Good House, Bad Investment – Worth the Oil to Gas Conversion?

[Ambur Fulse]

Hello Bigger Pockets Community! I’ve been on the site for about a month now and have immersed myself in the forums and podcasts. I am a newbie multi-family investor in the Greater Hartford, CT area. I am grateful for the breadth of knowledge available on BiggerPockets. I just wish I knew to consult the site before I purchased my first “investment,” property, and so I present my dilemma….

Last year I purchased a two family home in Windsor, CT, a suburb outside of Hartford, CT. As intended I have rented out one unit and am living in another with my roommate. My share of the $1500 mortgage is $118 when all is said and done. I eventually would like to move out and rent both units, I’m estimating a $2000 income for both units. This all sounded so good going into the purchase…

The problem is all of the utilities are connected. I am currently paying for the electricity, water, and :gasp: oil heating for both units. While I would expect a landlord to pay for water, I am growing more and more distressed at the idea of paying for other people’s utility usage. I travel 2/3 of the year for work so I am hardly home, yet my average expense for heat/electricity is $400 a month.

I think the only way I can create a positive cash flow is to separate the utilities. This will involve an oil to gas conversion. Luckily the gas company will bring the lines to my house for free, but I will have to fund the costs to install the equipment. Estimates I’m getting have been in the range of 18k to 25k. I can make it work through a 0% financing program offered for high efficiency conversions and borrowing the rest from my 401k.

My question to you all is: Is it worth the additional investment? When I do the math using the conservative 25k investment for the conversion, plus my down-payment and closing costs of: $12,144.36, my ROI (considering monthly expenses) is 5% or a $155 positive monthly cashflow if both units are rented. While I wasn't expecting this property to be a big money maker, I am unsure if it is worth tying up my funds in a property that isn't giving me much of a return. I really do love this property and feel this could be a great place for me to learn but similarly I don't want to stay emotionally attached to a dud.

I’ve considered selling the property and starting fresh. I hesitate because I am pretty sure I overpaid and doubt there is much equity in it. I would be lucky to break even, the more likely scenario is I would take a loss. But the loss could give me the freedom to find a more solid investment.

The one thing I cannot do, is continue spending 5K a year on other people’s utility usage.

I would greatly appreciate any feedback, thank you in advance!