To Do or Not To Do - HVAC Converson on 7-Unit Building in Chicago

[Edouard Pierre]

Let's see if I can keep this short and sweet. I just closed on a 7-unit building in Chicago for a very good price. My biggest and most expensive decision is whether or not to convert the massive boiler/radiator system that heats the whole building at my expense. 

The building is currently comprised of 3 occupied units with great tenants. They're under market rent but they're on-time and will incur a rent increase soon once I fix a couple small issues in the units. The top two units are occupied by tenants that are NOT paying rent and have not for the last year or more. I have already given them 30 day notices and will end up doing cash-for-keys with them.  2 units are thus vacant. The bill for the gas can vary anywhere between $178-$1700. This is obviously a summer vs winter cost done for the last year of service. One detail is that Chicago had a pretty mild winter last year (same this year). The second detail is that the thermostat is regularly set to 85 degrees (first thing to change on my end). What the previous owner did was put the building on a budget plan, which results in each bill (summer or winter) being an average of the yearly use. So I could do work on the boiler to make sure it's as efficient as possible, make sure all the radiators are functioning, and make sure the thermostat is always set to a reasonable temperature. 

The boiler itself is not in great shape but is running strong (pumps out 840,000 BTUs!!!  The cost to replace such a unit is $40k-$50k. 

The three bids that I've received for installing high-efficiency Rheem furnaces in the units have hovered around $8500 all in (run electrical, gas, furnace purchase, ducting, AC coil for later use, AC line to roof, and then soffit installation to hide the ducting). One could say that I could repay the installation of the HVAC units in 5yrs and with the rent increase could do it a bit faster. 

In my opinion I have three options and hoping you pros have some great ideas:

1) Hiring a professional commercial boiler expert to thoroughly clean the boiler and go through the whole system with a fine tooth comb.

2) Do the HVAC conversion in the soon to be 4 empty units and keep the boiler working for the remaining occupied 3 units. 

3) Do the HVAC conversion in each unit one at a time and when I get to the units that are occupied I'd offer them the other units to sleep in or perhaps rent them a temporary place to live. 

THANK YOU!