Hot Water Heater - Rent it or Buy it?

[dwb]

Was wondering what you thought of the hot water heating option to rent or buy. Please forgive me if this discussion has already taken place...
I have several rental properties in Ontario. The hot water heating tanks are all from Reliance Home Comfort. Each house costs for this expense approx $140 each year to rent it from the company. I plan on holding these places for a long time (long-term holds all of them).

Have you guys considered just buying this tank outright?

I imagine it would cost a lot to purchase and thus a lot of cash up front, but I would rid myself of the ongoing rental cost that will otherwise go on forever. And if it goes on forever, then likely I would pay more in the long-run.

I`m interested to hear what you chose to do about this.

 

[WadeFenner]

Hello,



To be honest......... Iv'e never heard of renting a hot water tank before.........



For less than the cost of what you're paying for one year you can have a new tank installed that should last you for years without any problems...........



Yes the cost up front is higher but look at the return on your investment.



Good Luck,



Wade




QUOTE (dwb @ Mar 20 2008, 09:58 AM)
Was wondering what you thought of the hot water heating option to rent or buy. Please forgive me if this discussion has already taken place...



I have several rental properties in Ontario. The hot water heating tanks are all from Reliance Home Comfort. Each house costs for this expense approx $140 each year to rent it from the company. I plan on holding these places for a long time (long-term holds all of them).



Have you guys considered just buying this tank outright?



I imagine it would cost a lot to purchase and thus a lot of cash up front, but I would rid myself of the ongoing rental cost that will otherwise go on forever. And if it goes on forever, then likely I would pay more in the long-run.



I'm interested to hear what you chose to do about this.

 

[invst4profit]

A new tank (electric) will run you about $400-$500 at home depo plus instilation if you pay someone to install.
Your pay back is about 3-4 years.
What I do is watch the "articles for sale " section of the newspaper and get a newer used one. There are often listings for heaters 1-2 years old. You can usually expect a 10+ year life span.
In January I was lucky enough to find a new one (never installed) for less than 1/3 price and although I did not need one at the time I know I will so I bought it. It`s always nice to spread out your expences and having a spare available is a plus.
If you are in for the long hall you learn to be constantly on the lookout for this type of savings for your rentals.

 

[Nir]

Hi,
I posted a similar question about hot water tank in the past. My situation was a little different though, I had to continue a contract to rent the water tank as part of a property purchase.. Believe it or not I had to pay $1500 to buyout a 3 years old water tank in order to stop the rent and discontinue the contract! - and I still chose to do that.

To answer your question: I have no doubt it does not make sense financially to rent the hot water tank. I find it hard to believe those businesses even exist.

As a rule of thumb, we should not rent any thing that costs around $1000 or less. You are not in the real estate business to rent things from people you are here to rent things out.

Are you renting your PC, cellphone, range, fridge, TV etc..? I`m sure not. so why in the world should we rent a water heater.

I agree with what Mr. Thomas Beyer mentioned about it: "if you can`t afford the $1000 .. then you should not be in the real estate business or you are too leveraged or have too little reserves !"

Regards,
Neil

 

[Thomas Beyer]

QUOTE (investmart @ Mar 22 2008, 12:00 AM)
Hi,

I posted a similar question about hot water tank in the past. My situation was a little different though, I had to continue a contract to rent the water tank as part of a property purchase.. Believe it or not I had to pay $1500 to buyout a 3 years old water tank in order to stop the rent and discontinue the contract! - and I still chose to do that.





...



I agree with what Mr. Thomas Beyer mentioned about it: "if you can't afford the $1000 .. then you should not be in the real estate business or you are too leveraged or have too little reserves !"



Regards,

Neil




The price of a decent deal, I suppose .. as you did not have to purchase the property .. but chose to ..



renting a hot water tank is like running a credit card debt of $1200 @ 24%/annually .. a dumb idea .. but many folks (unfortunately) do it .. and the banks / CC firms love it ..

 

[MonteDobson]

Sometimes renting a Hot Water Tank makes sense.

We have properties where the rental is $80 per year...that`s right, $6.66/month. And the best part is this includes yearly maintenance and replacement if there are any problems.

We have also tried tankless water heaters in some properties. Pro: Energy efficient and tenants never run out of hot water. Con: Expensive initial cost.

 

[Nir]

Thomas, you`re 100% correct the $1500 is simply part of a bigger deal.

Monte, when a new water heater costs around $400 and you keep it for an average of 20 years with no service required (on average), then even $80/year is 4 times that price. Plus, the $400 comes back to you when you sell the property as you`re adding value to the property. plus, with the $80/year you`re paying, even after 10 years the water heaters are still not yours.

Cheers,
Neil

 

[MonteDobson]

Hi Neil,

Some of the properties we own are in areas of hard water, so I`ve seen water heaters that need to be replaced in 5-8 years. Also, they come out once a year to check it over and will even install a larger one if the current capacity is not sufficient...which is great for multi suite houses where the tenants always complain about running out of hot water.

Also, I am sure hoping we don`t need to keep our properties for 10-20 years...hoping to have reached Belize by then!!

It`s all up to personal preference and what makes sense for each property and situation.

Regards,

 

[billf]

Hi,

Another bonus of the rental hot water heater in Ontario, is that the rental fee is included in the gas bill if you use the Enbridge/Direct Energy collusion...sorry combination, then your tenant pays for the hot water heater and you don`t have to worry about maintenance.

Bill F.

