Do I add a 2nd furnace to improve cash flow?
Hi all,
i am new to REI and would like some advice on how to look at a issue that exists with a duplex i am interested in.
currently, the owner pays for the heat (oil) for the 2 apartments - his estimate is $4000 a year.
However, if i were to purchase I would prefer to have the tenants pay. the issue is that there are two oil tanks (connected) but one furnace that powers the heat for both units (hence the owners pays as no way to separate out).
i have run the number for the property. Since this would be my first duplex i have been conservative with the numbers - after subtracting out vacancy rate of 1 1/2 months for each unit and a repairs/maintenance of 10%, the combined cash flow would be $400 per month.
However, this also takes into account the $334 per month the owner pays for oil.
so my question is, do i go ahead and add a second boiler (likely ~$5000) which would then allow me to have each tenant pay for their own oil and increasing the cash flow to $734?
Since i am looking at C class units (this duplex is on the market for $48000), is it better served for my $5000 to go toward a duplex that already has a separate unit? I should say, that other than the oil issue, both units are completely remodeled.
Many thanks for your advice
Neil