New install: choose propane or oil?

NetWareHead

I'm evaluating purchasing a rental property where a renovation of the heating system is needed. All tenants currently run off of a shared oil boiler with baseboard radiators. DHW is electric water heaters. Points below:



1. Property is located in Southern NH which has cold winters.

2. Multi-unit dwelling where I'd like to segregate the tenant utilities. I absolutely do not want to pay for tenant's propane or oil so this is non-negotiable. Future design must include this element and have tenant responsible for own fuel.

3. No Natural gas, Must be electric, oil or propane. I also don't trust a tenant to tend a solid fuel burning device like a wood or coal stove.

4. Building has a chimney so all units could be vented there. I would like to use it for venting rather than powerventing through opening in side of building. Arguably, a powervented condensing boiler/furnace is the most efficient but there will be a cost to buy such a sophisticated efficient boiler/furnace. A cheaper non-condensing boiler/furnace is better for me to purchase from a landlord perspective. note: This is just a preliminary pricing of equipment with minimal research that I have done and not indicative of what I may actually find. If this were my own residence, I would undoubtedly want the higher efficiency condensing models, but if cost is unfeasible in a tenant installation, they are not getting it.

5. Basement has the space for each tenant's oil tank assuming I went that route. This is one strike against oil since that space could be rented to a tenant for storage purposes.

6. Outdoor near house has space for each tenant's propane tank assuming I went that route.



I am just stuck on which fuel to choose for my future tenants. If you were a tenant, would you necessarily choose one place over another because one had oil and the other had propane heat?



I am leaning towards propane heat since a local plumber told me that propane can "tolerate short cycling better than oil and is more efficient in the long run". Also propane burns "cleaner" than oil and requires less servicing/cleaning. If I have propane, I can also plumb in a propane cooking stove; I know many people like cooking on a "gas" stove vs electric. (Is that something most tenants want? I love cooking and don't like electric stoves). Also with propane, you need to have it filled by a propane company. Since it is a sealed pressurized cylinder, there is no oil tank sabotage that can occur with propane e.g. someone opening the oil tank nozzle and pouring water etc.. into it. Propane has lower heat energy per gallon when compared to oil, but again the cost of the fuel will be the tenant responsibility and not mine.



Any opinions/help is greatly appreciated. What do you guys think? Thanks...

Weezbo

this is understandable in a tenant , management perspective.

may i ask though what happens if one of them move away and the heat source has no fuel ?



Another is , with the the current single boiler , about how many BTU's , can each apartment burn , ? approximately a year ? in gallons of oil ?

what is the actual amount of gallons it used last year?



If you have a total say for January last year what would that be?



As not all people have the same lifestyle , there are variables lets say that though minor , may throw some monkey wrench in the works .



very few buildings are ideal other than a cube so there are variations to take into account there as well . one apartment might have a propane solution and another a different appliance .



What happens about maintenance going forward? will it be run to destruction or a required proof of maintenance each year?



If , one fuel type appliance will fill the requirements for each apartment it may be that they are not all the same one , these are some more considerations i roll out to you .



if the oil boiler is currently 150 K dividing the number of apartments into that might mean finding some appliances that are small enough to fit the bill go electric , the cost of ownership is then chained to a utility rate and the electrical to each apartment may have to be upgraded to more recent codes that require arc fault etc..

are you considering the cost in that regard ?



Were you to get a second opinion from another source he may have a slightly different set of considerations along similar lines ...



I hope this helps prior to embarking on your Mission.

NetWareHead

tenants

The lease for each of the tenants will be written that I (the landlord) provide them with a full tank of fuel (whether propane or oil, to be decided) and at end of tenancy, the tenant must return possession of the unit to landlord with a full tank. The tenant must also maintain the apartment at a reasonable temperature to prevent freezing of any pipes or cold temperature damage.



I wish I had the specs for the current boiler, all I know is that it is old and needs to go. If it even works is questionable, the building is winterized at the moment and in bank's possession. Oil/propane is expensive and that is my sole reason for wanting to divide the fuel costs and make each tenant responsible for their own consumption. With current shared setup, it is impossible to gauge usage, therefore landlord needs to pick up the fuel tab and factor it into the rent.



