Electric wall heaters, or new natural gas furnace?
Contractor · Idaho Falls, ID · Member since 2014 · 8 posts · 0 votes
Hi everyone, my wife and I are currently working on a live in flip. We are doing really well on keeping cost down however we have come to a point where we need to make a decision on heat. At the moment we have small electric wall heaters in each room. They provide decent heat and are not terribly expensive to run. Our other option would be to have a natural gas forced air system installed that would run about 5800 dollars. The basement is unfinished at the moment which would make for an easy install. The houses in the neighborhood are split about 50/50 on their heat sources. Ultimately I guess my question is, would it be money well spent to have the furnace installed or a waste?
Disclaimer: I am not a professional HVAC person. Also, this is not legal or tax advice.
Where I live and have lived (Missouri, Oklahoma), you don't usually install straight electric heat unless it's a really small house (less than maybe 1000 sq ft) or seasonal, like a lake house, hunting cabin, etc. Natural gas, or electric heatpump with gas, is the most popular, if you already have gas to the house.
Natural gas is the only utility I pay for that has gotten cheaper over the past 3 to 5 years. I don't expect this to continue forever but it's fun while it lasts.
As some kind of reference, on the bills I paid in October, the headline rate for my electric was 11.15 cents/kWh (first 600 kWh) and 11.48 cents above that, plus a monthly charge and random inscrutable other charges. If you divide the total bill by the total kWh, the overall rate is 14.35 cents/kWh. For gas, the headline is 7.38 cents per CCF, plus a monthly charge. If you divide the total bill by the total CCF, the overall rate is $2.58 per CCF. If your rates are way different than this, the gas/electric tradeoff will be different.
If your current house is electric heat only, you probably get some kind of discounted rate from your electric company. If you go with gas heat, your electric rate may go up, but the total usage should be a lot less. The electric company may be able to estimate your usage without electric heat, or ask a couple of your neighbors with gas heat what they pay.
If you don't already have gas to the house, find out what it costs to bring the gas line in. I wouldn't be surprised if this is $1,000 or more.
Both the gas and electric company will probably have rebates for higher-efficiency equipment, and (more subtly) rebates for sticking with their fuel. This house had an old electric heatpump plus gas heat, plus electric A/C when I bought it in 2009; when I replaced it, the electric company offered some rebate because the A/C was more efficient, but more rebate because I stayed with the heat pump (which means more money for them). It is probably worth calling both the gas and electric company to see what they will do for you.
Back when I updated the A/C, the rebate was based on the nameplate rating of the old and new units. Now, they have a slightly different program, where an A/C tech measures the performance of the existing A/C before the swap, and the performance of the new A/C after the swap. This means it's important not to tear out the old one until the tech gets to look at it.
You might not care about A/C at all in Idaho, or just use a window unit for the two weeks in the summer that you need it. Forced-air gas does let you have central A/C if you want it... maybe that lets you get rid of a window unit that's in an awkward spot or noisy or whatever.
In 2009 there were some federal tax rebates for more efficient HVAC (or more insulation, better windows, etc) but I don't know if those are still available... the furnace salesman should know all about them. The way it worked back then was that after it was installed, the install company wrote you a letter that said "Your Acme model 1234 furnace and Acme model 6789 A/C installed on 31 February 2009 at 1011 Oak Street meet the efficiency requirements of the Super-Duper Energy Saving Act of 2008". You then claimed your rebate on your 2009 taxes and sent in a copy of that letter with your taxes. Sometimes your state has something as well. Some of these might be restricted to your residence, and not a place you rent out to others.
Disclaimer: I am not a professional HVAC person. Also, this is not legal or tax advice.
Where I live and have lived (Missouri, Oklahoma), you don't usually install straight electric heat unless it's a really small house (less than maybe 1000 sq ft) or seasonal, like a lake house, hunting cabin, etc. Natural gas, or electric heatpump with gas, is the most popular, if you already have gas to the house.
Natural gas is the only utility I pay for that has gotten cheaper over the past 3 to 5 years. I don't expect this to continue forever but it's fun while it lasts.
