I set my self a little puzzle.
How do I get my landlord to buy me a plasma TV?
Will this work?
1) I find a second hand plasma (keeps cost down)
2) Landlord leases screen over 5 years (e.g. Flexirent Minilease)
3) Lease costs are claimed back as legitimate deduction
4) Real cost (or plus a bit) of leasing added to rentLandlord
1) Landlord gets a more attractive property to rent, which, in the current market has to be a good thing
2) Potential to get rent increase in excess of real lease costs with next tenant (not from me of course!)
3) Landlord gets to take Plasma home between tenants (which of course will never happen because the property will always be rented! [
])Me
I get a big TV
I don’t spend my capital or get into debt []Screen $5,000 (seen them in the Tradingpost for this)
60 payments of say 5500/60 = $91 per month, OK lets use $100
After tax cost 48.75%*100 = say $50
Tenant (me) pays about $12.50 a week extra rent
I’d happily pay $15 – 20pw for PlasmaI’ll have to check the exact figures but there’s no point doing that if there’s a fundamental flaw in the idea.
Do you think this would fly? Have I missed something? What about insurance – landlord or tenant? Could the landlord also claim depreciation, if this was a rent-to-buy lease?
Who wants me for a tenant?
Cheers, Tom
Tom,
I think if the landlord buys the TV, he or she has to get it insured. And what happens when your friends are watching the world cup and, in their excitement, a beer gets knocked on it? hehe.
It’s a good idea, and you are a creative tenant! I’d have you as a tenant in a minute, but no plasma tv for you!
kay henry
Hey Tom, lol, i know you can afford a plasma tv…lol lol
cheers
s.i.sso im guessing everything went well this weekend, well hear from you soon.
s.i.s
Hey Vivarto,
Not a bad idea at all!! But do you know if you can FlexiRent/Lease a 2nd hand Plasma sold privately thru the Trading Post??
As far as the Insurance, you will have to pay the premiums (but you can build it into the rental of the property). As with Depreciation, I think it will depend how old the tv is and what the length of time the ATO will allow.Otherwise Great Idea. One I will be exploring too!!
Striker
Email MeHey ..I heard something like this at a Henry Kaye seminar once..
Henry used to teach ppl how to attract tenants by offering Plasma Screens to their IPs..
Then pple were asking. Where do I got the money to buy one to offer to my tenant. He used to say “You can take it out of the property”.
“But then what if my property hasnt gone up in value.” He then ignored the question” hhhahahahah
Well figures..
Vluu
Fantastic idea Vivarto. I played with some figures and it seems to work.
However, as always, does anyone know if there are any downsides to this??Quick update,
I’ve talked to the lease company and all the figures check out as far as the leasing goes. The equipment has to be new, and insurance is my responsibility. $5000 over 5 years is 130 pm gross ($15pw net). They’re not legaly allowed to advise me on points of tax law so I’ve asked my accountant to confirm tax deductability which I now believe should be fine.
Next step put case together on paper and see if I’ve got an imaginative landlord or a sheep…
How can I get a dishwasher bundled in with this deal? Do you think I could get the salesman in Harvey Norman to foregoe his commision on the purchase if I told him how to sell a plasma to every tenant that walks in through the door? Anybody know what the commission % is on a plasma?
Cheers, Tom
Hi Tom
I was just talking to a mate in a finance company and asked him about this. He said they would be able to do a second hand tv if the buyer and seller were companies. Maybe you could find one in a second hand shop and maybe your landlord has a corporate trustee??
I also looked at the figures, the interest rate on repayments of $130 per month over 5 yrs on $5000 works out to be 19% – which is fairly high!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Good point – I’m glad I’m not going to be paying for it!
Seriously though a cheaper financing option would help both the landlord and me so I’ll dig around a bit – I was going to calculate the rate but hadn’t got ’round to it
I also looked at the figures, the interest rate on repayments of $130 per month over 5 yrs on $5000 works out to be 19% – which is fairly high!
