Should I replace majors before refi?

2 Replies

We are preparing for a cash out refi. 3 of our majors (furnace,a/c, hot water heater) are all beyond their life expectancy, however, they are all currently functioning. Should we go ahead and replace them before the refi to add value or should we just let them run until they die? If we opt to replace them all I was thinking about just financing the purchase and paying it off over a longer time period. This should also reduce the likelihood of getting an emergency call from a tenant in the near future. The other part of me wants to use the items until they die and then replace them. All thoughts are greatly appreciated!

(Update: furnace and a/c are from 1993 or 1998. It’s difficult to make out)

@Steve Richardson . I don't think it matters much in terms of the valuation for the refi. Not only that but the math doesn't work very well. Let's say you could replace all for $10K and it increases the appraised value by $10K. Assuming 70% LTV that gets you only $7K more theoretically from the refi. So spend $10K, get $7K. I assume you're doing the refi to raise cash for other purposes and this doesn't help. On the other hand if you want to do the improvements for other reasons, then that should drive the decision. And you could do the improvements after pulling cash out as opposed to doing additional borrowing. Have you asked an HVAC technician for an opinion? Are your bills high because existing systems are inefficient? Are you having to do regular service calls? Are there incentives in place, such as tax credits, to go high efficiency?

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