Converting oil heat to electric on a 30 unit building

[Alex Goumilevski]

We are looking at a 30-unit built in the 1960's, and the current building is set up with two oil boilers, one for the hot water, and one for radiator heat. The current landlord is paying over 50K per year for #2 heating oil. The two boilers were replaced about 10 years ago and still look to be in good shape. They said the replacement ran about 60K.

There is no natural gas available nearby to tap into. The current building also has no duct work, and window a/c units.

Tenants pay for the electric in the property. Landlord pays for oil, water/sewer and trash.

If we end up acquiring the building, we would somehow want to pass the heating cost to the tenants for new leases.

One way would be to implement RUBS (utility bill back to the tenants based on sq footage of the units, # of occupants, etc).

Another way would be to convert to electric heat. We are exploring either adding duct work for central a/c and heat pumps; or doing a mini split ductless system. The first option with duct work seems more expensive and intrusive to occupied units.

Unfortunately there is no natural gas available nearby to tap into, which is of course my favorite way to heat.

Any thoughts or advice in this area would be appreciated.

Also curious to know if anyone is familiar with federal or state (we are in MD) tax breaks or incentives for improving efficiency of a building, or converting from oil heat. 

Thank you in advance,

Alex

[Salvatore Lentini]

$50K per year for oil?  Do whatever you can to get that cost off your back.  You’d increase the value of your building by $600,000+ at an 8 cap.  More if cap rates are lower there.  Electric is expensive but even if you have to lower rents and then have them cover electric,  you have $50,000 to work with.