Tenant want's A/C

PM has advised the tenant want's A/C in the bedroom and has offered to go halves

We're thinking it's best we pay 100%, but lift the rent accordingly at lease renewal
 
Why not offer to rescind the old lease, write a new one and both sign it at the new amount and add to the new lease that you will install air-con before XX date?

When is the lease finish date?
 
PM has advised the tenant want's A/C in the bedroom and has offered to go halves

We're thinking it's best we pay 100%, but lift the rent accordingly at lease renewal

Two Choices.

1. Install it yourself and agree an increase in rent effective from the date of installation. No need to do a new lease, just have the agreement in writing signed by both parties.

2. Have tenant buy a portable airconditioning unit that they can take with them when they vacate. I have two aircons in one of my properties and tenant put his own portable unit in one of the other bedrooms.

Option 1 is the best way to go IMO.
 
Thanks

What would a simple system and install cost and how much would you increase rent by to recoup

Ex only

system and install $1200
current rent per week $400
 
Thanks

What would a simple system and install cost and how much would you increase rent by to recoup

Ex only

system and install $1200
current rent per week $400

I would estimate the cost of a split system to be around $1500 (supply and install). I would expect cost recovery in 2 years. So I would be proposing rental increase of $15pw.

I have kept this simple and not factored the financing cost of the $1500 (eg. $1500 @ 6% = $90pa)

nb: However, Depreciation works in my favour as replacement is probably 10-15 years.:)

I would use this same principle for any add-on to the property (eg. dishwasher, washing machine, dryer, garden shed etc)
 
You could come at it another way too.

Assuming a small a/c @ $1500 supplied and install funded from your mortgage.
If your loan was interest only at say 6% that's $90 extra in interest per year. If you got $15 pw increase in rent then your looking at an extra $780per year in rent + depreciation benefits. No brainer really.
 
We had a tenant who wanted to extend a shed. We said no problem, but it had to stay when he vacated, with no compensation. They signed a contract agreeing to this.
...they have since moved and we have a larger shed.

If you were considering the a/c, I'd have them pay half of the a/c and installation..sign a contract stating it stays when they leave, and no compensation will be considered for it.

You pick the a/c and installation
otherwise, I would say no.
 
We get tenants to pay for stuff all the time if they want it. You pay the full amount and they re-imburse you for half. Has to remain there on vacate.

Never had any problems doing it that way. There are benefits in doing it this way.

1. No change in lease.
2. You can ask them to pay upfront prior to install.
3. If they choose to break lease 1 month after aircon is installed at least you have still been paid for it.
 
We get tenants to pay for stuff all the time if they want it. You pay the full amount and they re-imburse you for half. Has to remain there on vacate.

Never had any problems doing it that way. There are benefits in doing it this way.

1. No change in lease.
2. You can ask them to pay upfront prior to install.
3. If they choose to break lease 1 month after aircon is installed at least you have still been paid for it.

This is a good option, but I prefer the rental increase as it bumps up the rent immediately and stays at the higher level. When the lease is due for renewal the rent can then be increased from this higher base.

Eg: Initial IP rent of $500pw, but agreed aircon installation puts this at $515pw.

Say a typical rent increase is cpi (ie ~3% or $15pw).

When lease is renewed, the new rent becomes $530pw. Using the other method, in this example the rent would go to $515pw.

So whilst, I would have recovered the cost of the aircon in 2 years, I actually get the benefit of the rent increase for a lot more than this 2 year period.:)
 
Thatbum would know more, but I think rent can only be increased a minimum of 6 monthly?

You cannot increase their rent until it is due for renewal. You can't have a lease saying one thing and then a letter saying another, as this is not in line with the Residential Tenancies Act

I do like Joe's thought process though :D
 
Huh? The next tenant gets a totally new lease with whatever rent is agreed between the owner and the tenant.

Yes, but how would the increased rent compare with other properties in the area? If the rent is already towards the higher end of the scale, then increase the rent further, they might stay there while they look for another cheaper place that has an air-con. I do agree that depreciation of the air-con certainly helps the situation.

Are they just sounding you out, or is this a 'I must have it or I'm leaving' situation? I take it they're currently on a periodic lease?
 
PM has advised the tenant want's A/C in the bedroom and has offered to go halves

We're thinking it's best we pay 100%, but lift the rent accordingly at lease renewal

Lets say it cost $2000 inclusive of fitting for the AC and you use your LOC/offset facility to fund the purchase and installation.

$2000 x 6% = $120 p/a or $2.30 a week increase in your holding costs.

Less 30cents in the dollar tax deduction on the interest bill = $1.61 a week cost to you.

Less depreciation on the AC itself which increases your cash flow further.

Increase the rent just $10 a week and you're $400.00 p/a or $7.69 (pre-tax) a week more cash flow with the AC purchase price offset by past CG.

I hope this provides another perspective for you.

I hope this helps.
 
At first it sounded odd to me too (going halves with a tenant) so I understand your reaction of "Hey let's do this the normal way - I'll pay for it, and factor it into the rent".

But it's not like you're asking the tenants to pay half.
This is different. They thought of it! That's what they want to do!

I agree with 100% jenni_nextplace on this. Not everything has to be "by the book". Such arrangements with tenants usually work out ok.

I doubt they'll be happier paying more rent for to cover the cost, even if that saves them money in the short term. I reckon they'd rather be able to rave to their friends about the new air conditioner "they bought".
Relax.
 
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