Lease/handling repair question?

Question

Hey BP, curious how others handle their appliances?

I have 3 units total, started last March and have now had 2 refrigerator issues, costing me $730 total. First refrigerator broke down and was such a foreign brand no one would service it, so I just bought another used one for $175. Second one was used when I bought it as well to move into the 3rd unit I have when I finished the rehab on it and now 3 months later the control board went out and a fan, costing me $555

So my thoughts are, lesson learned, but what’s my solution to keep tenants happy yet not bankrupt myself on appliance repairs?

~Buy new when I need to replace and/or when I rehab a property

~Put something in my lease for repairs to appliances? First $100 is on the tenant or they’re able to use the appliances provided, but if they breakdown it’s up to them to fix or replace?

I do have a clause that says damage or neglect I’m not responsible, but nothing really speaking specifically to general wear and tear breakdowns like I had

Thank you in advance for feedback

Jessica Whitaker · Answer

Hi Cory!

I am in a very similar situation, my company just took over 50 units and since we have taken over I have had to find at least 6 or so used refrigerators in 2 months, and in the pandemic it is such a challenge to find good prices! I would recommend buying new when you can, this will protect you in a few different ways. #1 you know the exact condition of the fridge and most of the time there is a some kind of warranty that could help if a repair is needed in that time frame. #2 it is easier to tell if the resident is at fault if the appliance is new. I always make sure my repair guys are taking pictures of the inside and outside of the appliance when they go to work on one, and since they are the professionals I normally have them tell me if the resident is at fault or not.

As far as the lease goes, If you have something that says the resident is responsible for any damages that are a result of neglect or malicious damage then you should be good on that front. As far as making the residents pay for repairs that are normal wear and tear, I think that should still be the owner's responsibility unless the resident is free to take the appliances with them when they leave. Thank you!

Kar Sun · Answer

My tenants would pay for the repairs of all appliances, unless it needs to be replaced or defective. I provide these for their convenience and my contract states so.

Scott M. · Answer

@Cory Lucas I would shore up your lease in that spot where you say "nothing really specific"....I would make it specific.

When you are under the gun as it sounds like you were/are you sometimes just have to bite the bullet.  But, look around for sales (of course) and also dinged up merchandise.  I don't think it is around anymore but we used to have a place that all appliance shops would send their new but surface damaged good too and we would buy them from there.  I mean, new, with warranties and all.  Now most stores just sell that themselves.  I know both Home Depot/Lowes have this kind.  Great way to get good deals.

The best time to plan for this is when you don't need it.  Look for appliances repair guys or general handymen (and women) as they can often work magic.  Parts can be had online it is the labor and knowledge to know what you need and how to do it.  Ask around, ask everyone.

We use used when we can source good ones.  Good to get to know the workers in the used appliance shops too, make them your goto places and you can build a solid relationship with them and it will pay off when you do have that gun to your head.

Jennifer Williams · Answer

I couldn't put it better than what @Jessica Whitaker said. Buy appliances like refrigerators new when you can. Take photos when you get them, and if/when repairs are done. Definitely outline tenant responsibility in your lease for damage that's not due to wear and tear. I would not ever make it the tenant's responsibility to replace an essential appliance like a refrigerator unless they had patterns of repeated destructive /neglectful behavior damaging the property. In that case, you probably have some bigger issues to deal with though!

Cory Lucas · Answer

@Jessica Whitaker great stuff! Thanks a ton, sorry I’m so late I’m responding. Never saw the notification, thanks for taking the time to respond

John Alosio · Answer

@Cory Lucas

I see that 2020 was your first year in the buy and hold business. Do you have a good REI friendly CPA? If not I would recommend finding one. you may be pleasantly surprised how much write offs make a huge difference come tax time.  It makes it easier when faced with repairs, knowing that it will offset your taxable income. When I purchased both of My properties, the first year was always in the negative cash flow(on paper). That is a good problem to have. Not only did your renters pay down the mortgage, but they also improve the property. This is a slow game. Make good decisions and you set yourself up for years to come.

Cheers

John Alosio · Answer

@Cory Lucas

I would have to reccomend buying new if you can. There are relatively inexpensive options out there. They certainly don't need top of the line, just something to keep the milk cold. Also look if any retailers near you offer 'scratch and dent' appliances. Perfectly good appliances with minor imperfections...but if you really don't want to spring for the initial cost of buying new, you could wright in the lease that the fridge is not the owners property... If it craps out, it's on them to fix/replace. Yes you run the risk of them taking it with them. And if they do, keep replacing with used ones? Just an idea.

Cory Lucas · Answer

@Scott M. Good info, thanks for the feedback

Cory Lucas · Answer

@Jennifer Williams excellent info! Thanks a ton, really appreciate the insight

Cory Lucas · Answer

@John Alosio most definitely agreed. We just had our appointment with our tax guy this past week, so we’ll see. He came highly recommended from a mutual friend who’s in the landlord game herself

Lease/handling repair question?

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