As some kind of reference, on the bills I paid in October, the headline rate for my electric was 11.15 cents/kWh (first 600 kWh) and 11.48 cents above that, plus a monthly charge and random inscrutable other charges. If you divide the total bill by the total kWh, the overall rate is 14.35 cents/kWh. For gas, the headline is 7.38 cents per CCF, plus a monthly charge. If you divide the total bill by the total CCF, the overall rate is $2.58 per CCF. If your rates are way different than this, the gas/electric tradeoff will be different.
If your current house is electric heat only, you probably get some kind of discounted rate from your electric company. If you go with gas heat, your electric rate may go up, but the total usage should be a lot less. The electric company may be able to estimate your usage without electric heat, or ask a couple of your neighbors with gas heat what they pay.
If you don't already have gas to the house, find out what it costs to bring the gas line in. I wouldn't be surprised if this is $1,000 or more.
Both the gas and electric company will probably have rebates for higher-efficiency equipment, and (more subtly) rebates for sticking with their fuel. This house had an old electric heatpump plus gas heat, plus electric A/C when I bought it in 2009; when I replaced it, the electric company offered some rebate because the A/C was more efficient, but more rebate because I stayed with the heat pump (which means more money for them). It is probably worth calling both the gas and electric company to see what they will do for you.
Back when I updated the A/C, the rebate was based on the nameplate rating of the old and new units. Now, they have a slightly different program, where an A/C tech measures the performance of the existing A/C before the swap, and the performance of the new A/C after the swap. This means it's important not to tear out the old one until the tech gets to look at it.
You might not care about A/C at all in Idaho, or just use a window unit for the two weeks in the summer that you need it. Forced-air gas does let you have central A/C if you want it... maybe that lets you get rid of a window unit that's in an awkward spot or noisy or whatever.
In 2009 there were some federal tax rebates for more efficient HVAC (or more insulation, better windows, etc) but I don't know if those are still available... the furnace salesman should know all about them. The way it worked back then was that after it was installed, the install company wrote you a letter that said "Your Acme model 1234 furnace and Acme model 6789 A/C installed on 31 February 2009 at 1011 Oak Street meet the efficiency requirements of the Super-Duper Energy Saving Act of 2008". You then claimed your rebate on your 2009 taxes and sent in a copy of that letter with your taxes. Sometimes your state has something as well. Some of these might be restricted to your residence, and not a place you rent out to others.
maybe look around. I can get central heat and Ac installed for $4100-$4500. I think it also depends on your potential buyer and what level of home you are creating. A small $75k home might not need it, but if you're selling for $275k, you should probably put it in.
Outside of the cost of utility factor, it also comes down to ease of use. With a forced air gas furnace, you typically have one central thermostat to control the whole system. With electric heaters in each room, you need to fuss with setting the thermostat on each. I could see that being a turn off for a potential buyer even though it actually gives you more control over heat in each area.
you are doing a flip on your house and the homes are 50/50 gas vs electric the answer is leave it the way it is you would not get much added value for the gas and you can always give a partial credit to a new buyer if it becomes an issue
This is great feedback everyone, thank you for you input. Just to clarify on some of the points that people have made. The gas company will bring gas into the meter from the street for free (given that a gas appliance will be installed). Also the prices of homes in the area are selling anywhere from 150000 to 190000. Lastly my thoughts were to just keep them and not worry about a furnace and like was mentioned provide a credit to the future buyer. However the basement is unfinished and to be competitive in the area I should finish the basement and if the basement were finished the install price for the future home owner would be substantially more because the ceiling in the basement would have to be cut and patched. Any more input is welcomed. Thanks!
Simply put, if you are good at crunching numbers. Look at both money in money out scenarios. Also if it's a tie, will the HVAC way reduce time on market and or get you closer to asking price?
So let's look at both scenarios quickly.
Option one; you leave it as it is. Is it realistic in your area that it may add an extra month to the listing and then have to split the cost of an HVAC system anyways?
Option two; you spend the ( let's say $10k ), but you get $12k more for prop and it sells 2 or 4 weeks faster than that was obviously worth it.
The houses in the neighborhood are split 50/50 but what about the area in general outside your immediate neighborhood? Is it a general selling point in your town to have gas? Would it mean you have a better chance of selling quick? Electric heat here is one of the most expensive types of heat you can get but that does not sound true for your area (and there is no incentive to keep it there just are not gas in some neighborhoods). The other point would be if you go to the ability to have AC too does it matter ? If it does I would switch to gas.
