ENTIRE AC unit needs to be replace. Wiped out ALL cash flow ??

Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes

I just found out the AC unit needs to be replaced. The unit is 30 years old prior to the tenant being evicted it seem to work good. I got a quote from the ONE HOUR ac contractor and he said it'll cost 6k-8k to replace the Air handler, heat pump and entire wiring. This Cap EX is completely wiping out 1 yr of CF. What can I do ? Any suggestions \.

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Bob Razler

Rental Property Investor · Boca Raton, FL · Member since 2017 · 329 posts · 237 votes

Hello @Isiah Ferguson . That is a big hit.

An AC system is made up of parts - outside compressor, interior air handler/blower, etc. I would find out what "part" broke and see if you can't limit the replacement to that part of the system (for now).

Bob

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Isiah Ferguson
OP
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
9y
Originally posted by @Shawn M.:

@Isiah Ferguson it easily has the capacity, you will just need to keep the doors open to get the airflow to each room
Keep in mind, this is a low end rental in a D/C- area. I think the Ductless splits would be perfect, especially the unit being so small. I don't mine doing window units but Ductless would look much better. At lease it has a more modern feel too. Let hope this work out great. New investors problem/ Mom & pops issues. Wish me luck.
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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
9y
Shop, call around, attend REI meetings, and find a reasonable HVAC contractor. A Goodman 2 ton heat pump with matching air handler and auxiliary heat strip costs $1,600 from Chadwell Supply in Charlotte. I imagine you can get it all done for $3500-4000 (apartment owners and management companies pay less than that).
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Levi T.Pro Member
Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
9y
Originally posted by @Isiah Ferguson:

