No investor wants property to go unrented for long. But a bit of time between tenants can be a useful breather for you to get some maintenance and upkeep done on the property. Below are some items to replace between tenants that landlords should consider.
Carpeting is likely the number one item to be replaced between tenants. If you have had a tenant living in the space for some time, and they haven’t been diligent about cleaning the carpets themselves, you may have little choice.
Carpets are subject to regular wear and tear. High traffic areas will always wear faster than low-traffic areas.
Toddlers and pets wreak havoc over time. And different carpet materials and colors simply move in and out of fashion.
Legally, you cannot charge extra because there’s a child in the unit. That would be a violation of federal laws against familial discrimination. But if you allow pets, your pet deposit should be enough to cover the cost at least of a very deep and thorough carpet cleaning after the tenant moves out. The same goes for smokers, if your local law allows for it.
In fact, if a smoker rents your property for several years you will likely have to replace carpet, drapes, any upholstered furnishings, and even wallpaper to get the stale tobacco smoke out of the apartment.
Appliances wear out over time as well. You can keep bringing in a repair person as they get to the end of their useful lives, but unless you have a handyman on staff all the time who can repair appliances, it’s quickly going to make more sense just to replace them with a newer one you won’t have to worry about, or that is under a warrantee.
For most appliances, Consumer Reports suggests it makes more sense to replace broken appliances that are eight years old or older rather than repair them. Indeed, for lower end models, Consumer Reports research indicates the repair vs. replace timeline might be closer to three years.
The typical lifespan of a water heater is 10 to 15 years. That’s longer than most of your other appliances, but still shorter than the useful life of the dwelling itself. We hope. So chances are you’ll have to replace it sooner or later.
Most air conditioners are designed to last about 10 years. You’ll probably replace your unit sooner or later, if you own the property long enough. If you have a relatively new unit, you shouldn’t have to replace it for a while. Take a look at another Ask A Pro question to get another perspective: Q: Are property mangers responsible for broken air conditioners?
If your unit is a few years old, though, you might want to consider replacing it as soon as you can. According to the U.S. Department of Energy, Even if your air conditioner is only 10 years old, you may save 20% to 40% of your cooling energy costs by replacing it with a newer model. Why? Because of changes in federal HVAC industry regulations: Prior to 2006, the standard for efficiency in household air conditioning units was 10 SEER, or Seasonal Energy Efficiency Ratio. However, since then, the feds have imposed a 13 SEER standard – meaning all things being equal, electricity costs attributable to air conditioning should be 30 percent lower every month.
If you can get a 16 SEER unit, you can double your savings. Electricity costs attributable to air conditioning should be 60 percent cheaper than an older 10 SEER unit. Which means that if you’re paying your electricity bill out of pocket, either your profit margins will be that much greater (after accounting for the costs of the new unit, obviously), or you’ll be able to price your rental that much more competitively.
If your tenants are paying the electricity bills, make sure they understand the benefits of the higher-efficiency air conditioning units. These can be an important differentiator in a competitive rental market. In very hot areas, it’s almost a no-brainer.
The IRS lets you depreciate appliances, carpet and furniture that you use in rental real estate gradually, over a period of five years. That is, when you buy these items for your rental property, you can’t deduct the full cost in the same year. Instead, you must deduct the cost of this property over five years, under MACRS rules.
For this reason, you may want to try to invest in higher-quality appliances with a useful expected life of at least five years. Otherwise you will be trying to buy new appliances even though you haven’t even fully depreciated the old appliances yet. This could cause a bit of a cash crunch if you are operating on a thin budget.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.