Adam,
a lot of good advice - I would reiterate the call to run the numbers on each scenario. It sounds like you've talked to the gas company, have you spoken to the electric company? You should be able to get the numbers for the past year on your property, and a similar property (equivalent square footage) for both scenarios. I know where I used to live (in Wisconsin) I could see utility use by searching the address, but you may not be able to do that there to compare. Also, talk to the electric company about rebates to stick with what you have.
From a resale perspective, I suspect it would be considered a plus to have forced air and would lead to lower days on market at the very least, but an expert in your local market would be able to answer that question. Even if the neighborhood is a 50-50 mix the room-by-room heat may reduce resale or lengthen DOM. I live in St Louis, so the desire for central air means ductwork is really an expectation.
This is all great advice everyone thanks so much for the comments.
Around here (Kansas City), I would expect a $150k-$190k house to come with central heat and air. Probably straight gas heat, or electric heatpump with gas backup heat, and electric A/C. Towards the high end of that range I would start expecting a slightly larger house and maybe a couple of zones on the HVAC, so I get separate temperature adjustments for different parts of the house. Your area may be different.
One way you could hedge your bet a little would be to figure out where the furnace would go in the basement. (This has to do with where a good spot for the ductwork is, where the electrical panel is, where the gas pipe will come in to the house, where the furnace vent pipe(s) will go, how long the Freon lines are for a future A/C, etc.) Then, have the ductwork, both supply and return, installed from the rooms upstairs to that spot in the basement. Maybe even run a dedicated 15 amp 120 V circuit from the electrical panel to the future furnace location, and just terminate it in a junction box where the furnace will be. Then finish the basement as normal and go from there. That gives the buyer the option of putting in a furnace later without having to tear up the house.
On the other hand, getting just the ductwork done by itself will probably cost more than getting it at the same time as a furnace install. There is also somewhat of a risk that when the furnace gets installed down the road, the installers don't like something about the ductwork and require it to be re-done.
@Adam Smith Is this going to be a retail or rental flip. If rental, what class of property is it and how much is the rent. I can't imagine doing a retail flip and not having central air and heat as with an A or B class rental.
Think about the profile of your end buyer. $150,000-190,000 range around here is mostly young families with maybe 1 kid and another on the way or DINK couples upgrading from their starter home. My wife and I are around 30 y/o and we wouldn't buy or rent a home without central air/heat. Older buyers who didn't always have central HVAC or renters might not care as much, but I think most younger folks would want the efficiency and ease of use that comes with a central system/thermostat. Also, multiple electric heaters might make families with toddlers a little nervous.
I agree with those who recommend central HVAC, but one consideration I haven't seen is safety. With the electric wall heaters, especially older ones, there is a fire hazard if anything is up against them. When I was a kid, before my parents installed central HVAC in their house, one of the first things we would do when the weather got cooler was pull everything away from the wall so we wouldn't have a fire from the electric baseboard heaters. Yes, they should have thermostats, but I don't think I'd trust a thermostat that old, especially for a live-in flip.
Adam,
I'm not far from you and work in your market. I have had buyers who will only look at houses with Gas. That said I don't know if it adds enough value to justify the expense. I would say run some comps for what has sold with electric vs gas in that particular neighborhood and see if there is a discernible difference. If there isn't keep it cheap!
Not to repeat many of the great comments made I'll ad just one point: make sure that the finished "package" works - what I mean is, if your overall approach is to stick to necessary repairs, paint and carpet (and sell the house for 150k) then stick with cheap and easy. If you have updated kitchen, granite counters and tile bathrooms new windows etc and spent the money to make the whole house really nice the electric heating would stick out like a sore thumb.
In the USA, natural gas is the lowest cost heating fuel almost everywhere. So I suggest you look closely at the comps (both active and sold) in your market to see how natural gas may have affected the purchase decision - did the ask price get reduced and did the DOM go longer? I would expect gas to be in favor with buyers, so you should see some variations in the comps. And I would put the gas in.
Here is a gov't provided spreadsheet you can use to help in deciding on fuel source:
Great feedback everyone, once again I really appreciate it. I believe from the research I have done and the level of finishes I would like to have in the home I've decided to have the forced air system installed. Thanks again!