Chicago Multi-family HVAC Retrofit

Chicago Multi-family HVAC Retrofit

Rental Property Investor · Chicago, IL · Member since 2017 · 3 posts · 2 votes

Hello,


My apologies if this topic is covered elsewhere. If so, feel free to point me to it.

We are about to acquire a 10+ unit multi-family residential building in Chicago built c. 1970, and are exploring options for updating the HVAC.

There is currently a hot water boiler (three actually, and the original ones) for baseboard heat common to the whole building. Also, there are common domestic hot water tanks (gas paid by the owner), and a single gas meter so all tenants' cooking gas is paid by the owner as well.

We are exploring options for reducing the high gas-utility expense. Ideally, all of the tenants would pay for their own gas use (they are currently metered individually for electricity). The cost of doing so is the main question we are exploring.

The main unknown: the logistics/cost of running individual gas lines to each unit and giving each a separate gas meter.

Here are some of the options we are considering:
1) Keep the system basically as is, but update it for greater energy efficiency.
- Install two new high efficiency condensing boilers, and update windows and insulation for better heat loss performance.
PROS - a) minimally invasive; b) can provide 15-30% reduction in heating costs (we are told).
CONS - a)total gas expense is still paid by the landlord; b) individual units won't have individual control (except for a thermostat controlled shutoff valve for heat/water in each unit); c) AC would be available on with in wall/window units.

2) Try to individually meter each units' gas and provide each with a traditional forced air heating/cooling system.
PROS: a)gas expense could be completely removed for landlord (huge)- even tankless hot water could be installed in each unit; b) each unit would have their own climate control.
CONS: a) constructions costs of running new gas lines and soffiting sheet metal duct work. b) highly invasive with collateral construction costs; c) future costs of maintenance on multiple systems vs a single building-wide system.

3) An electric based heating system
- This is tricky in my mind because of the high cost of electric heat. We live in Chicago with harsh winters and expensive electric supply costs. I can't imagine shouldering that expense as a tenant, although I've been told that there are a number of nice buildings that utilize primarily electric heat.
- Also, we would have to run 220 lines to each unit.

4) Mini-split system.
PROS: a) minimally invasive; b) individual unit and in-unit-zone control; c) high efficiency
CONS: a) given Chicago's extreme cold snaps in winter, they cannot be (according to code) used as a "primary" heat source.
- One possible solution would be to keep the existing boiler/baseboard system for backup and/or use in extreme cold (possibly triggered by an outside temperature sensor). Then, of course, we haven't eliminated the heating gas expense, only reduced it. To what extent, is the question.
- Another solution would be to supply supplemental heat via electric baseboard heaters.


There a few moving parts to figure out here.

I'm sure that many people have experience with this very issue, and I'd love to hear about it!~

Thanks!

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Laura BottorffPro Member
Investor · Chicago, IL · Member since 2016 · 4 posts · 1 vote
5y

Thanks for the update, @Vijay T.! It's really helpful to know how other people decided. 

@John Warren: Thank you for chiming in! Would you have a moment to give your opinion on my specific issue (details below)?

I'm owner-occupying my 4-unit, and it is otherwise currently unrented while I work on other needed repairs. I recently had one of my steam pipes leak and then break (I found it on Thanksgiving...a wonderful holiday surprise!) which steamed my entire basement, buckled the hardwood flooring in Unit 1 above, and sent steam through the back wall (all my walls are hollow/uninsulated here in a 100 year old brick building) all the way through up Unit 1, 2, and 3. So...I have a bunch of flooring out right now in Unit 1 and at least some plaster and drywall rehab to complete in all of the units through that insurance claim now. I was going to wait to do a forced air/heat install until the next time I needed to replace one of the unit's floors (estimated at 4-5yrs from now)...but that decision timeline has now been accelerated because of the water damage disaster floor removal. The steam system has been giving me problems in general since I bought the place, and I am concerned about having future leaks/damaging events like the one I'm going through now. 

