1 furnace (gas heat) in a duplex, best way to get tenants to pay for heat

[Khouri Rice]

I have a couple of duplexes (upper and lower in each building) and each duplex has one furnace for both upper and lower units, I am paying the utilities right now, but would really like to have the tenants pay for heat. I have been trying to research cost-effective ways of doing this, instead of installing a new furnace in each unit and then separate everything out ($$). Right now the lower unit has the lone thermostat which does both units. Ideally, if possible I would like to somehow install some sort of submeter for gas usesd by each unit and then put in a thermosta in the upper unit so they have direct control over their each, and then have the tenants pay for their own utilities. Does anyone have any advice/experience with a legal way to pass on the heating costs to my tenants without installing a whole new heating system for the upper unit. Thanks!!

[David Krulac]

I'd install 1 new gas furnace and have the tenants pay the gas. Depending on your numbers it could have a pretty short payoff.

At a 2 unit building with a single gas boiler, we were paying about $3,600 for oil which included heat and domestic hot water, so it ran 365 days a year. Cost about $6,500 to install 2 new gas boilers and 2 new gas hot water heaters for domestic. Lowered tenant's rent $50 each right after installation costs $1,200, but saved $3,600 minus $1,200 = $24,000 yr. When new tenants moved in the rent was raised back up $50, savings per year $3,600. In less than 3 years conversion paid for, every year thereafter $3,600 increase in cash flow at 10 cap that equates to a $36,000 increase in building value.

At another 2 unit we were able to keep the existing hot air furnace, cutting off the ducts to the second floor and installing a new gas furnace in the attic. costs about $3,000.

At yet another 2 unit, kept existing oil hot water boiler for 1 units and converted the other unit to gas hot air, all new ducts, central air and new gas HWH. Costs about $6,500. Oil heating costs were $6,500 a year, raised rent back up on new tenant, saved $6,500 per year payback 1 year, increased value of building at 10 cap by $65,000.