Would you buy a new AC unit or pay $500 annually?

Los Angeles County, California
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Would you buy a new AC unit or pay $500 annually?

Allen Wu
Rental Property Investor · Member since 2021 · 335 posts · 193 votes

Hi All - I have a rental property closed back in 2015. The AC unit was installed in the late 1980s. The Unit now requires annual maintenance (Freon refill and tune up). The cost has been going up everything year. Recent cost to do this every year is $500.

Given the age of my AC unit, would you keep paying $500 every year (or more) to maintain it or would you just buy a brand new AC unit that will cost ($8k)? 
Appreciate your insights. 
Note: it’s a condo. Central air unit. 

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Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
4y

While you can get all theoretical about it and argue the time value of money and how your discount rate need to be higher than 6.25% to justify that capital outlay, the bottom line is that this AC unit is 35+ years, is costing you $500 per year, and is highly likely to cause you another issue in the near term. Personally, I'd either: 

- Repair it this fall (when neither heating or cooling companies have a lot of business) 

- Wait for the next big repair and just replace the whole thing. 

I bet you save money and stress, and never know it, by replacing the unit in the next offseason. If you pay utilities, you may also find that they are cheaper with a newer, more efficient unit.

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  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    4y

    While you can get all theoretical about it and argue the time value of money and how your discount rate need to be higher than 6.25% to justify that capital outlay, the bottom line is that this AC unit is 35+ years, is costing you $500 per year, and is highly likely to cause you another issue in the near term. Personally, I'd either: 

    - Repair it this fall (when neither heating or cooling companies have a lot of business) 

    - Wait for the next big repair and just replace the whole thing. 

    I bet you save money and stress, and never know it, by replacing the unit in the next offseason. If you pay utilities, you may also find that they are cheaper with a newer, more efficient unit.

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    BiggerPockets
    5Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    4y

    I would upgrade, for many reasons. 1, there's no guarantee that the replacement refrigerants won't keep going up in price. 2, it's an old unit so eventually you'll need a new compressor, coil, or other major component. If it's pushing 40 years old, it's going to be on its last legs. 3, Finances aside I just wouldn't feel good about dumping that much refrigerant into the atmosphere.

    1Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    recurring ongoing maintenance is recurring ongoing maintenance. whether or not the new unit would require the same amount of dollars on maintenance is TBD. I would most certainly plan on replacing it during the next off season. Waiting for it to break down makes little sense because they tend to break when you need them most and getting a new one takes a few weeks during the busiest of seasons!

    2Reply
  • Jason B.Pro Member
    Rental Property Investor · Boise, ID · Member since 2017 · 228 posts · 180 votes
    4y

    @Allen Wu my mom is in this situation, too; she owns a single family in Texas, built in the 80’s, same deal as for servicing and repair. What’s happening now is because of the age and ever increasing lack of parts, different coolants being used, etc. more and more companies around her are refusing to repair or maintain units that old, so she is now in a situation where she has to replace it. I would bite the bullet if you can and replace the unit; at some point you’re most likely going to have no choice but to cut bait and do it.

    1Reply
  • Allen Wu
    OP
    Rental Property Investor · Member since 2021 · 335 posts · 193 votes
    4y
    Quote from @Scott Trench:

    While you can get all theoretical about it and argue the time value of money and how your discount rate need to be higher than 6.25% to justify that capital outlay, the bottom line is that this AC unit is 35+ years, is costing you $500 per year, and is highly likely to cause you another issue in the near term. Personally, I'd either: 

    - Repair it this fall (when neither heating or cooling companies have a lot of business) 

    - Wait for the next big repair and just replace the whole thing. 

    I bet you save money and stress, and never know it, by replacing the unit in the next offseason. If you pay utilities, you may also find that they are cheaper with a newer, more efficient unit.

    Wow. A response from the famous Scott. I feel So honored!!! 
    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    4y
    Quote from @Allen Wu:

    Hi All - I have a rental property closed back in 2015. The AC unit was installed in the late 1980s. The Unit now requires annual maintenance (Freon refill and tune up). The cost has been going up everything year. Recent cost to do this every year is $500.

    Given the age of my AC unit, would you keep paying $500 every year (or more) to maintain it or would you just buy a brand new AC unit that will cost ($8k)? 
    Appreciate your insights. 
    Note: it’s a condo. Central air unit. 


     When they have replaced the coolant, have they tried a sealant?  

    If it is still leaking annually after trying the sealant, I think you are better off replacing in the off season.  Save the $500 and increasing expense, get a more energy efficient unit, require less effort as it should require very little effort for at least the first 5 years, your unit is over 3 decades old and is likely to have something significant fail soon.  If sealant does not fix the coolant leak, this off season is good time for a new unit.  

