Adding a mini split in a rental?

Question

Hello Bigger Pockets community!  My wife and I are just getting started on our real estate journey, and this is my 1st time posting in the forum.  We live in the Dayton, OH area.  We have recently moved out of our home due to a family medical issue.  We plan to hold our primary residence and rent it out.  We will most likely be doing a long term rental.  My PITI is around $650 and rents are currently around $1,600 in my area.  We’ve owned the house for 20+ years and have great equity in the house, which was built in 1997.  We do have a HELOC on the property with available funds.

The attached 2 car garage was converted to living space by the original owner.  It has no ventilation or ductwork in it.  We have been told it would be difficult and expensive to try to run ductwork into the room due to the vaulted ceiling in the room the former garage is attached to.  For 20 years we have dealt with space heaters (of various types) for heating the room in the cold OH winters, or just ceiling fans for cooling in the summer.  Neither of those options are extremely efficient or effective.  We have discussed adding a mini split in that room.  If we add a mini split, we will also need to upgrade our electric panel, as it is currently full.  My question is this, would the cost of upgrading the panel and adding the mini split make sense for a rental?   Are there any considerations for either upgrading or not upgrading in this situation when we plan to have renters in the house?

Thanks in advance for your time and suggestions.

Henry T. · Answer

I agree with the others. If you want to get into the rental biz, sell and buy a couple other places, maybe three. No tax! Or, expect your present house to take a beating. As for the electrical.....Mini splits use very little current. For the space you'll be conditioning, a mini split will probably use about 1/3 the power of whatever space heater you have been using. Therefore you should not need to change service panels, since since mini's are such low current devices(comparatively). Like Kevin mentioned, you can buy a double breaker that fits in the space of one. Then you'll be code compliant on a dedicated circuit. There's probably a million youtube videos that can illustrate. This video is informative, but I wish the narrator more emphasized the lethal voltages within one inch of his finger. LOL

www.youtube.com/watch?v=K6JP5E0hPZA

Kevin Sobilo · Answer

@Nathan Gesner is correct in general.

However, I didn't suggest double tapping a normal breaker, although there actually are breakers specifically made to accept 2 conductors. So, with those specific kinds of breakers that is acceptable. Even some home inspectors don't seem to realize this one.  So, that is also a viable, safe and code compliant option. What I suggested was a tandem breaker which is basically 2 separate breakers but that fit into 1 slot thereby allowing for more circuits to be serviced in less space. Some panels have specific slots where these can be installed. This is also a safe and code compliant option.

Jaron Walling · Answer

@Jeff Gammon Welcome BP and welcome the journey! Sounds like a great cash-flowing rental. The only thing that matters is the ROI the mini split installation would provide. How much is the installation and how much does it increase rents? If you're at market rate rents maybe the investment isn't worth it.

Maybe it makes sense to do nothing? You guys have owned the property for years so have you considered selling? That equity spread out over 2-3 properties would significantly improve your ROI over time. It seems you're under leveraged when you could sell tax free and generate a bigger return with multiple properties. Let a future buyer deal with the mini split an electrical panel upgrade if they choose too.

The average cost for a mini split install is $4500 according to Google. That chuck of change could go a long way towards renovations like a small bathroom remodel, interior painting, or new flooring, etc. if you choose to sell at a higher list price.

Nathan Gesner · Answer

I would just warn that it's not advisable to connect two circuits to one breaker. Every circuit should have a separate breaker according to code and safety.As @Jaron Walling said, it's a simple math equation. What will it cost to install, and how much more rent will it bring in? If it pays for itself with one year of increased rent, then I would say it's worth the investment. If it takes five years to pay for itself, then it may not be worth it.

Kevin Sobilo · Answer

I agree with @Jaron Walling, you have an opportunity to sell and harvest a profit and avoid paying tax on that profit because it was your primary residence. If you rent this out, you eventually lose that benefit.

If you do, decide to keep and install a mini-split, consider that you may not need a new panel. You may be able to just add a sub panel or move some existing circuits to tandem breakers to create space. Tandem breakers allow you to have 2 circuits connected to 1 breaker that has 2 switches. So, you use less slots for what you have now. Many panels allow for a certain number of these but it depends on the make and model.

Adding a mini split in a rental?

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