When to replace furnace.

When to replace furnace.

SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes

I have a single family rental in a low- to middle-income area. The furnace is about 22 years old and seems like it may be on it's last leg. When it turns on, it can take 2-3 tries for the burners to light - but it does always light and start, and then functions fine. Another quirk is the furnace won't light unless the front cover is put on upside down. I know that sounds odd but it's true. I previously lived in this house for about 3 years, it did this since I bought the house, but I never worried about it since it otherwise was fine.

I have the furnace serviced every year by various companies and each time the HVAC contractor has said it's safe and functions ok. But they can't explain the odd behavior, I had another that said he "thought" it was a problem that could be fixed for about $450, but would not guarantee that would fix the problem, or even if the part could be found nowadays anymore.

I'd not really want to put a lot of money into repairing an old unit. Still, would you replace it now (house is currently vacant) or just wait until it dies and then replace? I have been thinking it could last a year or another 10 years so just keep it as-is, but not sure if I am thinking about it correctly, like would the replacement bids cost me that much more if it goes out unexpectedly and they know I'm in a bind?

The other part of this is that return air ducts were never put in (it is a gas forced air furnace). The house is small and according to the local inspector, there is nothing against code in doing this - just makes it less efficient - but some HVAC contractors I called would not put a new one in without also adding the new return air ductwork, which obviously increases the cost quite a bit.

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Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y

Keep in mind that after May 1, you will not be able to put in an 80% furnace. New federal regulations will require a 90% or higher, which costs a lot more money. If you think that old furnace will break in the next couple years, you might want to replace it now.

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  • Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    13y

    I understand you choice to wait until neccessary to change the furnace and it is not a bad choice by any means. From your statements I believe you do not have all the information. You stated that the furnace is 80% efficient. This was 22 years ago, with age I would bet it is 60% efficient at best currently. You also stated that you could not raise rent any higher as you are close to top that the market will allow. If you replace the furnace with a 90%+ efficient model your tenants utility bills should drop a decent chunk. My tenants have never complained when I did a furnace upgrade or other energy efficient upgrades and then raised rent on the next re-up as they were able to see their utility costs drop more than the rent was increased. So when their costs on utilities drop on average $30/m and you raise rents $20/m, they are still $10/m ahead and have a better unit without the fear of an old furnace going out at the most inconvient time. This has been a fantastic financial strategy as it not only improves my property but has also boosted tenant retention as well as new tenants from referrals.

  • Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    13y

    Amie D.

    Absolutely keep it until it breaks. I've replaced many furnaces, so far I've done 17 new gas furnaces.

    But on the other hand, I've kept a bunch also. Just sold a house in Oct. 2012 that had the original 1953 gas furnace. Took a lickin and still tickin.

    I bought a place in 1978 that had an old furnace in it probably from the 1950s. I said that I'd replace it in a few years, and I half expected it to break down. Never did and I just replaced it in 2012. another place i have has the original 1952 furnace in it still running great, but I did add central air to it a couple of years ago.

    I've been on a plan of upgrading property and imporving the properties, and as I said have updated many furnaces. But I still have some old ones still in service. I have been replacing with 92% efficient gas furnaces with PVC side wall vents, so no chimney is requires and furnance placement doesn't need to be right at the chimney.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y
    Originally posted by Randy F.:
    Hi Amie!

    As long as the furnace is in its own room, with a fire door and outside combustion air vent, and return air drawn from main house, It should be good to go and doesnt have to have return air ducted throughout house.

    I called the city inspector. It has all those requirements except a "fire door". Not sure what that would be?

    Kyle Hipp, the furnace is an 80% efficiency, that would not be unheard of for a 1991 "high efficiency" furnace (for it's time), I have read the label myself, as well technicians have commented on it. I do not believe the new furnace would bring in higher rents, esp when I'm on the projected top end of rents, my neighborhood is a lower income neighborhood, most people do not even have central air, there was one woman who lived 3 doors down who had the utilities shut off to her house for a couple of years and burned wood for heat in her house. It is not a dump, the house was remodeled and it is an area that is being "revitalized" but certainly not at the point where you'd say it was being gentrified or buy top end things. I get applicants with spotty credit, high debt/income ratios, etc, and have to pick the best of those. They would not respond well to a rent increase and would probably say, "well why did my rent go up when the old one worked fine".

