Repair or Replace HVAC in Rental Property?

[Aaron P.]

Hey BP. Long time reader, first time poster. Looking for some input on whether I should repair or replace my HVAC system in my rental property.

Background: The property is a 1500 sq ft house in Arizona. Current HVAC system is 31 years old. It's inefficient, and it usually needs repair about three times a year. I've spent about $2,500 in repairs on it over the past five years or so. That said, when it's working, it works fine.

Problem: The compressor overheated and is more or less dead. I either need to replace the compressor or install a new unit.

Solutions: I got a few quotes for repairing and replacing, but I don't know whether they're reasonable or not.

• Repair: The technician quoted $1,500 to install a new compressor with a one-year parts and labor warranty. The costs breakdown as follows: $600 for an R22 compressor; $500 for 8 lbs of R22 refrigerant; $400 for labor. The company is reputable.
• Replace: I got two quotes for a new 3.5 ton, 14 SEER split system. One quote is $4,700 for a system made by "Day & Night" (never heard of them) with a 10-year parts/2-year labor warranty. The other quote is $4,500 for a system made by Trane/American Standard with a 10-year parts/1-year labor warranty. Both companies are reputable.

Questions:

1. Do you recommend repair or replacing?
2. Are the quotes reasonable? I'm still shopping around, but any suggestions on ways to get the quotes down more?
3. When replacing a unit, how common are "unanticipated" problems that cause the quoted price to increase?
4. From a tax perspective, it seems like repair is the better option. I can deduct a repair this year, whereas I'd have to depreciate a replacement over 27.5 years. And because the units I'm looking at are 14 SEER and not the more expensive 15 SEER, I wouldn't get the $300 federal tax credit or the $200 local tax credit. I am missing anything here?
5. Do you recommend any companies in the Phoenix-area for this job?
6. Any other advice or thoughts? I'm all ears.

Many thanks!

[John P.]

Replace it and move on. I can't imagine spending so much time and analysis about such a decision. Just do it!