Should I let my tenant pay for this AC repair?

[Jack B.]

I told them when they moved in the hot tub and AC were luxury items that came with the house, but if they break I would not be repairing or replacing them. I can't recoup the cost of a 15K hot tub replacement by raising rents really high. Only way I'd recoup it is if they stay forever and I have no turnover and so far that has not been the case.

The AC recently broke. It's a $60 part but every quote we got (tenant and I) was $3,500 give or take. It's like the head gasket on a car engine, the part is cheap, but the labor to disassemble everything and re-assemble is intensive. 

I declined to pay for the repairs. The tenant offered from the outset to pay for it, no issues. In fact they do this all the time for tree trimming, etc.

I have not raised their rent in the two years they have lived there and they intend to stay for a long time they said. I could raise their rents to market and recoup the cost of the repair, but honestly, of the rentals I own, only two have AC. Only one has a hot tub. I don't think it's worth paying for the repairs for a tax deduction, if the tenants want the AC they are welcome to pay for it themselves and they are. But I agreed not to raise their rent on them. Mind you, if I did, I'd recoup the cost of the AC repair in two years. BUT...the tenant has some weird expensive demand every year. Tree trimming, 3K. They paid for it the year before. I could raise rent but with them it seems I'd just forever be raising rents to just barely cover repairs. 

I feel like I made the right call in this case. Even the HVAC tech told them your landlord must be really nice if he's paying for AC repairs. It's a luxury, not a necessity like heat, at least here. And I told them when they moved in I'd not replace or repair the AC or hot tub if they broke. It just doesn't make sense to offer these amenities here. I can't really charge higher rent for them and the repairs outweigh any rent increases.

[Theresa Harris]

If they want to pay to have it repaired, let them. Especially as you said in the lease if they broke you were not going to fix it.  I would however get into the habit of increasing rent every year, even if it is a small amount-it adds up and I'll bet your costs (insurance, taxes, etc) go up every year.

[Jack B.]

Quote from @Theresa Harris:

If they want to pay to have it repaired, let them. Especially as you said in the lease if they broke you were not going to fix it.  I would however get into the habit of increasing rent every year, even if it is a small amount-it adds up and I'll bet your costs (insurance, taxes, etc) go up every year.

 They do, but trust me, turnover is even more expensive. Between paint and flooring that are sometimes needed, and months of vacancy, it would take me YEARS to recoup those losses even with new rent increases. A few years ago when I did just under market rate rent increases, half the tenants left, leaving with 114K in bills to pay out of pocket. Rent increases are not always worth it. But yes, I have some tenants that I've had for 8+ years now and I've had to raise their rents twice to near market because...as I told them...insurance and taxes have gone up, and the property operates at a loss, it's a business and I must raise rents to stay afloat. 

Tenants don't really realize on the west coast it is MUCH cheaper to rent than to own. My mortgage payments are barely a few hundred dollars below rents and when you factor in 300+K minimum in each house, vacancy, repairs, etc. it's barely good for appreciation, or at least it was. Now, not so much...As much as people complain about the cost of renting...they should try being a west coast landlord. It's not even worth it anymore.

[Bill B.]

Tell them to buy a portable version? The HiGHEST AC r-air bill I ever had. Was $800 parts and labor. And that’s with 20+ ac units over 25+ years. It’s either a $100-$300 part plus $150-$250 in labor or it’s a $2,000 part you’d never replace because the system is out of warranty (so over 20 years old) and any other part could die next. 

1) are you sure it’s not under warranty? It’s well over 20 years old? 
2)it sounds like you’re sure they aren’t required and your lease will stand up if it ends up in court a year or two from now?

3) what’s the plan if they spend that $3,500 and a month later another $2,000 bill comes up?

4) I have literally replaced entire ac units for $3,500. (The 3 ton units was $1,700 and the labor and Freon to remove and replace was $1500. The rest was taxes/supplies whatever.  Find out what replacement costs. I would certainly rather have the tenant pay $3,500 and personally pay an extra $100-$500 for a whole new unit. 

Can you post the name of this mythical $60 part that costs $3,400 to replace? (Easily 20-30 hours of tech time? They better be working on the unit for 2-3 SOLID 8 hour days. If it’s fixed in one 12 hour day you got hosed.)

[Jack B.]

We got quotes from 2 different companies. Their labor rates are about $500 an hour. As I said, it's a cheap part, but the labor to replace it is a few hours and their rates are high. This isn't Vegas, the average house here is over a million dollars, three times what they cost in Vegas. I suspect that's why their rates are so high. It's a scam IMO, but unfortunately it is what it is. It's the low pressure sensor on a Coleman AC unit.