Regarding the maintenance, I will be responsible for that. I am looking for a fuel choice that will easier on me. In New England here, everyone either has oil or propane and I have yet to find a non-biased answer as to which is preferable from a landlord perspective. Fuel will be tenant's responsibility.



I have not considered electric heating (I'd like to avoid electric baseboard) and I have no experience with an electric boiler.



From am maintenance perspective, what is cheaper in long run: propane or oil? Also, I know it may sound silly but it is only n my mind because this happened to a friend where a very problematic tenant filled the oil tank with water and rocks to fudge the level. This cannot happen with a pressurized propane cylinder. Thanks...

Paul48

Current

Does the current piping arrangement lend itself to easy seperation? If not, the conversion cost could be huge.

SWEI

What is the heat loss for each unit?

You will likely find yourself with limited options unless they are large units (or very poorly insulated.)  What kind of radiation?



http://www.eia.gov/neic/experts/heatcalc.xls will help you understand the real costs of each fuel.  It's also worth investigating historic fuel costs in the area, and competitive options (how many suppliers can you choose from for each fuel type?)

NetWareHead

Piping

Each unit has baseboard radiators and all of the lead to the boiler area. IMO (I'm not a plumber), it didn't look like such a pain to separate and create zones out of each unit. Of course, when the building is de-winterized and filled with water, I'm expecting the worst and alot of leaks. Who knows though...

NetWareHead

Fuel

I do appreciate your link that details the fuel costs, but in the arrangement I am proposing, each tenant is responsible for their own fuel. Fuel cost borne by the tenant is not really my concern. Unless someone here tells me that they are a landlord and have had tenants reject their unit because it was propane for instance. The only time I will be paying for fuel is when the unit is vacant which will hopefully be short times between tenants.



This is New England so either propane or oil will be expensive. But what I am asking for is costs from a landlord perspective, mainly maintenance of either a propane or oil system. I intend to have the boilers serviced regularly as part of ongoing maintenance but considering maintenance, does either fuel have an advantage over the other? I know propane burns cleaner than oil but is that really a factor to consider here?

SWEI

Heat loss for each unit

is essential.  There are limited options for small boilers.



If oil hits $7 per gallon your property may lose some of its attractiveness to potential tenants.  An oversized boiler will exacerbate this problem, whatever the fuel.

conversiontime

up rents to cover fuel

I can promise you will not be happy requiring multi tenant house where each buys their own fuel. The reason is no contract will help (without legal fees) once the tank runs out and possible property damage occur. While you can put in the contract anything you want, generally most states recognize right of the lessee--this includes functional systems like heat. So in the end you will be paying to have boiler restarted, lines purged, etc every time the tank runs dry. Ask around for other owners of multi tenant housing in NE if heat is included in price--almost all do for good reason.

NetWareHead

oil

While your point about $7 oil is true, it will be this price for everyone then, not just me. I have no way to do a heat loss calculation now while the building is winterized and especially while I am not the owner. Building is typical early 1900s construction and each unit is roughly 600-1100 sq feet comprising of several rooms if that helps.

NetWareHead

legality

I know several landlords who require tenants to maintain the fuel levels in the tanks and have written it into lease contract that tenant is required to pay for cost of hvac tech visit if boiler requires servicing if it runs out of fuel. Now that you mention it, I will ask specifically on this point, but my point is that what I am proposing is not out of the ordinary.

conversiontime

single family is better bet

Is this your first rental property? What you are seeking is a responsible, professional tenant(s) who can afford the 6 months of heating bills that NE requires. 20 years experience has taught me these renters are not common. but it is easier to find responsible single family tenants than multi tenants ime. Contracts are great, but when you are 3 months into trying to evict a deadbeat tenant they really don't mean much, esp relative to collecting money. Credit checks are best thing in weeding these types out.

NetWareHead

agree

Not just credit checks but I also verify employment, criminal background and have a minimum income proportional to each unit's rent. I also do not participate in section 8. This will be my first rental in New England but I have units in other states.

Zman

Electric

This is very simple.

Converting the whole building to electric is the easy answer.

Everyone already has a meter, it will be much cheaper to install. It may even cost the same to run (you would know if you used the spreadsheet SWEI posted)

It is the ultimate slumlord solution. No hassles.

