Best suggestions for replacing several AC units (rooftop package heat pumps)

8 Replies

Hello Everyone, 

New to bigger pockets but not to investing in properties. I own 3 multiplex properties and Over the last few years I've spent a lot of money on AC units that have died. I have working (but old) AC units and the ones I haven't replaced are going to crap out on me soon I'm thinking. I'm looking for a better solution to replace the other units I have that won't cost me a fortune. I've spent between 2700 and 3200 for rooftop package heat pump replacements (which isn't terrible here in Phoenix) but 8 more of those is another 25,000 that I don't want to spend. So my question is what does everyone else do when replacing AC? I'm sure someone has figured out a better solution to this that I'm not aware of. Do you buy used units? Refurbished? Online wholesalers? Any advice is appreciated.

@Andrew, not sure if you misunderstood but I was wondering what to do about replacing several AC units at a time. I'm not super concerned with keeping cooling costs/electricity down. 

Limp through the summer and get bids on the entire package in the winter when HVAC guys are slow. In bulk you may be able to get them closer to $2k a unit. Having to replace them one at a time after breaking puts you in a poor negotiating position.

@Corey G.

I would say same as recommended above about a package deal or.....

Look into Mitsubishi mini split systems perhaps. They cost about the same, are ductless, and run on less electricity than central HVAC units. Since you have multi units this may be a viable alternative. 

Good luck 

Originally posted by @Corey G. :

@Andrew, not sure if you misunderstood but I was wondering what to do about replacing several AC units at a time. I'm not super concerned with keeping cooling costs/electricity down. 

His point is, if your structure is not that hot, then your AC won't work that hard, it is like a car, if you put it at 5,000 rpm 24 hours a day, it tends to break.  You could install additional blown-in insulation which won't cost a lot, the reduction of the R Value is both energy saving and helps the AC usage.  On another note, online wholesalers like acwholesalers.com or genieac.com (I just order from them because they are close and I could actually pick from their warehouse), works well, you just have to order everything at once, and have them install it at once, hire someone to do all 8. 

I've heard about online orders and the companies not honoring the warranty or having to sent parts back in for replacement? How accurate is that? I don't want to have a tenant out of AC for weeks waiting for the parts to ship. Also would you guys ever consider rehabbed units. There is a company here that gives a 1 year warranty on units and sells them for about 1800 to 2000

Originally posted by @Corey G. :

I've heard about online orders and the companies not honoring the warranty or having to sent parts back in for replacement? How accurate is that? I don't want to have a tenant out of AC for weeks waiting for the parts to ship. Also would you guys ever consider rehabbed units. There is a company here that gives a 1 year warranty on units and sells them for about 1800 to 2000

The one I buy from is a local company, I just bring internet prices so I could let them match it.  Anyway, you can not rely on online wholesalers, as 95% of them are just dropship companies, they are kind of like a middle man (or bird dog in the RE terms), and they only transact with the company when there is a sale from their website, they have almost no overhead, and only work at their day-off or after work hours, they might have a good system of getting orders straight to their phone and forwarding the order to the manufacturer, but it is what it is, and that's why they are cheap. If they have an office address, that's a good sign, just double check if it's a PO box. I have ordered from online, and so far, they surpass all the company warranties, if I had a broken part, I'll just buy it and have it installed, the advantage of having your own employees to do technical work though. I wont wait for days for the part, specially with AC, it kind of gives you a bad reputation.

@Corey G.

I like the package deal advice, however I'd also advise you to consider the tax implications of going that route. With the Final IRS Tangible Property Regs, investors owning multi-family property have special loopholes they can now take advantage of. 

The HVAC system has been defined as its own unit of property. This means that in order for a repair to be deducted currently rather than capitalized and depreciated, the repair must not be material to the system as a whole. Materiality comes in at around 30%. 

What this means is, if you own a 4-unit property and each unit has it's own HVAC system, you can replace one HVAC unit and deduct the cost in the current year rather than depreciating the cost over several years. This is because replacing one HVAC unit out of four is arguably 25% (less if you include duct work) of the HVAC system as a whole and therefore not material to the HVAC unit of property. 

So while you should absolutely try to negotiate package deals, you can also get a steep discount come tax time utilizing this method - just another wrinkle to consider.