Central Heat and A/C

10 Replies

Hey BP community!

I just closed on my first property, a duplex, and am just starting the rehab process. There property currently has in window cooling units and no heating source. I am already having to upgrade the utility box to increase the amperage. I am weighing the possibility of fixing up the current AC units and installing wall heaters in each room versus installing central heat and air. I plan on having the property as a long term hold. I spoke with my property manager and GC today, both who I feel are reliable and very knowledgable of my local market. It looks like it will cost me an extra $14,500 total to install the duct work and electrical and put separate running units in each unit. On the rents side, my PM anticipated that I may be able to rent each unit for $800 vs $775 if I were to have central heat and air. This would increase my rents by $600 a year which is a CoC ROI of 4.12%.

Is this worth the extra capital investment? Should there be something else I am factoring in?

Thanks everyone!

I went to college in Oklahoma....and I can not for the life of me imagine living in a property there without central AC. I would imagine it would be very hard to rent without it.

I'm assuming current ac units, you mean window units? You can get 110v window heat and air units now fairly reasonably.

However. Personally I'm a fan of central air, and most of our units have that, or are moving towards it. In Florida, we add 50-100 per month on the rents with central heat and air, not just 25. If your tenants are using window units, their electricity bills will drop considerably, and they'll be in much nicer apartments that don't have window units hanging around, let alone the noise. It's worth way more than 25 a month extra.

I can't say central air is much more reliable frankly considering the call outs we get, maybe a little bit, less things for the tenants to beat up I suppose, but they just work so much nicer.

Another issue we've found is that central attracts nicer tenants.

The final consideration, is when you come to sell your property, will central air be a standard thing? Personally, in the long run, I think it will, so when you come to sell up you'll be penalized for not having it. Imagine in 100 years when looking at photos and someone saying "what's that hanging out of that window?".

Lack of CHA is a killer where I live. All apartments here offer CHA, so failing to offer such in a single-family home for me not only makes my units unable to compete with apartments as well, it also lowers the amount of rent I can collect.

Not only will CHA make the units more desirable, if you ever want to sell it will be a huge plus for the next buyer that the electrical service & heating/air have already been upgraded. 200 amp service & CHA are two specific items I look for on purchases, even if they need to be repaired. 

@Matthew Brill I suggest you take a look at local rental rates yourself for units with and without central air.  I bet you will see a much bigger difference than $25/month.

Now without much information on the size of the place, its hard to advise on the price, but it seems high.  To put it in perspective, my new construction duplexes that are 1900ft2 total (2 x 950ft2 units) cost me $9k total for central HVAC.  A refit would be a bit more, but not $5k more.  Shop around and  see if that cost is real.

Also, dont fail to consider the costs of ownership with the window units.  They dont last forever, and tenants can be rough on them.  Also having no heat may be an issue for some rental programs like Section 8.

You could also look into some of those units which are installed in each room without requiring duct work. May or may not be useful in your area. Ask an HVAC contractor.

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict

For 15 grand you could probably buy another unit and central air is just another thing you will have to pay someone to maintain when it fails or gets stolen.  I'd probably keep the AC units in there or switch them out for portable heat pumps. Wall heaters, base heaters, or 220 volt heaters, ductless heat pumps are other options. 220 volt heaters are probably going to be the cheapest at a cost of $50-200 for 4800-7500 watts and will heat 600 to 1000 square feet followed by base heaters and wall heaters.

I agree with going ahead and converting to CHA now if you are in the financial position to do so. As was previously mentioned, "quality tenants" expect to have CHA in their units (and I don't blame them) which will make your life easier in the long run.

I was in the same boat as you in 1997 with a duplex I own. I ran it for several years prior to that with window units & old gravity Oil Furnaces (what a PITA they were). When I was financially able to do so in 1997 I just bit the bullet and upgrade the Electrical systems, installed duct work and Heat Pumps in both units.

I was able to increase my rents significantly after that, thereby attracting better quality tenants all these years, so I've had no regrets. I had to replace the Heat Pump in one side of that duplex in 2014, and the one on the other side last month, so I've gotten my money's worth out of them. 

Also, as @JD Martin mentioned, it is a HUGE benefit if you decide to sell.

Bill 

         

I don't know rents in your area but a lot depends on the neighborhood.  If you would be the only one with central air and the neighborhood is lower end don't do it.  If it is a good neighborhood and you have the funds to do it central air or  minisplit units heat/ac are the way to go providing your region needs AC.  Local comments indicate it does need AC.  Yes, it will take a long time to recoup costs but you might want to look at the cost  to recoup based on  the price difference between the two options over time.   Window units can damage your windows when taken in and out.  They need replacement over time and they block the window.  Individual baseboard the tenants always complain about heat cost.

Thank you all for the input! Great stuff. 

@Mike Wood @Colleen F.

The units are 1200 sq ft per side. The neighborhood is of the historic variety with a mix of B+ and A- type blocks. All the homes are from the 1920s and 1930s. Of the rental units, they appear to be 50/50 in terms of having AC units hanging out the windows. But I think I'll pull the trigger now rather than later and put in the central units while I'm doing all the other rehab work. I'll aim to go for an extra $50 rent per unit while hopefully getting a better tenant, getting it rented quicker, cutting down on maintenence issues, and increasing my retail value. 

@Matthew Brill In my area, Central AC is worth at least $100/month.

Even at 1200 sq ft per side, $14.5k is high for just the HVAC costs.  Not sure if that cost includes the cost of other things like the electrical upgrade that you spoke of.  

If you have attic access in both units, fitted the HVAC is quite easy, as everything can go in the attic.  If the duplex is an upstairs/downstairs arrangement, you will have to find a closet to sacrifice for the HVAC air handler, and may need to drop the ceiling around it to hide the duct work. 

Good luck.