P.S. The cheapest hot water heater I could find installed was over $1000 and I pay under $11.00 a month for my rental, not a bad deal, and I don`t pay the rental fee except for one of my units.

PSS- Do any of the companies rent on demand units?

 

[Nir]

Bill, Monte,

I understand it`s a matter of preference and that there are exceptions. Personally, anything that costs less than $1000 I strongly prefer not to rent. It just doesn`t make sense financially. I like comparing it to renting a fridge, PC, car, oven, TV etc.. which is just wrong financially.

Regards,
Neil

 

[EdRenkema]

I`m with Bill and Monte on this one. In my home the company that installed my new furnace gave me an unsolicited quote for a hot water tank at $1600 installed. I currently rent for $11 per month. I`ve had issues with the unit and the serviceman came out twice on 24 hours notice on a Saturday and co-ordinated his schedule with mine to fix the problem. Can`t beat that.

 

[Nir]

I still like to compare them to "insurance" companies who make money, not lose. Now, insuring a property worth hundreds of thousands obviously makes sense and is done to reduce risk.

However, insuring something worth $1000 does not make sense financially as you are expected, statistically, to lose money by insuring it. (Otherwise these water tank rental companies would be losing money which is obviously not the case).

It`s interesting how these companies are making millions of Dollars simply by offering very low monthly fees ($11, $8, $6..) tempting millions of people who do not do the math or do not understand that "risking" a $1000 is not a big deal when the other option is a "guarantee" to pay more than $1000.

Just my 2 cents.

Cheers,
Neil

 

[Ubiquitous]

Does anyone know where I can get a tankless hot water heater in Ontario at a reasonable price? Is there a place where I can buy one online at a good price and then get it installed by a contractor? Any info. would be appreciated.

Thanks.

 

[Dan_Eisenhauer]

The answer is not always black or white. The best way to answer this question is to do a Present Value comparison of all the costs associated with buying compared to the PV of all the costs associated with leasing. You have to use the same length of time for both comparisons. For example, if the lease is ten years, you compare that to ten years of owning.

You would include repairs, replacement costs, income tax effect, etc of each plan, and work back the PV to today. Whichever plan has the lower PV is the better choice.

Remember that with a lease you write off 100% of the payment. Depending on the contract, you may have no repairs to consider when leasing, either. When purchased, you only get to write off the interest payment, plus CCA of the unit itself... assuming you claim CCA at all. And then you will have to deal with recapture of CCA on the sale. This could make a difference in your calculations.

I would post a spreadsheet to show how to do this, but I don`t think we can do that in the non-members` section.

 

[nav1940]

QUOTE (Dan_Eisenhauer @ May 23 2009, 03:01 PM)
The answer is not always black or white. The best way to answer this question is to do a Present Value comparison of all the costs associated with buying compared to the PV of all the costs associated with leasing. You have to use the same length of time for both comparisons. For example, if the lease is ten years, you compare that to ten years of owning.



You would include repairs, replacement costs, income tax effect, etc of each plan, and work back the PV to today. Whichever plan has the lower PV is the better choice.



Remember that with a lease you write off 100% of the payment. Depending on the contract, you may have no repairs to consider when leasing, either. When purchased, you only get to write off the interest payment, plus CCA of the unit itself... assuming you claim CCA at all. And then you will have to deal with recapture of CCA on the sale. This could make a difference in your calculations.



I would post a spreadsheet to show how to do this, but I don't think we can do that in the non-members' section.






Hi Dan

Can you send me the speadsheet by email on how to figure it out. because i need to install 4 hot water tank. I have been debating to buy or rent my email is [email protected]

 

[Dan_Eisenhauer]

I have seen PV calculators online, and rather than my taking responsibility for a possible error in your answer, I suggest you Google "Lease vs Buying Calculator".

Here is one I found: Canada Business PV Calculator Just fill in the data as requested, and the answer appears at the bottom.

 

[suzuki12]

I had a rental water heater that started at a price, less than $10, where I couldn`t justify buying. Over the years the price slowly edged up to $25/month so it became more cost effective to buy.

 

[adamturner]

$1600 to put a hot water tank in? That is a really high quote. Get another one.

Buying one is $300- 600.00 AT THE MOST.
Im more than positive that any rein member could put one in with just 5 min of reading.
The only thing that goes wrong with them is the elements burn out, which cost 35.00 to replace, and are easy to install as well.
Its really just another appliance that you own.

If you do the REAL numbers and not the worst case senario numbers, purchasing a hot water tank is BY FAR the cheapest way to go.

2Cent

 

[housingrental]

Actually this isn't correct

I've paid apx. $1200 (including the tank) before and it was the cheapest quote of many...and never been able to get one installed for $300-600 (though close to 600 for cheapest)

Factors impacting :

A) Is it a gas tank? Is it legal for someone not licensed to install?

B) How far of a run for the line?

C) Venting same q?

D) What size and type is the tank... it might make sense for the particular end user to purchase a tank double the cost of an alternate..










QUOTE (adamturner @ May 26 2009, 01:49 PM)
$1600 to put a hot water tank in? That is a really high quote. Get another one.



Buying one is $300- 600.00 AT THE MOST.

Im more than positive that any rein member could put one in with just 5 min of reading.

The only thing that goes wrong with them is the elements burn out, which cost 35.00 to replace, and are easy to install as well.

Its really just another appliance that you own.



If you do the REAL numbers and not the worst case senario numbers, purchasing a hot water tank is BY FAR the cheapest way to go.



2Cent