Carl



If you want the most efficient option, that would be a single condensing propane boiler plant and BTU meters to keep track of the usage of each unit. I don't think it is the right answer for you  because it may cost more up front and you don't see efficiency as important.

bld999

I would lean

Towards one propane tank with separate metering so you bulk fill the tank and sell them the gas. LPG I think is mostly made out of NG these days, so some price stability can be expected out to the future. Plus, you then control whether fuel is available in empty units during turnover. Meters are available with web- based monitoring if you are three towns over. You could run gas ranges through the same meter and capture the "I like cooking with gas" crowd. I have three rentals and the gas ranges are still appreciated in spite of the induction range crowd pointing out that they are fine machines also.



The LP tanks can be buried or above ground, and outside, so no loss of useable building sq. footage.

NetWareHead

Separate metering?

Do you guys have any links or information to share so I can learn about this? I never knew separate metering of fuel was possible from one source. it would be an incentive to me to put one efficient boiler plant instead of multiples if this solution was financially feasible. How is the tenant "charged"? By BTU or by volume of fuel flowed? Thanks.

Zman

BTU meter

In that scenario,you would install a BTU meter on each zone. You could read the BTU meters monthly then divide the monthly bill based on usage.

Fuel costs vary so much by region that I would still try to figure out where you stand.

Oil burners will be about 80% and high efficiency propane is more like 90%.

Carl

Paul48

BTU vs. Volume

Every volume of fuel has a BTU output.

NetWareHead

Interesting

Ok now I see how this would work. You will have a number of BTUs consumed per zone (tenant) and knowing the number of BTUs in each unit of fuel you can mathematically calculate the amount of fuel consumed per month.



This will introduce another level of complexity in billing my tenant and I have too decide if this is worth it. This will require a lawyer's blessing because now I am not only landlord but I would also act as a utility. Clearly I have 3 paths in front of me.



Shared boiler and heat and/or hot water built into rent.

Shared boiler with BTU meters on separate zones and monthly "utilities" billing

Separate boilers and tanks with tenants responsible for own fuel.



I have some calculations and homework to do... Thanks for these great ideas!

Zman

Calculations

You can get real close on your cost per btu using the spread sheet. Once it has run a while you should be able to fine tune the numbers and get it exact.

If you decide to build the cost into the rent, you should devise a way to limit the heat in each unit.

I have an apartment that is set up so the tenant can have any temp they want up to 70.you can set the thermostat to whatever you want it just won't get hotter than 70.

I have only had one issue where the wench decided she needed a portable electric heater which she actually hid during the day and took out at night. A separate electric meter would be nice.

I think if you look at the install costs as well as the increased maintanance of seperate boilers, a central system looks pretty good.

Carl

NetWareHead

Name of this?

You said "If you decide to build the cost into the rent, you should devise a way to limit the heat in each unit.

I have an apartment that is set up so the tenant can have any temp they want up to 70.you can set the thermostat to whatever you want it just won't get hotter than 70."



This sounds great. What is this piece called so I know what to ask when I get my system designed? "Programmable thermostat with an upper limit"? Thanks...

Zman

Limit

There are a few T-stats with built in limits on the market. The problem with them is that the tenant may be able to tamper with them. They also cannot be adjusted higher than a certain point. People like to turn t-stats up. I say, "let them". you can turn it up to 90 degrees, it just won't get hotter than 70.

If you take a device like this http://www.pexsupply.com/Tekmar-150-One-Stage-Setpoint-Control-4149000-p?gclid=CMm74uqvp7sCFUQ6QgodBXIAcA

and wire it in series with the existing thermostat, you will limit the max temp in the unit.

You do need to run an extra 2 wires and install a sensor somewhere in the unit. The setpoint controller would live in the boiler room where only you have access.

Carl

nicholas bonham-carter

Upper limit

Using outdoor reset, will prevent any open window situations--NBC

NetWareHead

Option 2 eliminated

Ok, so after speaking to some associates and fellow landlords, I've decided to eliminate option #2: Shared boiler with BTU meters on separate zones and monthly "utilities" billing"



The overwhelming consensus was that I should segregate the utilities and fuel by tenant and not get into submetering. This is something that may seriously discourage most buyers down the road. I'm going to treat this property as an investment and therefore maintain it in a most valuable state if I ever choose to sell it down the line.



A shame really, the submetering concept appealed to me and I thought it would have been cool to implement and fun to tinker with. Appreciate the help and responses!

