CapEx Projects Way Sooner Than Expected

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CapEx Projects Way Sooner Than Expected

Michal Kolenda
Member since 2017 · 26 posts · 10 votes

Hi all, 

Just last week I closed and acquired my first rental. Its a 3 flat in Chicago, I will be moving in soon when the next lease is up, but since I've closed the water heater hasn't been starting back up occasionally when it cycles back up (pilot hasnt been working properly). This happened twice last week, and both time resulted in loss of hot water overnight. The 3 inherited tenants are alright with it (so far) because I've been proactive in their needs and dealing with the last owners deferred maintenance. 

It seems to me the seller was just keeping the heater alive long enough to sell, but I think I should just replace it with another 75gal and get it over with. So moving onto the boiler... The boiler is as old as the building, with the manufactured date in 1973. I had a fantastic price quoted for the work, and the man would do the heater and boiler in a day each. 

I was wondering what you all would do in this situation. I know the boiler is at the end of its life cycle. Would you rather get infront of it, or would it be better to wait and hope it lasts until its warmer to not shut off heat for a day? I'm leaning towards getting ahead of it because I know if something does go it'll most likely be at the most inconvenient time.  

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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y

deferred maintenance is very common and to be expected . When you get an old multi apartment 9 times out of ten your going to have tons of secret crap those first few months that needs repaired and replaced ! This is a tough situation out of the gate especially if you went into hock to get into it only to find you were lied to and taken advantage of . Sadly it’s a Very common problem with older landlords dumping their portfolio . We all went through this crap so be bold and don’t let this ruin it for you

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  • Kevin Coleman
    Investor · Chicago, IL · Member since 2014 · 143 posts · 37 votes
    7y

    I say if you KNOW its not going to make it through the winter then go ahead and replace the boiler when you can plan around it. If it goes in Jan or Feb when its 10degrees outside and the tenants have to wait  a day or two unexpectedly in the cold they are going to be upset.  Also, you run the risk of your pipes freezing. 

    1Reply
  • Michal Kolenda
    OP
    Member since 2017 · 26 posts · 10 votes
    7y
    @Kevin Coleman I guess I’m not 100% certain the boilers gonna go. I haven’t been around it too much but it seems that it has been running as it’s intended, I’m only assuming that it’s going to fail based on its age and condition. You bring a good point about the pipes freezing, especially since I have radiant floor heat in the garden unit. Which leads me to think that even if my loss is installing a unit a year or two too soon that would be better than facing any losses associated with frozen pipes.
    1Reply
  • Wesley W.
    Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
    7y

    As far as the hot water tank, if it's already giving you problems it's really worth it to just go ahead and replace it.  Every time it konks out you are going to have to make a trip to get it started again (time is money) and you will lose more favor with your inherited tenants.

    Have your HVAC guy inspect the boiler and give you his opinion when he comes to replace the hot water tank.

    2Reply
  • Mike McCarthy
    Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    Water heater is worth replacing.  If you can't get the pilot to be consistent (assuming the pilot tube and such has already been replaced), just bite the bullet and replace.

    If it's a gas boiler, I would consider keeping it.  They tend to last just about forever... so just because it's old, doesn't mean it's going bad.  Really rusting through is the end of most gas boilers.  Oil boilers are more temperamental, and more things to go wrong and fix, but I wouldn't necessarily go replace it just because it's old.  

    2Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    @Michal Kolenda. Replace the water heater. Keep the boiler til it doesn’t work anymore, then replace it
    1Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    deferred maintenance is very common and to be expected . When you get an old multi apartment 9 times out of ten your going to have tons of secret crap those first few months that needs repaired and replaced ! This is a tough situation out of the gate especially if you went into hock to get into it only to find you were lied to and taken advantage of . Sadly it’s a Very common problem with older landlords dumping their portfolio . We all went through this crap so be bold and don’t let this ruin it for you

    3Reply
  • Jeff Burdick
    Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    7y
    Originally posted by @Michal Kolenda:

    Hi all, 

    Just last week I closed and acquired my first rental. Its a 3 flat in Chicago, I will be moving in soon when the next lease is up, but since I've closed the water heater hasn't been starting back up occasionally when it cycles back up (pilot hasnt been working properly). This happened twice last week, and both time resulted in loss of hot water overnight. The 3 inherited tenants are alright with it (so far) because I've been proactive in their needs and dealing with the last owners deferred maintenance. 

    It seems to me the seller was just keeping the heater alive long enough to sell, but I think I should just replace it with another 75gal and get it over with. So moving onto the boiler... The boiler is as old as the building, with the manufactured date in 1973. I had a fantastic price quoted for the work, and the man would do the heater and boiler in a day each. 

    I was wondering what you all would do in this situation. I know the boiler is at the end of its life cycle. Would you rather get infront of it, or would it be better to wait and hope it lasts until its warmer to not shut off heat for a day? I'm leaning towards getting ahead of it because I know if something does go it'll most likely be at the most inconvenient time.  

     What does your HVAC tech say about the boiler?  Being without heat for any amount of time is very scary in Chicago.  I have a bunch of space heaters as backups.  

    2Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    On a side note (which does not help the OP), around here it is common to ask the seller to supply a 12 month Homeowners Warranty on SFH's and small multi-families. I bought a duplex in January 2018 and the tenants fridge died two weeks later (I definitely think the seller knew about this dying fridge). $100 deductible and they received a $700 brand new fridge. It helps to not get crushed by capex in the first 12 months of ownership.

    2Reply
  • Josh Adams
    Rental Property Investor · Cincinnati, OH · Member since 2017 · 23 posts · 19 votes
    7y

    @Michal Kolenda you should definitely talk to a couple of HVAC technicians and have them do an annual maintenance. Have them walk you through the different components of the boiler system while they are doing it. Preferably get referrals and also ask them how often the technician has worked on boilers before they come out. Boilers can last a long, long time. They were designed to. And even if a boiler “goes out” it may not need to be completely replaced. It may be some component of the boiler system.

    2Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7y

    @Michal Kolenda

    During due diligence have a HVAC contractor inspect those components.  There is no guarantee.  Boilers last a long time 50 years plus or minus a decade or two.  If I’m you I replace the water heater.  The boiler I would get some estimates.  I had a building where the boiler had to be replaced.  It died.  I had to put my tenants up in a hotel for a week until I could get estimates and it replaced.  In the Chicago area we have not hit the cold snap yet.  Be prepared for January/February when the real cold weather comes.

    Good Luck.

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    7y

    Do these repairs before the end of the year. The IRS has a $2500 safe harbor provision allowing 100% write off. 

    1Reply
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