Increasing Rental Yield - Air Conditioning

Oh, the comfort factor is enormous, which is what I was trying to say. But not much of a value add. I personally couldn't live in a house without decent heating and I imagine that's a common perception here, so a reverse cycle aircon or wood fire is essential. If the weather is nice in Perth, not so much of an issue.

Window airconditioners *should* just plug into a powerpoint (our three do) but invariably airconditioners in rentals have been installed on the cheap and you can't use your toaster while the aircon is on. Split system is a tad more expensive to install.
 
Lets say $1500 inclusive of fitting for the AC with payment coming from OPM.

$1500 x 7% = $105 p/a or $2.01 a week expenses increase.

Less 30cents in the dollar tax deduction = $1.40 a week cost to you.

Less depreciation on the AC itself which decreases your expenses even further

So keep the rent as is and absorb the cost yourself, or increase the rent $5 a week and you're $187 p/a or $3.60 (pre-tax) a week better off.

I hope this provides another perspective for you Kim.
 
One thing that my PM in Brisbane mentioned when we discussed this issue, is that if the property is at the lower end of the market then a ceiling fan may be a better option - lower income renters whilst they may like the idea of AC may be unable to run it due to electricity costs.
 
If your tenants have asked for the A/C then by all means negotiate the increase, however if they haven't asked for it then I wouldn't recommend putting anything in.
 
Rixter said:
Lets say $1500 inclusive of fitting for the AC with payment coming from OPM.

$1500 x 7% = $105 p/a or $2.01 a week expenses increase.

Less 30cents in the dollar tax deduction = $1.40 a week cost to you.

Less depreciation on the AC itself which decreases your expenses even further

So keep the rent as is and absorb the cost yourself, or increase the rent $5 a week and you're $187 p/a or $3.60 (pre-tax) a week better off.

I hope this provides another perspective for you Kim.
Click to expand...


So keep the rent as is and absorb the cost yourself, or...

Is that really a good business plan ??


...or...with that $ 3.60 pre-tax profit....you can obviously pay the same 30% tax on the income of $ 1.08, leaving you with $ 2.52 per week in your hand.

But you've still got the $ 1,500 debt.

No worries.

Give it 595 weeks or 11 and a half years and you'll be back to square one.....

....unless in that 11 years the thing ***** itself, and the A/C repairman is called out, say 3 times in the 11 year timeframe. $ 80.00 to drive up, another $ 100 to tinker with it.

No worries.

Tax deductible you say - out of pocket expenses = 3 * (0.7 * 180) = $ 378.

No worries.

At $ 2.52 per week, the maintenance bills will be paid off in another 150 weeks or 3 years.


......after year 15 you'll be in the black.....

No worries.

......but then the Tenant's will be whinging so much by then about the "old clunker" not working, you can start the merry-go-round all again.

No worries.

I hope this provides another perspective for you Kim.
 
Last edited:
Dazz said:
......but then the Tenant's will be whinging so much by then about the "old clunker" not working, you can start the merry-go-round all again.
Click to expand...
Haha, I own one of those "old clunkers". It has that wood-look contact stuck all over it, beige fins on the air outlet, and the numbers on the dials have long since come off and are now done in handwritten texta. It would easily be 30 years old, give or take.

It works a treat (has obviously been regassed in the past), it just looks terrible - half those beige fins are broken off, for a start. I did say I got it free :D

With the current modern throw-away technology though I suspect you won't get 15 years of life out of a 2010 airconditioner.
 
so can we all agree? Kim you should just stick the $1500 into your mortgage offset until you can find a better use for it.
 
Dazz said:


But you've still got the $ 1,500 debt.

Click to expand...


Why pay it off or own it??

The idea is to control the asset whilst others pay the holding costs.

This is where most fail residential investment 101. :eek:

I hope this provides another perspective Kim.
 
Ausprop said:
so can we all agree?
Click to expand...

Silly question on Somersoft. Of course the answer is no Ausprop.

As you can see from above, ol Rixter reckons carrying a $ 1,500 debt for a clapped out 15 yr rusty piece of junk is good business. :D

He also equates ownership of a clapped out 15 yr rusty piece of junk as the equivalent of succeeding in residential investing. :D

If that's investing, then put me down as wanting to fail immediately.

Get outta that class ASAP if that's what the teacher is teaching.
 
Im surprised Rixter's suggestsing it.

I just can't see th evalue in it, nor how it would help one avoid failure.

What do you mean Rixter ?
 
Rixter said:
Show me where I suggested what Bobby states I did :confused:

All I see is Bobby twisting words as usual. :D
Click to expand...

Rixter, I saw Dazz adding his own colourful touch to words...

I was referring to this:


Lets say $1500 inclusive of fitting for the AC with payment coming from OPM.

$1500 x 7% = $105 p/a or $2.01 a week expenses increase.

Less 30cents in the dollar tax deduction = $1.40 a week cost to you.

Less depreciation on the AC itself which decreases your expenses even further

So keep the rent as is and absorb the cost yourself, or increase the rent $5 a week and you're $187 p/a or $3.60 (pre-tax) a week better off.

and this

Why pay it off or own it??

The idea is to control the asset whilst others pay the holding costs.

This is where most fail residential investment 101.


and that's what made me ask you this

Im surprised Rixter's suggestsing it.

I just can't see th evalue in it, nor how it would help one avoid failure.

What do you mean Rixter ?


What do you mean ?
 
Sometimes, reading the "excitment" in some of the comments .... you start to think ... should I ..
Any way, I decided I should.
I believe that you should have a plan, not only to maintain, your investments, but also to upgrade them over the years.
The reason I say that is, that each year, new products hit the market place, and over time, what was an "option" is now looked upon, as a standard item.
From my observations, the properties that are of a higher and better standard (but naturally not then stratisphere priced) rent quicker, than the under optioned or under maintained. These are my observations, to both residential as well as non residential properties.
 
I'm with Rixter and Peterw in that, if we can upgrade our IPs and increase the rent to more than cover the cost to us per week, it makes the IP easier to rent next time. Dishwashers and air-conditioning are two obvious examples of things that were considered somewhat of a luxury in a rental even ten years ago, but are almost expected now. A house with them would certainly rent faster than without, all other things being equal.
 
this should be simple. the thing costs $1500 and has a life of say 5 years. so there is a $7 per week. plus maintenance say $2 a week. interest is say $1 a week.

the cost is about $10 a week, plus the time and hassle of doing it.

youwould want $20 a week extra rent to even think about this. but it all depends on your return benchmark
 
You must log in or register to reply here.

Similar threads

B
Would you add air con in your IP?
2
Replies
33
Views
3K
citystar
C
D
should I add a new air con split system
Replies
2
Views
1K
BMan
B
F
Air con semi broken
Replies
4
Views
1K
beachside
beachside
devank
Inefficiencies of PMs
Replies
7
Views
4K
Genia
Genia
A
Tenant Requesting Evap cooling
2
Replies
24
Views
4K
Scott No Mates
Scott No Mates
Back
Top