The 3 main units are large (3-bedroom, all Queen+ sized) with separate dining and living rooms - so I feel that Electric heating will be too pricey - especially considering that the vinyl windows are not very well sealed and I do not currently have the budget to replace. Electric does sound like a good choice for the 1-bedroom Garden/Basement unit. Cooking gas is already separated for Units 2 & 3 and I had intended to work on getting a separate meter for Unit 1 (probably leave G on the building meter). Electric is separate for all units and I recently increased my service to 400 AMP while completing a necessary electrical box repair.

The building is definitely not in an A-class neighborhood, but it's been gentrifying and was recently reclassified as West Town (was considered part of Humboldt Park when I purchased). It's probably somewhere around B. Previous tenants have had to purchase 6-8 window air conditioning units for summer...which seems like an unreasonable ask to me, but I'm not originally from the Midwest so I'm not sure what the perception on that type of purchase typically is here among natives. 

See this reply in the discussion

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  • Laura BottorffPro Member
    Investor · Chicago, IL · Member since 2016 · 4 posts · 1 vote
    5y

    @Vijay T. What did you end up deciding on this? I’m also a landlord currently paying for single-system heat on a 4-unit building in Chicago and you had a pretty good outline of the possible options I have also found.

  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Vijay T. - I would definitely go with option 2, mainly because I believe wholeheartedly that spending more money for the long term pays off more in the long term.

    Too many investors try to cut costs in construction to save money in the short term without really evaluating the long term ROI of what they are doing. If you can submeter the gas there is no question that will be the right move no matter what the cost is because the ROI is infinite as long as you hold the property.

  • Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Laura Bottorff I am about to start a major construction project on a 22 unit in Cicero right outside of Chicago. We are going to eliminate the boiler and go to electric base board. I am a HUGE fan of baseboard in smaller apartments (these are 1 beds and studios). Electric is more expensive than the gas, but it is not too bad for smaller apartments. In addition, there is very little maintenance you do to electric baseboard heaters in comparison to either boilers (lots of maintenance) or furnaces (some maintenance). 

    I also run a 19 unit in Berwyn where the boiler was decommissioned and replaced with furnaces. This setup works well, but it is more useful in my mind if you are doing a gut rehab. I am not sure it would make sense if you have an operational apartment building and you are looking to continue operations. It is very, very invasive. 

    I also have buildings that are central boiler and hot water tank buildings. In a lot of cases, it isn't worth peeling the layers back on the onion so to speak if the building is performing well. Does it stink paying the heat? Of course! Is it worth removing great tenants and gutting units? Not really. 

  • Rental Property Investor · Chicago, IL · Member since 2017 · 3 posts · 2 votes
    5y

    We are now about half way through the renovations on the 22 unit building. We are hoping to be completed in three more years renovating three units per year. 

    - It quickly became apparent that the mini-split systems were out.  Perhaps they are the wave of the future, but in our circumstance they weren't right for the following reasons 1) the cost would have been about double of what we've paid for traditional forced air systems; 2) it would have required too much unsightly hardware and line sets all over the outside of the building; 3)they are designed for better insulated construction than this era of building provides. 

    - We decided not to replace the existing boilers with high efficiency modulating condensing boilers.  The expense of these boilers is relatively high and the logistics of venting and providing air supply to them seemed too trouble some.  That coupled with the fact that all of the buildings heat, hot water and cooking gas would still be paid by us, made it so the savings from the boiler efficiency would not have been enough of an incentive. 

    - Running individual gas meters and providing per-unit forced air was our ideal option, but we went against it for the following reasons: 1) the logistics of running new gas lines to each unit would be difficult and expensive; 2) that coupled with the fact that it was only a partial renovation of the building (not all the units at once) added to the difficulty; 3)given the time frame we had to complete the units we were working on, it was too risky to bring in the logistics of city and utility collaboration and inspections, to stay on schedule. 

    - Regarding baseboard heat: given the upgrades we were doing (not fully high end but still nice), baseboard didn't provide the "amenities" we wanted the tenants to have e.g. air conditioning, programable thermostat, etc. 

