One of my tennants contacted me today and said they would be moving out at the end of their lease. They have been good tennants so I enquired as to the reason. They said that the house was too hot in summer. I offered to consider putting in ducted air con (cost @ 3 to 4 k). What would you guys consider to be a fair rental increase, if any, for this benefit.
The current rent is $250 per week and has not changed in the last 12 Months.
Cheers,
Benson.[cap]
Benson,
The house is too hot in winter???
Ultimately, you need to reference what other properties with a/c are renting for in your area. Sometimes, whilst it seems like a good idea to put it in, it doesn’t necessarily mean that you can charge more. It may however assist in keeping tenants or attracting new tenants more quickly when vacant.
Are you using a property manager? If so, they should confirm what increase you could charge. If not, go and speak to a couple to get their opinion about managing and get some of their ideas.
James
Benson
I had a similar situation last year. I wanted an extra $20 pw on top of $240 pw rent for ducted evap system however we ended up agreeing on $10 pw. System cost $3399 so a 14.7% return on money spent and the tenants stayed on.
SMTM
Sorry James I meant Summer, now where is that edit button ?
I am leasing it privately and the rents for the area vary a hell of a lot so its a bit difficult to judge.
I’m sure I could rent the property again at around the $260 p/w mark, but I just wanted to see what other peoples thoughts/experiences were.
Cheers,
Benson
Thanks SMTM,
I was leaning towards @ $10 per week, hopefully they go for that but I guess I would probably keep them regardless. A good tennant is worth keeping even at a little discount to the market.
Cheers,
Benson
benson,
Some of my favourite RE’s online have a rental section on their site. I guess you could check out if similar rentals in your area have A/C and at what price. If your tenants are living in a REALLY hot area, then an installation of AC might just be bringing your place up to standard. But then- some hot places are on the ocean too- perhaps they just need to go for a swim instead- hehehe.
I am gonna offer an alternative- and this might sound like a crap idea to some, but I guess you could also buy them a half decent FAN as a gift, if oyu think they’re good tenants. Would they scgoff at such a gesture? Another cheaper alternative to aircon might be a ceiling fan or two.
If you do provide aircon- of the exxy type- you will also benefit from such an improvement in the resell. I think one day, that aircon is gonna be seen as a similar essential to having a LUG (I see the latter as a bit of an essential anyway).
Seems that you have a good relationship with your tenants. Have a chat to them about if they are willing to pay a rent increase if you install AC- if they won’t go for it, then at least you know what you’re looking at. Next tenants might not new aircon, or you can just raise the rents for the new tenant to market rent with AC for the area.
kay henry
Does the airconditioning have to be of the expensive ducted type? In my own home, I had an LG airconditioner installed; the window type. Cost was less than $1000.
Had it have been for an ip, that amount would have been put into a ‘low value pool’ and within a few short years, I would have my money back without having to increase the rent.
If you want to get out of a hole, first stop digging.
Red Dot’s still selling thier Split-system airconditioners V-Cheap, think they reduced the price $200..
So the cheapest, is about $400 + Instalation and the units motors are Fujitsu and Hitachi made..
In our Current PPOR we have a Ducted airconditioning unit, i’ve never had one prior ( we needed the refrigerated ones in Broome, WA on a hot day ) and i don’t think i’d have one again, for the price of the units and thier ability…i’m just not a fan ! (*pun*)
I’d definetly put the deal to your tenants though, if thats the only reason thier leaving, a rental increase could be justified and they may sign a longer lease agreement.. in marketing it’s easier to retain a good customer, than to source a new one..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Hi Benson,
I would also suggest that an airconditioner is almost a compulsory bit of gear in today’s world. As a generalised statement we (the collective we) tend to prefer a slightly higher level of comfort and are prepared to pay a reasonable amount for that comfort.
As an example we installed a 2.5hp split system airconditioner in one of our properties and increased the rent by $20/week.
Having said that the key decider about the increase was a lengthy conversation with my PM to ascertain what the wider market was paying. As you are now running a business you need to ensure you are competetive in your service but that you do not price yourself out of the market.
Derek
Originally posted by Brenda Irwin:Does the airconditioning have to be of the expensive ducted type? In my own home, I had an LG airconditioner installed; the window type. Cost was less than $1000.
Had it have been for an ip, that amount would have been put into a ‘low value pool’ and within a few short years, I would have my money back without having to increase the rent.
If you want to get out of a hole, first stop digging.
Brenda (or anyone who knows) what is a ‘low value pool’ and how does it work? I’ve never heard of this, interesting to find out what you mean by it!
I think that an airco in hot areas is a must, tenants love it. Yes may be you can just ask your tenants how much extra rent they would be willing to pay if you put in an airco for them.
Benson,
I have two ways of looking at this.
