HVAC vs adding rooms for ARV

3 Replies

Hi everyone! My wife and I have been listening to the podcast and reading BP books for almost a year now. After months of hunting we finally dove in and bought our first investment property!

Let's just say it's been a learning experience. And might wind up being an expensive one. The house was built in 1900 and has plenty of the old home charm and issues that you would expect.

We paid 80k and are hoping for a rehab budget of around 40k. It is currently a 4 bed 1.5 bath with a large structurally sound attic. The hope was to make a master bed/full bath in the attic to make it a 5 bed 2.5 bath.

What is hurting us is that the home still has the original 100+ year old gravity furnace. Asbestos wrap and all. We are having an HVAC company come out tomorrow to inspect it and make sure it is at least safe to turn on. Average quotes for new HVAC have been coming in around 15-20k for furnace, AC, and all new ductwork along with remediation and removal of the old furnace. So almost half our budget. We are hoping for an ARV of around 140-150k but now don't think we have enough to do both HVAC and finish the attic. So assuming the furnace works and is safe, would new HVAC or the master bed/bath in the attic be better for the ARV? We paid cash and are looking to BRRR it. Thanks in advance everyone!

If your furnace works and will sell in its aged condition, look into ductless mini splits for a (possibly) cheaper AC option.

@Max T.

We will be doing a split system for the attic if we wind up going that route. I suppose we could expand the system to run to other floors as well.

My big concern is the value of adding a bed and bath vs how much an appraiser will look down on and take away value on a gravity furnace.

@Adam McCarthy   I had to google what a gravity furnace is. That's an elephant in the room that either you or the next home owner needs to address. You’re dealing with a heating efficiency of 50% or lower. Newer furnaces are nearly twice as efficient and distribute even heat around the home. You can't even put a filter on some gravity systems which sucks for air quality. 

I would 100% replace the out dated HVAC system before adding rooms or baths. People may disagree but energy bills add up and it's also terrible for the environment. A new HVAC has more value in my opinion.