They agreed in writing to pay the repairs themselves. If there are more AC related repairs, or any hot tub issues, again, they've been told before these are luxuries and I told them from the get-go I will not be replacing them if they fail. AC unit's here are tens of thousands of dollars to put in. Again, it's not Vegas, cost of living here is MUCH higher, it's the 6th most expensive housing market in the country.

[Theresa Harris]

Quote from @Jack B.:

Quote from @Theresa Harris:

If they want to pay to have it repaired, let them. Especially as you said in the lease if they broke you were not going to fix it.  I would however get into the habit of increasing rent every year, even if it is a small amount-it adds up and I'll bet your costs (insurance, taxes, etc) go up every year.

 They do, but trust me, turnover is even more expensive. Between paint and flooring that are sometimes needed, and months of vacancy, it would take me YEARS to recoup those losses even with new rent increases. A few years ago when I did just under market rate rent increases, half the tenants left, leaving with 114K in bills to pay out of pocket. Rent increases are not always worth it. But yes, I have some tenants that I've had for 8+ years now and I've had to raise their rents twice to near market because...as I told them...insurance and taxes have gone up, and the property operates at a loss, it's a business and I must raise rents to stay afloat. 

Tenants don't really realize on the west coast it is MUCH cheaper to rent than to own. My mortgage payments are barely a few hundred dollars below rents and when you factor in 300+K minimum in each house, vacancy, repairs, etc. it's barely good for appreciation, or at least it was. Now, not so much...As much as people complain about the cost of renting...they should try being a west coast landlord. It's not even worth it anymore.

 I have rentals on the west coast, but in Canada!  Most tenants won't leave over small, gradual rent increases.  It is easier to pay $25 a month instead of moving.  I don't usually get long vacancies (knock on wood) because the vacancy rate is close to 0 where my rentals are.  I don't know about OR, but WA, CA and BC are all very tenant friendly.  We also have caps on rent increases in BC, so the only time I can get the rent back up to market value is when there is a turnover.

[Bill B.]

@Jack B.. So even at quadruple overtime rates. They ar saying this job will take 7 hours to complete? Again. Please post what part takes 7 hours to change on an ac unit. I’m sure there are 50 AC technicians on BP to give you a real estimate. Heck, you might get offers from technicians in expensive markets like San Francisco to cover there and fix it for half price. 

I own everything from $400k to nearly $1m properties. In the desert. Where the AC’s actually matter. The ac units cost exactly the same regardless of the property price. In fact, the expensive properties usually have multiple ac units so the repairs are cheaper. Get an estimate on replacing the unit before you even think of spending $3,500 on a repair.

They can agree to pay for the repair, and your lease can say they have to. But if it dies a month later and they go to court. Your odds of having to pay them back for a repair that didn’t work isn’t 100%. But it’s far from zero. After you pay a lawyer to fight the lawyer they get for free as the poor disadvantaged renter.  

I hope you understand. I don’t have a dog in this fight. I just hate to see you taken advantage of. Pleas just list the $60 part so an expert can weigh in with a “I could see that being expensive…” or a “Nope, never ever fix that, especially for that price.”

[Nathan Gesner]

Quote from @Jack B.:

1. You can say it until you are blue in the face. You can put it in writing six ways to Sunday. No matter what you do, tenants will always push back when there's an expensive repair.

2. If you force the tenant to pay for repairs, they are more likely to hide what needs to be done. They will move to a different home where the owner keeps up on maintenance, and you'll be stuck trying to rent a non-functional home or paying a lot of money at once to fix everything back up.

Best practice is to maintain your property. It's also best practice to maintain market rates so you can afford to maintain your property. 

You shouldn't invest in a rental if you can't afford to maintain it.

[Marcus Auerbach]

@Jack B. I don't know if I agree with your philosophy about maintaining some components and others not. And AC being a luxury item in 2024? What would you tell the rental car company if the AC on your car does not work and they tell you it's a luxury item, but you rented an economy car.

Milwaukee gets a little warmer in the summer than Seattle, but we have AC on 100% of our properties. We usually replace a hand full every year due to age. And have just as many repaired, usually in May and June.

You are getting quotes from consumer grade AC contractors. $500 is outrageous and no AC service call should take longer than an hour anyway. Find an AC service that local investors use. WA has a huge REIA, I would check there.

Be a pro, get your AC fixed. And also, adjust your rent to fair market.