Psychology of IP Expenses eg repairs

[geoffw]

Yeah, because as soon as they stop eating correctly and working out... bam goes on the weight.

Yeah, when people stop caring about their weight.

Um what was the title of this thread? I should be deleting my own posts as off topic. this topic is rather off.

 

[Africandaisy]

whats your view?

if a tenant/real estate agent requests something to do with your IP, assuming the quote/price is reasonable, do you compare the $$$ with your weekly rent OR potential rental increase for the next 12 months?????

I had this dilemma recently. I have had good tenants in my Bendigo IP for 18 months. They asked me to install an airconditioner upstairs (there is already one downstairs). The quote to put one in was $2222.

Obviously they were prepared to lease the house without aircon upstairs at the current rent, so I figured it wouldnt be reasonable to expect me to just wear the cost of putting in a second airconditioner now.

I want to be a fair landlord but I also want to make senible commercial decisions about my IPs as they are meant to provide for my retirement. I was willing to outlay the cost up of getting the aircon (from my savings) but I wanted to recoup that cost within a reasonable time. I cant claim it up front on tax because its an improvement not a repair, so I would need to bring in extra rent to cover it.

I asked the tenant if they were prepared to pay an extra $15 pw rent (which would still take 2.8 years to pay off the aircon or a bit less allowing for tax depreciation benefits) and they said no. So I havent put the aircon in and I feel guilty because its been a hot summer and they have young kids.

Should I have just calculated the interest on $2222 (at say 7%), which is $156 per year (or $3 per week) and said I would put the aircon in and raise the rent by $3 per week. If that is the correct way to calculate the "real" cost of these sort of improvements, even if I'm not actually borrowing the money to pay for them?

 

[wylie]

I asked the tenant if they were prepared to pay an extra $15 pw rent (which would still take 2.8 years to pay off the aircon or a bit less allowing for tax depreciation benefits) and they said no. So I havent put the aircon in and I feel guilty because its been a hot summer and they have young kids.

Should I have just calculated the interest on $2222 (at say 7%), which is $156 per year (or $3 per week) and said I would put the aircon in and raise the rent by $3 per week. If that is the correct way to calculate the "real" cost of these sort of improvements, even if I'm not actually borrowing the money to pay for them?

Don't feel guilty. If these tenants moved out and you spent $2222 installing an air-conditioner, you would more than likely be able to ask an extra $15 per week rent, wouldn't you?

We had a similar dilemma recently where a new (fantastic so far) tenant is happy for us to put on a deck but not prepared to pay more than $20 per week extra. If it costs us $25K to do the deck, that is $33 per week interest on the loan that we are paying to give her a better living environment. If she was leaving, we would go ahead and ask an extra $40 per week for the house.

In Brisbane, a deck is a huge plus and we would probably get $40 per week extra.

We are not prepared to spend $25K unless we get back everything that costs us on a weekly basis. She is happy NOT to have a deck. We will do this job when she is close to moving, and ask for higher rent, unless we can do it for less than $25K.

 

[BMan]

i would of done the later but added a bit and said maybe $10
you got to atleast cover the costs to you
and if there a good tenant
it it was up for rent again or not so good then add $15

 

[Africandaisy]

Thanks for the responses. Its a bit hard to predict exactly how much extra rent a single improvement is worth. I cant say for sure that a house with two airconditioners would actually pull in $15 per week more than a house with just one.

 

[BMan]

good point
although the second a/c wouldnt be as big or cost as much if its in the main bedroom

 

[vaughan]

Thanks for the responses. Its a bit hard to predict exactly how much extra rent a single improvement is worth.

It's easy to work out what it will COST though. If the tenant won't cover the additional improvement's cost then it's not a good investment for the landlord.

 

[vaughan]

good point
although the second a/c wouldnt be as big or cost as much if its in the main bedroom

Often a lot of the cost is running a separate power circuit.

 

[archi88]

slum lord approach

Hi, as a slum lord , If my PM ask me for expenses such as new air con or repair existing fence, I usually would ask my PM how much rent I could rise by approve the quotation.
if an air-con cost me 1800 dollars, I expect to have minimum 10%-20% return on the quotation, Eg. 1800x10%/52, roughly 5 dollars to 10 dollars

 

[lizzie]

If a repair is needed to bring a property back to the condition is was when rented - or something is dangerous (ie, fence) - then you have to pay.

Everything else is open to negotiation and you can always say no. If a tenant wants an aircon, you have the option of telling them the rent will increase or they can pay for it but it must stay at the end of occupation or you can go halves and increase the rent anyhow next review ... choice is yours as it's your property.

 

[Africandaisy]

Hi, as a slum lord , If my PM ask me for expenses such as new air con or repair existing fence, I usually would ask my PM how much rent I could rise by approve the quotation.
if an air-con cost me 1800 dollars, I expect to have minimum 10%-20% return on the quotation, Eg. 1800x10%/52, roughly 5 dollars to 10 dollars

10% return sounds like a reasonable rule of thumb to me, thanks.

 

[knightm]

10% return sounds like a reasonable rule of thumb to me, thanks.

I work of the expected life. If an ac has a 5 yr warrantee and could die after that you need all your money back by then just to break even. If its something with a 12 month warranty especially electrical and it could die at month13 then you really need all your money back in yr 1. The longer it lasts the more profit there is after that but otherwise you are taking all the risk.

 

[marg4000]

I work of the expected life. If an ac has a 5 yr warrantee and could die after that you need all your money back by then just to break even. If its something with a 12 month warranty especially electrical and it could die at month13 then you really need all your money back in yr 1. The longer it lasts the more profit there is after that but otherwise you are taking all the risk.

Don't forget you will also be able to claim depreciation as a tax deduction.
Marg

 

[Truly Exotic]

I work of the expected life. If an ac has a 5 yr warrantee and could die after that you need all your money back by then just to break even. If its something with a 12 month warranty especially electrical and it could die at month13 then you really need all your money back in yr 1. The longer it lasts the more profit there is after that but otherwise you are taking all the risk.

so does that mean if the aircon at $3000, has a warranty of 3 years, thats $20 per year increanse in rent?, and $90 per week if the warrranty is only 1 year