Rental Property Uses Firewood to Heat

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Rental Property Uses Firewood to Heat

Russell Woodbridge
Member since 2021 · 9 posts · 1 vote

I am looking at a property that has a heating system for a small house and a duplex that uses firewood. The system is fairly new and apparently works well. In the past, one of the tenants got wood from the property (1.5 acres) and put a log in each day during the winter in North Carolina. That tenant is gone. I am thinking about moving on from the deal since I do not want to supply firewood but the cash flow on the place is amazing. Any advice or have you owned SFR / Duplex with firewood as the heat? Pro or cons? Thank you!

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
4y

Easy answer: put in a new heating system. If it has amazing cash flow, a new heat pump system installed even with ductwork is going to cost you under 10k in NC (I'm in TN) and factored out over time is virtually nothing. Then you don't have to worry about anyone providing firewood. If I came upon an amazing property, but for the heating system, I'd just replace that aspect just like I'd do if it was an amazing property and needed a new roof or new kitchen. 

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y
    Quote from @Russell Woodbridge:

    I'm not sure why you would walk away over that issue. If the heating system is the one I'm thinking of, they are efficient, easy, and cheap. Why not hold onto a property that cash flows? 

    The only thing I would change is I would provide the wood - or make them purchase it - so they're not cutting down trees.


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  • Russell Woodbridge
    OP
    Member since 2021 · 9 posts · 1 vote
    4y

    Thank you for your advice! It is just a new wrinkle I have not seen before. The system is efficient and the properties are small. Supposedly it does not take much wood to keep it going and provide more than enough heat.

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  • Evan B.
    Member since 2021 · 31 posts · 23 votes
    4y

    I have a newer woodstove in my house,

    as long as the tenant follows these rules theres only a low chance of a house fire:

    1.) The woodstove is installed correctly, with correct clearences to combustible materials (including the chimney setup)

    2.) The wood they use has been seasoned properly (below 15% moisture content, you can buy a $30 tool to measure it)

    3.) They don't overfire the stove, and keep it within the safe operating range,  this is tricky because softwoods like pine can take off faster, and well seasoned Oak will output 2 - 3 times as much heat per piece of wood as softwoods / other hardwoods do.

    4.) Adaquate fire alarms and fire extinguishers are installed properly, in correct locations, and confirmed working.

    Overall I personally wouldn't want a woodstove operated in a rental that I own, they are a bit complicated to run correctly.

    But at the same time, if the person is knowledgeable about wood stoves, it should be ok. Make sure you do research on insurance for this - I pay $10 more per year on my home's insurance because of my wood stove!!

    Can you share some pictures of the wood stove? Also check out Hearth.com forums for wood stove information.

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

    We have a wood stove in our house as an extra heat source. No problems if used correctly, especially pay attention to clearances to combustibles.

    Still, having a fire source in a house that is a rental makes me nervous anyway. Maybe it's not worth it....what do you mean by 'cashflow is amazing' ?

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  • Russell Woodbridge
    OP
    Member since 2021 · 9 posts · 1 vote
    4y
    Thank you. Some good info there.
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  • Russell Woodbridge
    OP
    Member since 2021 · 9 posts · 1 vote
    4y

    Well the cash on cash return would be around 20% and that includes PM, and 5% each for vacancy, repairs and Cap Ex. This is a small house and a duplex on one piece of land so three rents. So maybe the cash flow per rent is not amazing but overall looks good.

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  • Russell Woodbridge
    OP
    Member since 2021 · 9 posts · 1 vote
    4y

    Evan,

    I should have pics later today.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y

    Easy answer: put in a new heating system. If it has amazing cash flow, a new heat pump system installed even with ductwork is going to cost you under 10k in NC (I'm in TN) and factored out over time is virtually nothing. Then you don't have to worry about anyone providing firewood. If I came upon an amazing property, but for the heating system, I'd just replace that aspect just like I'd do if it was an amazing property and needed a new roof or new kitchen. 

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  • Russell Woodbridge
    OP
    Member since 2021 · 9 posts · 1 vote
    4y
    Good point JD. Thanks. The property itself needs some TLC anyways so that could be a good option.
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  • Andrew S.
    Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
    4y
    Quote from @JD Martin:

    Easy answer: put in a new heating system. If it has amazing cash flow, a new heat pump system installed even with ductwork is going to cost you under 10k in NC (I'm in TN) and factored out over time is virtually nothing. Then you don't have to worry about anyone providing firewood. If I came upon an amazing property, but for the heating system, I'd just replace that aspect just like I'd do if it was an amazing property and needed a new roof or new kitchen. 


     Agreed!  In fact, since you are in a mild climate a d the properties are small, you might be an ideal candidate for mini split HVAC systems.  Since you won’t even need ductwork, it is likely the cheapest solution.  

    2Reply
  • Evan B.
    Member since 2021 · 31 posts · 23 votes
    4y

    +1 Vote for buying a heat pump mini split

    That adds convenience and value to the property, and there is no risk of a fire or other issues with the woodstove. Your climate isn't too cold anyway :D 

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