Originally posted by @Brian Ploszay:
That sounds expensive if it is a smaller building. Get more quotes.
It's. 2/1 900sq
Should be in the $4K - 4.6k price point to replacement for a 2.5 ton. Get more quotes.
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Randy Makiej
Investor · Parksville, NY · Member since 2017 · 7 posts · 3 votes
9y
You always want to get multiple quotes. It gets you informed about what you're buying, and this isn't a cheap purchase. Three is kind of the minimum because you can start to see differences between them and find out who's fudging the estimate, and where. If the first guy is insisting on "all new wiring", the second guy might say, "it's ok to keep that", and that same logic applies to all the various parts of the system. If all 3 contractors come back and say the same thing, then it's probably a fact. Also, you can compare the quotes, and start to negotiating at the line item. "how come it's $1k to run a 6ft wire to the breaker box, it's under $100 in materials?" However, 30 year old system sounds kind of done.
I've installed my own split system. The contractor wanted like $5k, for two days work. Hardware was lower end. I paid about $2500 for a really nice Mitsubishi system, for a 700sq ft space, with tall ceilings. Probably more unit then I needed in retrospect. You do have to buy a few hundred dollars in specialized tools. It's not super simple, so if you don't consider yourself handy, don't do it. If you don't seal the joints right, you're refrigerant could leak out and then you could damage the equipment, so no savings. But if you can figure it out, it does save many $gs. I watched a lot of youtube videos and read a lot of forum info before doing the job. Tons of info out there. I'm rehabbing a building now where I'll be installing at least 3 of these systems so it was worth the time to learn. Good luck.
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Paul Bojinov
Investor · San Diego, CA · Member since 2015 · 36 posts · 21 votes
9y
Get more quotes. About 6 years ago I had Sears installed a Carrier unit with all duct work on a 2400 sqf property in San Diego for $9500. Cheapest quote I got back then was $8000 for a unknown brand.
So 6-8K for 900sqf sounds like a lot. I will not hire a contractor that can't even quote an exact price.
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Wade G.
Houston, TX · Member since 2010 · 150 posts · 159 votes
9y
I had a 2/1 , 934 square feet, and had a whole new system including duct work replaced for 3k but that was back in 2009. I hate to say this but this expense should really come as no surprise since the unit is 30 years old. Its just part of the business. Ample reserves is the key, then when repairs like this happen its easy just to pay for it to be replaced and get on with life. I would suck it up and get a nice new system that will be worry free for several years. When you start cutting corners and replacing things with sub par equipment you are then knocking on the door of becoming a slumlord. I'm not saying you are a slumlord but when you skimp on repairs before you know it your property becomes something an investor would buy for pennies on the dollar.
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Scott Daily
Investor · Waco, TX · Member since 2017 · 7 posts · 3 votes
9y
I'm an AC and elec contractor
I agree completely with Michael Hayworth
Except my English is pretty decent and I'm not a redneck :)
The most important day for your ac is the day it's installed !
Make sure it's done correctly
Call a local ac supply house and ask for the name of a contractor that's reliable and does his own work
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P.J. Bremner
Rental Property Investor · Claremont, CA · Member since 2015 · 292 posts · 374 votes
9y
@Isiah Ferguson
That quote does sound high, at least from my experience. I had an entire unit installed in a 1,400 sqft house (actually I had a bigger unit installed, rated for 2,000 sqft) and it was just at $5,000. I've used this same guy for 4 other AC installs on bigger homes, nothing was over $6k.
I'm curious to know where you are getting these quotes from? Maybe you should ask for a local referral and stay away from the guys that advertise OR you can set things up before you get the quote. Find out from BP what a reasonable price is, then tell the contractors that you are getting a couple quotes and they are coming in around $X,000 so if they want to stay competitive they can match or beat that price. Often times, experienced contractors will rip you hard if they think you don't know what you're doing. If they know you're price shopping, they will either try to compete to earn your business or flat out tell you to use the other guy because his price is too good.
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Michael Swan
Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
9y
Hi all,
As I said on Podcast 238, if you have a single family rental property you need at least $10,000 in reserves for each single family for when Murphy's Law raises its ugly head. It is not if, it is when.
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Jason Chen
Tampa, FL · Member since 2017 · 240 posts · 153 votes
9y
Get a lower bid.
Always anticipate these costs by setting aside about 10% of your rental income into a repair reserve fund. Like $500 a year, so that after 20 years (assuming youre doing super long term holding), you'll have $10,000 to repair a roof or A/C. The 10% number I use is just a rough and convenient number.
If you factored the old age of the A/C unit into the purchase price and cost of the property when you bought it (like you should have), then you should be ok.
This isn't as big of a disaster as it seems - you just need to get it replaced and done for a good price.
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Chris T.Pro Member
Rental Property Investor · Charlotte, NC · Member since 2013 · 491 posts · 253 votes
9y
@Isiah Ferguson - I recently got a quote for a replacement AC unit here in Charlotte from a very reputable company that I've worked with many times for $3500. That was for a 3/1 1065 sq ft property. PM me and I can give you the contact info.
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John C.
Investor · Suwanee, GA · Member since 2010 · 104 posts · 22 votes
9y
Definitely $6500 is not an investor friendly price. Should be more around $2800 to $3500 depending on length of line set.
This is why "Cap Rates" do not work for SFRs/single units. IMHO any seller that quotes a cap rate for a SFR (Single Family Residence) or just one unit (condo/townhome/etc) doesn't really understand what they are selling.
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Chris Camuglia
Investor · Raleigh, NC · Member since 2016 · 14 posts · 3 votes
9y
@IsiahF
The 6-8K range sounds high, especially on the size of the unit. It would be worth it to shop around and you should be able to get it in the 6K range. I just had both my units done in 2015 and the total was around 12K and that was including upgrading one of the units to a 95% HE rating. Also since you are in NC and possibly use Duke energy you can get a rebate. Every little bit helps. I went for the SEER 16 models and not that it helps you so to speak, but the electrical consumption goes way down.
https://www.duke-energy.com/home/products/smart-sa...
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Robert Foley
Investor · Fruitland, NM · Member since 2015 · 11 posts · 12 votes
9y
So a heat pump/ ac unit has a typical rated life of 15 years. Many die in 10 so getting 30 years out of a unit is really good. The equipment cost (wholesale) is between 1700-3000 depending on size and brand. Check out a-c wholesale.com for reference. You have be EPA licensed to legally install a/c units and since the equipment is so expensive you really don't want an amateur doing that work. A great price would be $4500 but don't hold your breath.
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Geoffrey Schnake
Property Manager · Saint Petersburg, FL · Member since 2016 · 113 posts · 87 votes
9y
new, not used. ask me how I know. 2 ton in your market should be less than 3k installed.
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Anastasia Jordan
Investor · Birmingham, AL · Member since 2016 · 446 posts · 305 votes
9y
Originally posted by @Isiah Ferguson:

Originally posted by @Brian Ploszay:
That sounds expensive if it is a smaller building. Get more quotes.
It's. 2/1 900sq
3 window units from Home Depot.
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Isiah Ferguson
OP
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
9y
Originally posted by @Anastasia Jordan:

Originally posted by @Isiah Ferguson:
Originally posted by @Brian Ploszay:

That sounds expensive if it is a smaller building. Get more quotes.
It's. 2/1 900sq
3 window units from Home Depot.
ANY great ideas for Heat. The winter time is approaching.
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
9y
I would get at least another quote or two. I just had a 2 ton added to a house that only had central heat - in other words, it needed everything you need - for $2700. Comfortaire, 10 year warranty. You should only need a 2 ton in that house that size.
Hint: If you can somehow have some shade on the compressor it will add life to the unit, because it doesn't have to work so hard to transfer the heat outside.
Podcast Guest on Show #243
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Will G.
Rental Property Investor · Maryville, TN · Member since 2009 · 529 posts · 414 votes
9y
I was paying $3k for 2.5 ton units (rheem) to replace condensor and air handler, with electric heat. Why would you be redoing wiring?
1 Reply
Jesse Hargrove
Investor · Charlestown, NH · Member since 2016 · 48 posts · 15 votes
9y
@Isiah Ferguson I would agree that a smaller HVAC business will be less expensive. I have replaced 3 AC units complete.
The price was between 3500.00 to 4000.00 That was in florida. I would say get more quotes. It is me experience that AC units last around 12 to 15 years. The good news is when you replace the unit you should be good to go for many years.
Good Luck with your search.
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Bill Alpert
Investor · Morro Bay, CA · Member since 2013 · 24 posts · 1 vote
9y
I was given the same verdict by an a/c company. I called a plumber/ac repair guy who got the unit working again for about $250.
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David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
9y
That's why you have cash reserves. If not, then yes - you'll need to borrow and use cash flow to repay the loan.
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Peter S.
Attorney · Miami, FL · Member since 2017 · 108 posts · 113 votes
9y
6k-8k is a complete ripoff.
I just had a 2 ton-14 SEER Goodman Unit installed for $2,500. Even if you need a little ductwork or electrical, it shouldn't be that much.
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Jana Hristova
Property Manager · Tampa, FL · Member since 2016 · 34 posts · 25 votes
9y
It sounds expensive. You need to get more quotes and not from the companies on Google and Yelp. The really good ones don't advertise. Call a property management companies and ask who they use.
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Erwin F.
Rental Property Investor · Seminole, FL · Member since 2014 · 85 posts · 68 votes
9y
Whoa! How big is the unit? I just got a Trane 4 ton ($5K), Trane 3.5 ton ($4.5K), and a Goodman 4 ton ($4K) in the last year. I usually call 5 different companies for quotes, but I generally use the same company.
Per wiping out cash flow. If you're buy and hold, you'll recoup that cash over the 15 years that they estimate the new unit will last. I generally take off $150 per unit to put in my CapEx account. We're fully funded for each unit now.
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