    Good luck

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y
    Quote from @Allen Wu:

    Hi All - I have a rental property closed back in 2015. The AC unit was installed in the late 1980s. The Unit now requires annual maintenance (Freon refill and tune up). The cost has been going up everything year. Recent cost to do this every year is $500.

    Given the age of my AC unit, would you keep paying $500 every year (or more) to maintain it or would you just buy a brand new AC unit that will cost ($8k)? 
    Appreciate your insights. 
    Note: it’s a condo. Central air unit. 


     Do both. We always have maintenance agreements on our HVAC equipment. We are primarily in climates with change of seasons so we will have it maintained in spring and fall, but for the ones we have in areas with consistent weather, we still get it maintained every year. 

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    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    4y

    @Allen Wu replace for sure; that's an investment in your asset. 

    But 8k for a new AC is a rip-off! We usually replace AC units (condenser and evaporator) for about $2,500 on an average house in Milwaukee. I assume you only need a small unit for your condo, so might be slightly less.

    Run a quick google search before you talk to a contractor about the cost so he knows that you know: 

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    The unit is 30+ years old, I'd buy a new one. It is probably going to be more energy efficient and the current one has done really well.  Scott has a good point-replace it in the offseason when costs may be lower.  Get 2-3 quotes.

    1Reply
  • Lucia Rushton
    Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
    4y

    @Allen Wu agree with @scotttrench and I’d still budget for maintenance to keep the life of the unit.

    1Reply
  • Robert Reynolds
    Real Estate Agent · Los Angeles, CA · Member since 2019 · 302 posts · 163 votes
    4y

    I would buy the new AC. It's probably more energy efficient than your old one and will increase the value of your property. You can also look into mini-splits, it may be cheaper and better option. 

    1Reply
  • Kyle Marshall
    Member since 2021 · 1 post · 1 vote
    4y

    You might consider looking into if there are companies in your area that allow you to lease central AC units. You essentially pay a monthly fee for the 15-20 years that the unit lasts instead of paying all at once. Good for rentals as rent timing matches the expense. 

    1Reply
  • Kevin Rodgers
    Chicago (North West Indiana) · Member since 2022 · 4 posts · 3 votes
    4y
    Quote from @Marcus Auerbach:

    @Allen Wu replace for sure; that's an investment in your asset. 

    But 8k for a new AC is a rip-off! We usually replace AC units (condenser and evaporator) for about $2,500 on an average house in Milwaukee. I assume you only need a small unit for your condo, so might be slightly less.

    Run a quick google search before you talk to a contractor about the cost so he knows that you know: 


     I agree. $8k is high for a new unit. That may just be the California market that you are in, but I would get a few bids. At that age, they will have to change the outdoor and indoor unit as the refrigerant will be different with new units and it is just time to replace both while you are doing this. How many square feet is the condo and what size (tons) is the existing system?

    1Reply
  • Will KennerPro Member
    Rental Property Investor · Seattle · Member since 2018 · 134 posts · 100 votes
    4y

    Another thing to consider is the refrigerant used in those older systems is no longer being made. A big reason for the cost going up constantly is the supply going down. And simply re-charging an older system with the newer refrigerant is not possible as they are not compatible. When able, get a new unit, ideally in the fall or winter when demand is low. 

    1Reply
  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    A new unit at $8k will last about 15 years. That averages to about $500 per year, so it's very close to keeping old. But you'd have to keep scheduling maintenance which is a time investment.

    1Reply
  • Allen Wu
    OP
    Rental Property Investor · Member since 2021 · 335 posts · 193 votes
    4y
    Quote from @Kevin Rodgers:
    Quote from @Marcus Auerbach:

    @Allen Wu replace for sure; that's an investment in your asset. 

    But 8k for a new AC is a rip-off! We usually replace AC units (condenser and evaporator) for about $2,500 on an average house in Milwaukee. I assume you only need a small unit for your condo, so might be slightly less.

    Run a quick google search before you talk to a contractor about the cost so he knows that you know: 


     I agree. $8k is high for a new unit. That may just be the California market that you are in, but I would get a few bids. At that age, they will have to change the outdoor and indoor unit as the refrigerant will be different with new units and it is just time to replace both while you are doing this. How many square feet is the condo and what size (tons) is the existing system?

    Condo is 800 sqft
    0Reply
  • Mary Smith
    Rental Property Investor · Member since 2021 · 385 posts · 197 votes
    4y

    I agree with the others. I think it would be best to replace the unit, since it will be more efficient and will also be the more economical option in the long run.

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    New unit for sure. #1 it is well past it's expected life span and will fail soon. #2 You will save SO much money on the operation #3 that price is way high...labor and materials should be closer to $3-4k

    1Reply
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