TerryW
Why would it matter whether it is a company financing the equipment. I thought finance companies would not finance 2nd hand stuff to anyone, esp under $10K
James
Striker
Email MeVivarto, this is something that I have been looking at doing in some of my properties – but I’d look at doing the whole ‘home theatre’ bit, and would purchase rather than lease. Cost about $8K wholesale, value about $15K. Would look at borrowing the money as part of the mortgage (IO of course), and so it really doesn’t cost that much per year, and you can depreciate it.
Projector preferably embedded in the roof, remote control screen that rolls away etc. etc. When I get my own house I’m definitely going to have one for myself!
Cheers
MelHi MelBear,
Where can you purchase these sort of items at wholesale? Secondly, with your repayments, is the principal deductible, or is it just the interest repayments?
Finally, if I indicated to the ATO I had purchased the home theatre for one of my rental properties and kept it myself (getting tax benefits in the meantime), how would the ATO know?Thanks
JStriker
Email MeJames
The ato wouldn’t necessarily know, but i wouldn’t want to risk the chance of them auditing. I think one of the things they have been cracking down on lately is where landlords claim repairs etc. on IPs but it’s really been at their residence.
Cheers
MelHi All
Looking at this as the landlord my initial thought is “you’ve got to be crazy”. I don’t have a problem with improving properties where the improvements are part of the building. But any improvements that that have a high or expensive maintenance risk is certainly to be avoided.
Where we buy property that has a dishwasher we will even remove the dishwasher as and equipment in the property is the responsibility of the landlord.
So looking purely at a plasma screen which you say is $5000. With any improvements I am looking for a +20% return on funds so for a $5k spend this would have to return $20pw.
Then I would have to look at the live of the artical. A new bathroom will last me at least 10 years a plasma screen I would think you are lucky to run for 5 before it is well and truly over the hill as new versions are comming out. Moreso what condition is it in after 5 years??? With a tenant anything seems to have a much shorter live as it ain’t theirs.
The risk are also very high, aprt from insurance costs I think there is an aspect of insurance policies that if the tenant removed the screen then you are not covered. So there is an added cost for special over and an added risk with an appropriate bond cost for the tenant. A real negative in that rather than encourage tenants the up front cost may actually deter a tenants.
Maintenance costs. As there is very little componetary in a plasma screen the cost per maintenance event may be very high, as in the $1000’s. This could be similar to modern washing machines break the computer and you are looking at over $500 in repiars and it seems they only have one moter and the computer in them these days. I actually have 3 properties where washing machines are part of the set up, couldn’t remove them as they are the laundry in a cupboard type with the washing machines front loaders under the kitchen bench. Anyway all maintenace on these properties have been washing machine related.
So all up a plasma screen or any other electronic device as part of a properties rental propositon is a no no in my opinion.
Just had a thought if you arranged this as a seperate lease buy for the tenant then it may work as the land lord is simply providing the finance with ownership implied with the tenant. But that would require a completely different set of calculations.
Cheers
Ziz,
A welcome splash of cold water. OK, I now have tax deductibility given the thumbs up by my accountant though interestingly he did raise a number of points that you did.
My challenge is now to have rebuttals…
Thanks for the input, rather have it from you than the landlord.
Cheers, Tom
If it was something like a TV that was easily ‘removable’ and had a definite shelf life, I would include it as a ‘gift’ to the tenant if they stayed for say, 2 years, paying an extra $20 or so per week. If it’s included in the house, I believe that you can depreciate it, so you also cover some of your costs this way.
Cheers
MelZiz,
Aren’t the maintenance costs covered in the Warranty of the item? So say you took out a FlexiRent over 5 years, they tend to extend warranty over 5 years too.
Also, how about a Ceiling mounted projector instead of a Plasma. One that projects on to a wall or large pull-down screen. Not only do they last longer and are cheaper, but tennants cannot physically touch the unit or spill a drink on to it.
James
Striker
Email Me
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