    - What we ended up doing was an electric forced air system.  This is like a traditional gas system but with an electric furnace (and AC).  My main objection to this system had been that electric heat is so much more expensive than gas, and that this would be a major problem in attracting long term tenants.  It's too early to tell if that is the case or not.  Last winter was very mild, and the financial difficulties of COVID have made it hard to assess causality.  We also went to an electric stove and hot water heater.  For the water heater, we were hoping to do tankless.  But electric tankless water heaters large enough to provide hot water for a family requires more amperage than we could reasonably get into each unit.  One downside of this all electric solution was that we had to upgrade the total service coming into the building, which was extremely expensive.  Still though from a mid to long term investment stand point, I think this was the best way to go given our reasonable options. 

    We also have a four unit building with an expensive and inefficient steam boiler.  We really want to get rid of this.  Fortunately, each of those units already has its own gas meter. So the plan is to put in a central forced air furnace/AC into each individual unit.  The problem is that this is not an easy renovation to do while the units are occupied, and we have had long term tenants in each unit.  Also, the building really needs a major overhaul of electric and plumbing also, so the ideal solution would be to empty out the whole building and do something like a complete gut rehab. 

  • Laura BottorffPro Member
    Investor · Chicago, IL · Member since 2016 · 4 posts · 1 vote
    5y

    Thanks for the update, @Vijay T.! It's really helpful to know how other people decided. 

    @John Warren: Thank you for chiming in! Would you have a moment to give your opinion on my specific issue (details below)?

    I'm owner-occupying my 4-unit, and it is otherwise currently unrented while I work on other needed repairs. I recently had one of my steam pipes leak and then break (I found it on Thanksgiving...a wonderful holiday surprise!) which steamed my entire basement, buckled the hardwood flooring in Unit 1 above, and sent steam through the back wall (all my walls are hollow/uninsulated here in a 100 year old brick building) all the way through up Unit 1, 2, and 3. So...I have a bunch of flooring out right now in Unit 1 and at least some plaster and drywall rehab to complete in all of the units through that insurance claim now. I was going to wait to do a forced air/heat install until the next time I needed to replace one of the unit's floors (estimated at 4-5yrs from now)...but that decision timeline has now been accelerated because of the water damage disaster floor removal. The steam system has been giving me problems in general since I bought the place, and I am concerned about having future leaks/damaging events like the one I'm going through now. 

    The 3 main units are large (3-bedroom, all Queen+ sized) with separate dining and living rooms - so I feel that Electric heating will be too pricey - especially considering that the vinyl windows are not very well sealed and I do not currently have the budget to replace. Electric does sound like a good choice for the 1-bedroom Garden/Basement unit. Cooking gas is already separated for Units 2 & 3 and I had intended to work on getting a separate meter for Unit 1 (probably leave G on the building meter). Electric is separate for all units and I recently increased my service to 400 AMP while completing a necessary electrical box repair.

    The building is definitely not in an A-class neighborhood, but it's been gentrifying and was recently reclassified as West Town (was considered part of Humboldt Park when I purchased). It's probably somewhere around B. Previous tenants have had to purchase 6-8 window air conditioning units for summer...which seems like an unreasonable ask to me, but I'm not originally from the Midwest so I'm not sure what the perception on that type of purchase typically is here among natives. 

  • Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Laura Bottorff happy to have a conversation with you. You have a lot of moving parts on this one! I will give you a call and discuss and hopefully I can send you a GC referral or something to help you out with that one. 

  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Laura Bottorff - If you are still in need of some help with your 4 unit building let me know.  We have a great network of subcontractors and can definitely help you out.

  • Member since 2021 · 16 posts · 5 votes
    4y

    Hi @Vijay T. , was your final solution to have an electric furnace/AC for each individual unit for your 10-unit property? 

    If so, how did you install the vents? Did you install them all at once as your tenants were occupying your units or did you install the vents after they moved out? 

    Do you know how much much the electricity bill increased for your tenants after using the electric furnace/AC?

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