5200 sq ft 6 unit boiler cost?

Question

The owner is claiming that the gas cost is $2500 a year. Seems a little low for Chicago no? What do you think? He's also claiming $4200 for insurance. I'm checking with my insurance agent later this morning to see if I can get that reduced.

Michael Garcia · Answer

@Mark Ainley

Just wondering why I should stay away from state farm and American Family. I actually have one property with state farm because they're rates were the best I found. Should I be afraid of something?

Michael Garcia · Answer

@Pat L.  @Mark Ainley @Jason Bott @Joe Mueller @Lumi Ispas

Wow those are some crazy bills guys. I think I may have figured it out. The building is only half occupied right now. So that's probably why the bill is so low. And this building is brick and very similar to the way it was built in 1925. So when you were talking about upgrading heat that was to electric. How much does that usually run?

Definitely going to have to do some more research both on the utilities and the insurance to see if he's been making claims. And raise that deductible.

Thanks for the great advise

Lumi Ispas · Answer

Michael, one more thing. If you want your property insurance bill to be lower, you can increase the deductible.

These two factors matter most when you see two people getting different quotes on the same property: credit score and the amount of deductible.

The only other way to lower your bill is to make improvements to the building.

Hope this helps!

Lumi Ispas · Answer

That's low. Is the building new construction? Does it have lots of isolation and double pane windows?

The cost seems low. My yearly bill for a four flat is double than that...

Also, in Chicago there is a low that the seller has to disclose the heat bill. The owner can call People Gas and they will send him or his Realtor a Disclosure that shows how much was the gas over the last 12 months.

Regarding the property insurance, the amount will differ depending on the owner's credit score, the zip code the building is located in,  exterior type, age of roof, boiler, year built, etc

Good luck to you!

Mark Ainley · Answer

Last years $9000 is normally $5100 range the last two years which for 8 months of heat averages about $106.25 per unit in a normal year.  Because we pay heat we do get about $200 more per unit per month from our subsidy tenants.

We learned our lesson with baseboard electric heaters when we first got into this market.  Tenants don't know how to operate the heaters efficiently which runs up their bills, they cant afford it, and they move out.  Unless it is a boiler we stick to the furnaces where the tenants pay for their own metered usage.

Jason Bott · Answer

@Michael Garcia

Higher than usual insurance  premiums can be a factor of past losses, higher risk property characteristics, or insuring too much.

Ask the seller if they had any losses.  You can even ask them to have their insurance agent send you "loss runs"  This is the official report from the insurance carrier detailing the loss and total payouts.

High risk property characteristics in the Midwest right now are any electrical system other than 100 amp circuit breakers & a roof more than 20 years old.

Regarding insuring too much, I had 1 client sell 88 units to another and the premium for the buyer was 55% of the seller because he reduced building limits and took a $25k deducible (not for everybody).

Pat L. · Answer

WOW ..........

& I thought we were paying too much !!!!!

Our tenants pay their own electric & I had previously switched one unit to electric heat & their highest (monthly) bill, (during last winter), was $185.

any plans to upgrade your facility ??

Mark Ainley · Answer

I would recommend getting the actual bills from the seller for gas or get the account number and your Realtor can pull up the actual for the last year in the MLS or get me the account number and I can help you.  In our crazy winter last year our smallest 6 flat which is right around the same size was still at $9,000 for the year and that is on a 6 year old system.

$4200 for insurance can be in line depending on coverage.   For $4200 you should have a $1000 deductible and replacement costs with all the bells and whistles of a policy.  Don't go thru a state farm or american family on a policy like this go to a true broker and if you need a guy let me know.

Pat L. · Answer

We usually get the utility Co to provide us with the actual costs.

We have a similar situation 1 boiler 5 large units. $5500 last year (upstate NY).

We are in the process of converting the 'heating' for each unit to tenant responsibilty.