cost by getting double approvals that even brought the idea of doing it all into our thought processes.

I was keen to do the whole thing (hoping for about $40K) and only charge her the actual interest it costs us, but that is silly use of our money when we could get possibly another $110 per week or more (according to the agent) for the whole job. That would not be good use of money we can do other things with, and I would not do that to this new tenant, or to ANY tenant. I like to sleep at night.

We don't want to spend $40K on the whole job now unless we get a huge hike in rent, and I would not do this with this new tenant. She rented a house "as is", loves it, and is prepared to pay some extra for a deck. That is what we will provide to her if she is happy to cover the interest it will cost us to do (event hough perhaps we could get more for a new tenant).

It is the "considerably" more that we would get for the bigger job that I would not even ask this tenant to cover. It would put the house into a different category and if she was looking for that larger and more expensive house, she would not have looked at our house.

My only dilemma now is whether to do anything at all. That is up to her, once we run the numbers past her and she says "yes" or "no".

If she says "yes" we will still engineer the deck to take the extra weight of a kitchen down the track (even if we never do it) and we will make weatherboard up to sill height so we don't have to rip out railings.

My ONLY concern is not wanting to spend too much on double draftsman, council and certifier fees and the extent of the extra is something I will be discussing with them tomorrow when I call them.

If I find it is going to cost us $1000 per service EXTRA (ie $3K) to do it in two stages, then we would possibly have the full draftsman service drawn up in two parts, have the first approved and built (deck only) and see if we can "extend" the approval for the other part more than the usual two years that we have to complete the project under the current plans.

If we can do that, and extend it to four years, I guess that probably would give us long enough. I've never had a tenant stay that long (I don't think).

So, after sleeping on it, next comes the phone calls to see how much double paying is involved, and we take it from there.

I have no plans to rip this tenant off (or anybody else ) but want to improve the rentability for the next tenant, make it more attractive to keep this tenant long term and do it without wasting our money by double handling.

I will report back once I have a day home to make these calls (hopefully tomorrow) and share the outcome.

Thanks everyone.

 

[NBS]

One of the others that will need to be considered for a pricing, is a surveyor.

So you have the Draftsman, Certifier, Council, Surveyor.

The council fees, the certifier may include in thier fees just be aware some certifiers charge extra on top of these and can be lots of extra $$$. Do a call to the council on what thier fees are, then you are more informed when specking to a certifier.

Brian

 

[Ed Barton]

sounds like a good plan. good luck.

 

[wylie]

One of the others that will need to be considered for a pricing, is a surveyor.

So you have the Draftsman, Certifier, Council, Surveyor.

The council fees, the certifier may include in thier fees just be aware some certifiers charge extra on top of these and can be lots of extra $$$. Do a call to the council on what thier fees are, then you are more informed when specking to a certifier.

Brian

Thanks Brian. Would the surveyor be needed when the block is large enough that there is no chance of being on anybody else's block? Is there another reason we would need a surveyor?