Tenant Heat Preferences

[Chris Babcock]

Have a general question poll for the community: Have you ever had a potential tenant lose interest in your property because of the heat fuel source?

I.E. I have a duplex that has an oil boiler on one side, it's a PITA to maintain and just one more thing that can go wrong. I'm considering replacing the hydronic system with electric baseboards throughout the unit to match the other side. Has anyone ever had a potential tenant lose interest in a unit specifically because it was electric heat vs oil/propane/NG? Especially in the case where the tenant is responsible for the heat bill.

[Michael Noto]

@Chris Babcock I am in CT which has a similar climate to where you are in upstate New York. We fill about a dozen rentals a month for either our own properties or for clients and this is the general feedback we get regarding heat sources:

Natural Gas: Definitely the most preferred and the most efficient across the board. If used responsibly this is the best way for tenants to keep heat costs down during the winter. 

With that said, if someone wants to keep their apartment at 75 degrees 24 hours a day their heat cost is going to be substantial no matter what the source is. Landlords tend to like gas because there is less maintenance that comes up with them outside of a servicing every couple years.

Oil: Although the price of oil has come down in our area over the last 5-6 years this is a heating source that is still hard for tenants to wrap their minds around in our experience. Why? 

I think it has to do with being more of a responsibility for the tenant. It is not like natural gas where they can just flip on the theromstat and that is the last they have to think of it until they get their bill. With oil you pay for it before you use it which is not what tenants (and people in general) are used to. 

Also, add in the fact that they have to keep track of when the tank is getting low so they can schedule another delivery before it runs out. To much for some people to handle. The cost of oil and natural gas is probably closer than most people think given how much oil has come down in price but people get flustered by the logistics involved.

For landlords, you have to service gas units every year (oil burns dirtier than gas). Make sure also as a landlord you clearly outline in your lease who is responsible for servicing the furnace should the tenant let their oil run dry.

Electric: 1-bedroom or studio apartments are the only units you really want to rent out with electric heat. We see no difference in the rent a 1-bed or studio commands with electric heat as opposed to other heating sources. Never any pushback. In fact, we get feedback very often at showings that they like "having all of their utilities on one bill". 

With that said, once you get into 2-bedroom and 3-bedroom apartments (larger units) this is where you get a lot of resisitance to electric heat because it is pretty well known that it is the most expensive type of heat for larger apartments. The trade off for that is you typically will end up getting less than market rent. It is also harder to retain tenants for multiple years with electric heat because one bad winter with insane heat costs has them looking elsewhere when their lease is up.

For landlords obviously the main draw for electric heat is that their is little to no maintenance for the most part and you are not getting the "no heat" calls in the middle of the winter like you mentioned.