No HVAC

17 Replies

BP, I am hesitant to purchase an investment property without HVAC. Not really keen on buying one that has or needs window units. Should this concern me or should I overlook this preference and focus on the numbers/cash flow? What are the pitfalls?

Thanks.

S.Ellis

When you say no HVAC exactly what do you mean?  Central heat but no central AC o just room heaters and window units?  If it has central heat but needs window AC then it isn't too bad.  If you have gas or electric room heaters it is much more of an issue because you need to make sure the gas system is in good shape and all the heaters work.  Also there are some injury issues with older gas heaters.

In a smaller sub 1000 sqft house window units and space heaters can actually be more efficient for the systems costs.  What do your potential tenants expect?  Are most of the houses in the area using the same setup?  I have one tenant that preferred to just use window units instead a air conditioning the whole house. 

As long as you can accurately estimate the cost to install the hvac and that is factored into the deal I see no reason to pass on the deal if the numbers work. The same goes for the windows. Is it there but not functioning? Dont forget to account for the cost to remove the junk system. Does the house not have windows at all? It sounds like somebody ran out of money. Best of luck. 

@Stanley E. , I understand your trepidation.  I was confronted with the same issue my first time out.  When you say, "no HVAC", I'm assuming you mean it has no central forced air heating or cooling.  I'm assuming it is heated with baseboard heat or kerosene heaters, and that it is cooled with window ACs.  These are not insurmountable problems.

Of course, cost is the issue here.  For a house under 1000 square feet, a new furnace, including installation, might run you between $2000-$4500.  The range is for whether or not the house already has duct work, model choice, and regional price fluctuation.  If you want to add AC to the system, it will cost more.  I've heard slightly higher prices mentioned, but not many that come in under $2000.  

Don't make the mistake of going with a national retailer who offers the option to pay by the month.  I got an estimate a few years ago for $10,000-$15000, and that was with all the duct work already in place.  I couldn't get the sales rep out the door quick enough.

As long as you incorporate the cost of the HVAC into your analysis of the deal, it shouldn't be much of a hindrance.  I've had two installed in different rental properties.  It took about a week from first visit, to ordering the unit, to installation.  Sometimes it might take a few days more because of waiting for permit inspection, but that shouldn't be a problem.

Honestly, I'm happy to find a property with a dead/damaged/missing furnace.  I can use that "problem" as a negotiating point and get the property for a lesser price.  Then, after the new unit is installed, I know the house has a brand new energy-efficient furnace that is going to last for at least the next 20-30 years.  That's better than waiting for an old furnace to die in the middle of winter when a tenant is demanding the heat get fixed immediately.  

Good luck!

I would probably consider installing HVAC if the property were in a nicer area. It is actually around 1000sq ft in a lower income area, but with the initial numbers, I would have positive cash flow and get a return of my investment in about 12 months. With the advice you gentlemen have provided, I think I will consider installing window units if it has heating already.

Thanks.

S.Ellis

you can also get window units with heat, if it does not have it.

Thanks Michael. I certainly did not know that.

If the cash flow is there I'll buy the property with the missing HVAC. I'm about to purchase another property with the electrical wiring missing (removed for the copper) and the coil inside AC handler missing (stolen). But at the end of the day that property will cash flow nicely for years to come.

Originally posted by @Stanley E. :

BP, I am hesitant to purchase an investment property without HVAC. Not really keen on buying one that has or needs window units. Should this concern me or should I overlook this preference and focus on the numbers/cash flow? What are the pitfalls?

If you mean central air systems, then down here it's very important. Window units just attracts a lower quality tenant, and central air here is a high priority for a lot of tenants. You can get lucky and get good tenants for window air units, but, you are making your pool of potential tenants that much smaller.

Plus, tenants are willing to pay the extra on a house with central air. To give you some idea, we have a 2/1 with central air (and heat) and a 2/1 with window units. One rents for $700pm, the other $575. The two houses are maybe 4 doors from each other. Your state and neighborhoods may be different though.

We do have a couple of properties with window units, but they'll be upgraded in the next 18 months to full central air+heat.

Something else to keep in mind is insurance is more expensive with window units than a central system and some companies won't insure homes at all without a central system.

With that said, in the older and more historic parts of where I live (NOLA), it is much more common to have window units instead of a central A/C and heat.  For example, on the block I have my duplex, every single house uses window units.

Quite frankly, I love having window units.  They last a very long time and are cheap to replace if they break.  For my side of the duplex, they are also energy efficient because our living room and our bedroom are on opposite sides of the house.  So we typically only have one unit going at a time.  I've never had issues renting my other side with window units and I'm in a B Class neighborhood.  But I could see where it could be an issue if window units are unusual for the area.

And @Michael Meeks is correct, you can buy window units that also provide heat.  Mine do.  They are more expensive and not quite as common as the A/C only ones, but you can still pick them up at Lowe's or Home Depot.  The last one I got that is A/C and heat is a powerful unit that provides heating or cooling for an open 500 square foot area and it was $400 at Lowe's.

Another heating option I put in my own home that I also think would look snazzy and upscale in a rental, but at a low cost, is those electric fireplaces.  They give off a lot of heat and look great.  If you shop around, you can find even the good sized ones for $200-$600.

I live in NC, and window units vs HVAC are dependant on neighborhood. My current place has central heat and air (thank the Lord), but my previous house did not. Both houses are sub 1000 sq ft. I've found I MUCH prefer HVAC (and ours is brand new) and so far our electric bill isn't crazy (the hot months haven't really hit yet though, so time will tell). 

I think it really depends on the neighborhood, the climate, and the cost. 

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Hi @Chrissy Monthomery. Thanks for the input. The 3.5 million dollars certainly got my attention. I appreciate the subtle encouragement. Going to reevaluate some properties I've been teetiering on because of no HVAC. S.Ellis

@Stanley E. - In Houston, we have financed a couple of deals that only have window units, but they are somewhat frowned upon. I would make sure you can line up financing before you got to far down the road. Best of luck!

Our smallest house (around 900 square feet) is our only one without HVAC; two window units cool it well.  These are inexpensive to purchase should they need to be replaced.  Would I ever install HVAC in this house?   Nope.  The rent isn't high enough to justify such an outlay in the neighborhood with this house.

Heat is provided by electric wall heaters.  While they can also be free standing we learned to attach them to walls securely after one "walked" when a tenant moved.

Window units "walking" upon tenants moving is another consideration although this hasn't happened yet.  Perhaps they are too heavy to be stolen.


Gail

Window units are so cheap these days. In a smaller home the resident will save money over a central system because they will be able to cool only the rooms that they are using.

Thanks everyone. So I guess the next question is, at what square footage should HVAC be considered? I generally look to invest in smaller SFRs in the 700-1200 sq ft range.

Perhaps a more important issue is how much would installing central heat/air cost you.  You mentioned a return in your investment in 12 months.  Not bad.

What type of neighborhood are you purchasing in?  How are the copper thefts going on in these places?

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