80% Vs 95% plus FURNACE which one to buy

[Glen Hark]

Hi I have to replace my AC and furnace.  I live in Michigan.  The first quote came in at $5,200 to install a 80% efficiency furnace and an AC unit.  For $650 more he will install a 95% plus furnace. 

My renter pays the gas bill.

I think the pros to having a 80% are slightly easier to repair.

The pros for the 95% are: better resale, and more appealing to renters.

Also I'm thinking that furnace can last over 20 years, so is a 80% going to look dumb in 5-10 years?

thanks for you input.

[Michael Gansberg]

Hi Glen,

Is the furnace the only one in the basement of a single family? Or are there a few other tenants(and furnaces) there? If your house isn't well constructed, sometimes, on very cold days, the waste heat from an inefficient furnace is needed to heat the basement. If your house is well constructed and insulated, the waste heat from the 95% furnace should suffice- even if it's the only furnace in the basement.

Assuming no mechanical problems as described above, I'd go with the 95%- your tenant's heating bill will be approximately 16% less than with the 80% version. So if his annual heating bill is $2,000(not unreasonable for Michigan, maybe even on the low side) he'd save $320 per year. 

Years ago, one of my managers asked why I'd bother improving the insulation in a house; "Mike, the tenants pay the heating bill, what do you care?" I figured it wasn't worth arguing- I knew I was right, but she was a new manager and I wanted to keep the peace. A year after the tenants moved in, they moved out- they said it was too expensive to heat. At this point, I reminded my manager of our conversation a year prior, and with her agreement, we fixed the insulation.

These days, I have gone beyond that- when tenants move out, I replace the lighting with low energy LED fixtures or bulbs to reduce their electric bills(the LED bulbs last decades, so it's basically a one-time investment.) A nice looking apartment will get tenants in, but a well-performing apartment will keep them there. Having inexpensive electric and heating bills not only lets them pay rent more easily(and possibly allows you to command a bit more rent,) but when their lease comes up for renewal, they'll think- "Where else will my utility bill be so low? I'd better renew." Lower turnover for the owner = higher profits. The little things count.

Michael