JohnHenry_2

yet another 2 cents...

If it was me, I'd go with option 1 and propane and do it this way:



1. Acquire a large (>=2500 gal, enough to last a year) propane storage tank that I owned outright.

2. Have it filled during the summer when prices are lowest. Propane was less than $0.70/gal at the refinery here this summer and when you have a large tank to fill your options for delivery can increase.



The reasons I'd do it this way:



1. Including heat and hot water in the rent gets you a premium on rent. If you can buy your fuel cheaper than the next landlord that includes heat, you have either a price or or profit advantage over him/her.



2. I wouldn't have to worry about a unit running out of fuel and freezing...



3. The overall heating fuel costs for the building would be quite a bit lower and I'd have the choice of pocketing the savings or sharing them with my tenants.

Tim McElwain

You may want to read this report

Part-Cargo of Propane Sells for $2.35/gal at Providence

 

A robust export market, declining U.S. inventories, logistical supply constraints and colder temperatures have converged to heighten domestic propane demand and boost propane prices at the onset of winter. And that has resulted in suppliers reaching outside North America to bring in additional supplies.

 

DCP Midstream Partners last week procured a part-cargo of propane slated for first-half January delivery into the Providence, R.I., NGL terminal. It plans to sell that cargo at $2.35/gal -- more than $1.00/gal over today's Mt. Belvieu anys price for December spot propane, sources tell OPIS.

 

It's thought that a multi-state marketer has agreed to purchase from DCP the bulk of the barrels -- up to six million gallons -- the minimum volume needed to base load a ship. DCP will make the remaining supply available to other buyers, according to reports.

 

The Providence terminal is owned by Enterprise Products but DCP holds a contract to market propane out of the 17-million gallon facility. DCP last sold a cargo of propane out of the terminal in April 2013 at $1.55/gal. It had gauged interest in a second ship since then, offering propane in October at $1.85/gal, then $1.95/gal, and then at $2.19/gal with no initial takers, sources said.

 

But now that more frigid weather is in play, there's no question that buyers will pay up for propane, rather than run out.

 

Spot prices continued to escalate at Mt. Belvieu this week, striking 22-month highs on Tuesday morning, with TET/non-TET deals worked from $1.3075- $1.3175/gal. In the Conway market, spot propane prices soared to $1.3475- $1.37125/gal.

 

U.S. inventories bear close watching this winter. Propane (and propylene) supplies are 18 million bbl below last year's levels, as of the last weekly inventory report from the Department of Energy. The year-on-year decline is attributed to increased propane exports out of the U.S. Gulf Coast, and a robust fall crop-drying season in the Midwest.

 

In addition, there are lingering logistical concerns that could potentially see some regions shortchanged of needed propane supply this winter. Shippers on Enterprise's TE Products pipeline system expect that allocations on the line could persist off and on through the winter now that the firm is reversing one of the two lines on its TE system for ethane service. That means that long haul shippers seeking to move propane from the Gulf Coast to the Northeast will have just one line to use on the TE system, forcing them to seek alternative means of moving propane to customers.

 

Meanwhile, railcar supply is tight in both U.S. markets and in Canada, and that is limiting deliveries of propane to retailers.

 

"This is going to be a tough winter," predicted one source as back-to-back winter snowstorms hit the Northeast. "There are going to be some dealers that run out of product."

 

--Mary Welge, mwelge@opisnet.com

Larry Weingarten

Have you considered. ..

...using mini splits?



Yours, Larry

JohnHenry_2

What was the Mt. Belvieu spot price last summer?

Propane has huge price fluctuations during the year. The spot price at Anacortes, WA ranged from around 0.70 to 1.60 in the past year.



That range is pretty much due to transportation costs. In the summer demand is so low here they have to transport it elsewhere to sell it so they price it at the "elsewhere" price less transportation costs. In the winter we use much more than the refineries produce (refining by product) so we have to ship it in and it's priced at the "elsewhere" price plus shipping.



The key to making propane pay is being able to buy and store all you need in the summer when prices are low and propane delivery trucks don't have a lot to do.

Jack

In your area

There are a couple tens of thousand Rinnai Energysavers doing precisely what you are wanting to do. I'd suggest that you look into that option. I think you will find it to be very cost effective and provide the comfort your tenants are looking for.