    For now I'm keeping the old one, but thanks for the suggestion. If I pick up a higher end property, I would definitely take your suggestion into consideration!

  • Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    13y

    Amie, I'm not trying to beat a dead horse it seems I was unclear on both points. The furnace may say 80% efficient, I habe no doubt it is. I am saying that the "actual" efficiency today of that furnace today would be closer to 60%. This is because as components age and wear they do not operate as new. I guess the best way to create and analogy is to say that Michael Jordan is the best basketball player in the world, this might have been true in the 1990's when he was in his prime but at todays condition with his age, there are many who could best him.

    Lastly, my demographic is just like what you are describing. What I suggested would not apply to just a higher end property. I do not see how income level or credit history would affect a tenant's ability to understand how you making an improvement that saves them $30/m in utilities and in turn charging them $20/m more 6 months down the road at lease renewal who be in anyway difficult for them to take. They come out ahead $10/m whereas if nothing is done they are in reality losing $10/m.

    I guess this is pointing out that many times it is the intangibles in any business where money and reputations are made.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Kyle, I see your point, but what happens when the current tenants move out and then I have to re-list the property? If I am already on the high end for my market, that puts me even higher before a new tenant would click on the ad. Income level would affect their decision at this point.

    But from a financial view as well, let's say it does get me another $20/month in rent. That is $240 extra per year. Say the furnace costs $4k to put in. The extra rents would take me around 16-17 years to break even with the cost at that rate (and who knows, the current one may very well last that long.) As well, this particular property I am not planning on keeping that long.

  • Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes
    13y

    Same thing goes for the new tenant. I always show my tenants the upgrades I have done and show the value to them. You can show the average heating costs for the property and show them how you have given them the value of a reliable and efficient furnace compared to the other options they have in the area. I have found especially in the demographic you habe described that many tenanta have experienced or heard of poor landlords. By you displaying that you upgrade the property and take an active interest in providing a quality product it fosters a better tenant and in turn better returns. It is also a selling feature when you do sell. I tend to focus on increasing rentability of my properties to be able to get long term tenants at high rental rates but also a better value than the competition.

    As for the breakeven analysis, no flaw in you numbers but it is also an aging furnace that will need to be replaced at some point eventually. In the end I wouldn't recommend upgrading something needlessly but I try to find ways to make repairs a win win whwn it makes sense to do them. I find it best to analyse all the possibilities in every choice you have and make even the unpleasent times of repairs a benefit instead of a burden.

  • Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    13y

    Somebody asked me just yesterday, "Why are you replacing furnaces in properties where you don't pay the heat?" Fair question. Almost all of our properties including both single family houses and apartments have their own individual heat which the tenant directly pays the utility company.

    I've been replacing oil heat mostly with natural gas. the oil prices fluctuate with the gasoline prices and have been as high as $4 a gallon here. When I have a property for rent or for sale, one of the first questions people ask is what kind of heat. If the answer is oil, the conversation often ends there. They don't care how nice the property is, how much remodeling has been done or what other great amenities there are. Oil heat is a deal killer, for renting or selling.

    One property that had oil heat was a large single family detached home, about 160 years old. The oil boiler with domestic hot water was probably 60 years old or more. When it ran, which was 365 days a year, due to the domestic hot water, it burned 1 gallon of oil an hour. The heat bill was $4,500. Needless to say, something had to be done. There was no gas in the house but there was gas in the street. The gas company dug up the street, got all the necessary permits, had 2 flagmen directing traffic, and had a policeman at a nearby disabled traffic light directing cars around the street construction. The gas co. did all that for FREE. The new installation of a gas boiler and a gas hot water heater both with side wall venting cost $6,250. The heat/hot water bills went from $4,500 to $1,500, a savings of $3,000 a year.

