Buying a quadplex with an old HVAC system? Homewarranty? Advice

[Jon Dang]

Hello BP Family,

I have found this quadplex that looks like a great deal. This will be my first deal that I plan to house hack and acquire via FHA. Numbers work out at ~$600/month in cash flow after all expenses. Saving 5% Repair, 5% Capital, 10% Property management, and 8% Vacancy. This is in Baton Rouge, Louisiana so there are hot summers. Also, tenants pay electric so I wont imagine they blast the AC like crazy.

3/4 units have very old HVAC, 12 year old. One unit has a new HVAC replaced in 2017. So the old units still use R-22 as well.  My concern is that if the HVAC goes bad i'm looking at $15,000 - $20,000 in replacement. Seller is offering 1st year of home warranty. Has anyone dealt with a similar situation. I.E buying a home that they know would need a large capital expenditure within 2-3 years. Also, any advice on homewarrarnty.  I talked to america home shield and they replace if they cannot repair and pay 10/lb freon. However, I always hear that 9/10 times they repair items that need to be replaced! I read conflicting things. 

Just looking for advice from anyone who has been in a similar simulation. Thank you!

[Kris L.]

Here is how I would anticipate that goes with the warranty:

If an older AC breaks, they will try to repair it.  It will take them a minimum of 2 weeks to get a tech out to you, where your tenant will have no ac.  The tech will attempt to repair it for the $75 charge, but they will have to drain the R22 to work on the unit.  The warranty will pay $10 a pound for the R22, but because it is no longer made, it will actually cost $100+ per pound, meaning you are out of pocket $1000 min.  If you are lucky, that will put a band aid on the issue, but that ac unit will break again, and you will go through the same rigamarole ad nauseam.