At what point do you replace heatings systems in rentals?

Question

I've got a quite a few units.  All have older 25+ year old gas boilers.  (gas baseboard)  I plan to keep them long term.  At what point do I start replacing the boilers, albeit before they actually break and have to be replaced?  I got a quote to do 2 of these units in one house for $14,000.  (Third unit is electric, and all the thermostats etc were replaced two years ago).  Was debating starting with this house, and then every year buying 1-3 systems.  I have money set aside from a property I sold already for these 2 units.  Just wondering should I do this or wait until they go in the middle of the winter sometime, where it will no doubt be more expensive.....thoughts for those who have experience with this?

John Teachout · Answer

I have never replaced a heating/cooling system that was operational. The life span is so unpredictable on these that you may be replacing it a week before it fails or 8 years before it fails. I even have a duplex with two identical systems where one quit about 2 years ago and the other works fine (heat pump).

Andrew Freed · Answer

@David K. - Why replace working units? As real estate investors, I replace the minimum when required. For instance, when I buy a property, I attempt to keep the cabinets and refinish / paint them rather than replace them. You get way more ROI in the long run and the tenants can't tell the difference. Either way, I personally think its foolish to replace such expensive systems that is not broken. I have a furnace over 40 years old right now in one of my buildings. Like you, I was concerned about it becoming non-functional but do not want to cover the cost of such an expensive fix right now since its a working unit. I actually took the middle ground and purchased a systems home warranty plan in case it does fail. I pay a small monthly fee and the warranty company will pay to repair or replace the system if it fails. That alleviated my concern about a failing unit while protecting my wallet from an unnecessary capital expenditure.

Nathan Gesner · Answer

I'm the same as the others. I make sure I have funds available, but I don't replace the unit until it needs it. Service them once a year to ensure they are clean, operational, and safe. The HVAC vendor will let you know if they think it's time to replace.

Scott M. · Answer

Generally at the point of fixing them is no longer viable or to expensive.  We work with investors from all over the world and I think I can count on 1 finger the number of them that would replace it proactively.  Meaning, while they were running.  Its more when the fixes started to be equal to 1/2 or more of the cost of a new one most decide its time to replace.

Alexander Szikla · Answer

Replace systems when they fail. They are expensive - no need to replace if they are still working properly.

Ryan Chatman · Answer

@David K. I do agree with the other posters that you probably shouldn't replace unless it isn't functional. We have a gas boiler from 1993 that our inspector said is on "it's last leg" but then when we had it serviced, the service guy was going on about how well it was performing.

Half of this same system was heating our second unit. In our situation, the heating was a bit inefficient and we were also doing a full gut renovation of this unit.. We decided it would be better to cap it off and go with a 3 zone ductless mini split to add home value and being able to list "heating & cooling" as a feature and command top rent for our area.

The mini split option has some cons but is also way cheaper than replacing a boiler and it doing heating AND cooling is a nice benefit.

Seth Borman · Answer

We replace heating and cooling systems when they start to need repairs. We've found that emergency replacements are far more expensive than planned replacements, often 60% more.

Ryan Chatman · Answer

@Heather S. We don't get a ton of subzero temps here in Southern PA but it has been around 15-20 degrees F, and no problems so far. The units are all electric, electrician ran 8-3 wiring from the box to get power to the units.

Heather S. · Answer

@Ryan Chatman I live in mpls and my next door neighbor has a split.  Its great MOST of the yr. She had issues though this month (Jan) due to the subzero temps.  Other than that her tenant has loved the AC in spring/summer & the heat was fun spring/fall/part of winter. Snow doesn't seem to be an issue as it was installed off the ground.

Heather S. · Answer

@David K. Did you end up replacing the boiler?  Im in a sort-of similar space.  I've had repair people out 2x to work on the boiler on a triplex I just bought in August.  Boiler is 30ish yrs old and probably is on its last leg.  Didn't really plan on having to replace and my capx fund isn't going to cover it, I had $ earmarked for other things, but am debating if I should do that now or do something like you did and add Home Service Plus to limp it through or bight the bullet.

@Ryan Chatman Are the splits electric?  I think I've seen those for AC but wasn't sure how well they worked for heat in the winter..  you guys get a lot of cold and snow right?  Do you have any issues in the winter?

At what point do you replace heatings systems in rentals?

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