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The Ultimate Appliance Financing Plan

by Andrew C. MacDonald on March 10, 2011

Dave's AppliancesIf you’ve ever been faced with a bill for new appliances upon purchasing a rental property, you’ll know that this expense comes at the worst possible time. Nobody wants to pay the interest and fees that go along with traditional retail financing for appliances, but conserving cash is also important. During the early months of owning a new rental property cash can be tight, so we are faced with a difficult decision. Thankfully, there is a better way to finance your appliances.

Mortgage Your Appliances

Do you know of any retailers who will offer financing for your appliances at an interest rate of 5% or less? Of those, how many will offer you a great rate without any sort of fee? Of those, how many will allow you to pay off your appliances over a period of 25 to 35 years? I haven’t yet come across a single retailer willing to offer that sweet of a deal.

The ultimate financing plan for appliances comes in the ability to mortgage them. You won’t be able to walk into the bank and get a mortgage for appliances, but you can finance them as part of your purchase of the property if you simply include them in your deal. When you make your offer, be sure to ask for all of the appliances you plan to provide to your tenants.

The Financial Impact

In our single family rentals we normally supply a stove, fridge, dishwasher, washer and dryer. We find that in order to attract top notch tenants, we need to provide the amenities the best tenants are looking for. Brand new, these five appliances may cost roughly $2,500 if we stick to entry-level models.

Purchasing these appliances today using cash would increase the cash required to make the investment. If you can include the appliances as part of your purchase instead, the cost is simply included in your mortgage balance and your initial investment is reduced. Even if you raise your purchase price by $2,500 to get the appliances, the extra mortgage payment of $10-15 per month will be the cheapest appliance financing you ever get.

Seller Cooperation

This strategy will work fine if the seller is offering appliances as part of the sale, but may require a little cooperation if they don’t have appliances or are set on keeping the ones they have.

In cases where a seller does not have any appliances, simply send a list of models and prices from a local retailer and request that they supply these appliances before closing. These can be listed as chattels in your offer and will require a little explanation from yourself or your Realtor. If the seller has appliances but is determined to keep them when they move, just provide the same type of list and ask them to supply the new appliances before closing.

This may strike some sellers as odd, so using a cover letter with your offer is a great way to explain what you are asking for. If you are offering a fair price and cooperating with the seller on their closing date and other terms, getting them to include some appliances is a reasonable request. This strategy won’t work in all cases, but it’s certainly worth a try.

Creative Commons License photo credit: .Larry Page

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