1. Is that is may provide you with the ability to to increase your cashflow. One exapmle is I recently simply installed ceiling fans in a regional unit. Less than $200 installed, yet I increased the rent by $5 per week. I received a $260 p/a for a $200 investment.
2. The second point is that it will reduce my vacancy rate. In this example the property is in a dry hot location in Qld. By fitting fans (or a/c units) it will ensure that my units will be the first ones tennanted. So even if vacancy rates hit 10%, it wont effect me as my property will be in one of the 90%.
With vacancy rates rising in some areas i believe that my second point will become more important.
Cheers,
Battz
Celivia
Low value pool , i believe, is part of your deprecation of items, all items under a certain value or able to write off in a short time, go into a low value pool..
Did i explain that ok ??
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Thanks Redwing! I should have guessed! Never too old to learn.
Probably depends alot on the climate of the area and the size of the house, but I don’t think I’d go the effort of installing a ducted system.
With the few properties I have, they’re all in an area where air conditioning really is a must due to the hot summers. It doesn’t add much to the rent return but most people wont want to rent a property with no air conditioning so I’m making money by reducing the vacancy time. Installing a good wall mounted air conditioner has been the first thing I’d do after buying a property if there wasn’t one there already. I usually go for a decent reverse cycle in the lounge room, under $1000, + a few hundred for installation. If the area doesn’t get too cold in winter, a cooling only unit will be cheaper still. Portable window air conditioners start at around $300 – maybe you could get 2 of these, for the lounge and main bedroom – no installation cost either.
And with the low value pool rule, improvements under $1000 can be 100% written off in the first year, rather than being apportioned over the defined period – see the ATO website for details.
Cheers,
MikeI bought two properties air con, they loved it and i charged an extra $10 a week each.
I considered one for the other prop, but I have a few issues with the tenants damaging things, so they aint getting one!
What concerns me is the remote controls tend to go missing and can be hard or not easy to eplace.
elves
My advice is too wait for two to three months.
1. It is getting cooler now so the ‘hot weather’ will become less of an issue.
2. Air Conditioning companies revel in the hot weather. They put there prices up because they know people want one. Once it gets into winter, the prices are reduced dramatically.
If you can convince the tenants that you will put one in but want to wait until they are cheaper, that will solve your problem.
‘Eat rich food, barbeque a yuppie’ [greedy]
Originally posted by Rugbyfan:My advice is too wait for two to three months.
2. Air Conditioning companies revel in the hot weather. They put there prices up because they know people want one. Once it gets into winter, the prices are reduced dramatically.
‘Eat rich food, barbeque a yuppie’ [greedy]
Shh, you’re giving away my secrets !!
I run an Air Con company in Adelaide and have a large number of customers with IPs
To be honest we would install more split systems than the older stle window/wall units. It has alot to do with the location as splits are a hell of a lot quieter.I’m about to buy my first IP and wont even think about renting it until it has a reasonble Air Con.Talking to my A list customers it is a must, will reduce your vacany rate considerably.
On a side note be carefull with the really cheap split systems on the market. I’m talking about the no name brands that claim to have quality compressors. More trouble than they are worth for many reasons, the least of which being service and spare part issues.
Hi Benson
cann’t help you with the rent but we juggled between split and ducted for our own home quoted $8,000-15,000 for ducted (could only use in zones – only one area cool at a time) put in 4 split systems 1-4hp. that was 2 years ago and we haven’t been sorry max electricity cost $25/week all going 24/7 through the heat(which was excessive, use but husband medical condition required usage). friends put in one 5hp for open plan and saved on insulation and cleaning. we have stayed at places with ducted i/c and they haven’t coped with the heat – total waste. No one has mentioned servicing that should be done professionally at least yearly c$60/unit more for ducted- who pays?, regular maintainance weekly to monthly by who?
NUMBER ONE AND PROBABLY CHEAPEST – is your property already insulated?
there are other alternatives to a/c “breesemaster” which is basically a commerical exhaust fan in roof- worked wonderfully at inlaws place only 20-25sq didnot work with 2 in our place ?too large ?not correctly positioned when installed – installer was the “expert” and refused to listen. you might also consider whirly things in the roof which can work on power of electricity or rising hot air added advantage it keeps timbers dry to prevent rot and damage from humiditydon’t be tempted to use “interest free” on your electricity bill with out knowing more than they are prepared to let you know – SEQEB QLD add 30% to every quote before forwarding to client
If I had a complaint about our a/c would be I paid $100 extra per unit for reverse cycle, coolling alone can be set on fan or 17 – 32 degrees before changing to heat!have you throught of planting some large native shade trees or disiduous(looses leaves in winter – never could spell) mature more expensive but cheaper in the long run may add CG from a cooler house and better street appeal or landscaping- just a though!
breakingout
You must be logged in to reply to this topic. If you don't have an account, you can register here.
