Rental property

jeb

I am looking change some boilers in a 2 family rental. Each apt has a gas hot water baseboard monoflow sytem. What would you recommend as the most reliable way to go. Tenants pay their own heat, but I also dont want to kill them with the gas bill.

Brad White_61

Tough one...

As a former landlord, I struggled with all of that, ordering Hotpoint appliances for the rental units and Kitchen Aid for mine, that second-tier, second-class citizen thing...

The issue of heat was not as strong back then but my core answer when advising homeowners is, "whoever pays the gas bill pays for the improvements" (meaning insulation, setback stats, TRV's). Basic philosophy of where the money train runs. Not what you asked, just a short share of common interest.

To your question: If I had a rental unit, my first inclination would be to give them the most efficient conventional boiler (EI and Vent Damper, maybe kick it up a notch to sealed combustion types such as W-M Gold series but not true condensing). Not a Repco, that would be ...just cruel....

I would cost that out. Then cost out a next tier condensing boiler such as a Munchkin (good price point for rental units IMHO) and perhaps a tier above that.

[You can also get into sub-options like reset controls, P/S piping to protect the lower cost boiler too of course, but I want to illustrate the principle.]

Basically get a price for three levels: Good, Better and Best. Total cost of ownership.

THEN, ask yourself, your real estate professional, your accountant: Could the rental market absorb a higher rent given the marketablility of lower potential heating bills?

IOW, say the base level rent in your area for a 2 BR is $1500 (range of $1300-$1700) with a generic heating system because no one asked. That is your base range and the heating bills might be, oh, $1,200 per year. ($200/month in heating season).

Say you cost out the Good Better and Best systems. Good is X, Better is X+ $2,500 and Best is X+$3,500 but would save the tenant respectively $200 and $300 per year in heating bills ($166 and $150 respectively per heating bill month).

Say you charged an additional $50 per month year round, $600 more per year against the capital cost? Don't forget your depreciation and borrowing costs too.

The question/answer becomes a personal one: What is it worth to you (what do you call a reasonable payback), how long will you hold/own this, what will the market bear, and does the market care, let alone bear?

My $0.02,

Brad