    The gas co. here hasn't had a price increase since 1994, and in Dec. 2012 got another rate DEcrease granted from the state.

    At another two unit property there was a single oil steam boiler that generated the heat for both units. Oil Heat bill was $6,500 per year. Gas co. again did their thing for FREE, and I added 1 gas hot air furnace, central air, all the duct work, and a gas hot water heater for $6,500. The existing oil steam boiler now only supplied the first floor tenant and they now paid the oil. Now the tenants both pay for their own heat and hot water. I did lower the rents $50 per month each, but after a couple years the rents were back up to previous levels. So spent $6,500 saved $5,300 the first year, $5,300 the second year, $6,500 the third year, etc. etc. etc.

    At yet another 2 unit, there was an oil hot water boiler with domestic hot water. I was paying the oil bill of $3,600 per year. The boiler was probably 60+ years old. I installed two new gas hot water boilers and two gas hot water heaters. There was already separate gas meters for the 2 apartments but only supplied the range. so the tenants were already paying a gas bill albeit small.
    Installation costs $6,800. again lowered rents by $50 a unit per month for two years. First year savings $2,400, second year $2,400, third year $3,600, etc. etc. etc.

    The tenants like having lower heat bills, in some cases we added central air, which tenants like and when you go to sell the building a great selling point to both owner occupants and investor owners is that the heat and hot water equipment has been updated to high efficiency gas.

    I've 17 new gas furnaces/boilers and have another one in process.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Sure, I think it's fine if it is financially justified/the market requires it.

    Actually Kyle, the numbers would be off for the tenant because where the house is located, the furnace would only be used 4-5 months of the year. So the tenants would only see a benefit during this time (I don't have central air there, like most of the other surrounding properties).

  • Real Estate Professional · Royal Oak, MI · Member since 2012 · 32 posts · 15 votes
    13y

    The furnace issue probably is just a flame sensor ($4 or clean it with steel wool) Look at the LED error code when it happens.

    A used furnace (2 years old) should run you about $150 and about 2 hours to install yourself.... I dont understand where these $4K quotes are coming from..

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Those are quotes for a new furnace, installation plus the return air ductwork most seem to want to install.

    How do you read the LED error codes. I did not see anything like this on the furnace (22 years old). It seems like if this would be possible, I'd have gotten a better diagnosis so far.

    I would have to hire some labor for the delivery and placement, removal of the old furnace as well. Yes, I am handy but doubt I could physically move a furnace by myself.

    In addition, this property is located in KY, I am located in Washington state, so add in the cost of a roundtrip flight ticket, time away, etc.

  • Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    13y

    That doesn't sound that old. It is normal for there to be a delay when you dial up the thermostat.

    Since you have a PM I wouldn't worry about it. The danger is when the heat exchanger cracks it releases carbon monoxide. If you get it serviced they will check that. You also have alarms.

    I have a gas furnace that age and the contractor servicing it said it was good as gold and suggested waiting as long as possible to get a new one because of the more complicated nature of the newer technology.

  • Real Estate Professional · Royal Oak, MI · Member since 2012 · 32 posts · 15 votes
    13y

    Then you should look at a repair. Remove the front panels to the Furnace and the error codes are listed on it. A 22 year old furnace should have them. If not, you can figure it out based on the timing sequence, for example does the burner light and then go out? Also you can troubleshoot by putting temp jumpers on sensors.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Jeff S., it's not a delay when you dial up the thermostat, you can hear the furnace attempting to fire up, then nothing, then it does it again, and repeats until it starts. That takes about 2-4 tries. The other odd thing is if the front cover is on the normal way, the furnace will not light at all. It will keep trying over and over. If the cover is on upside down, it goes back to 2-4 tries then lights. Technicians look at me like I am crazy when I say this but it's true.

    It seems the front cover placed right side up is blocking more airflow than when it is inserted upside down, in which case the vents are directly in front of the 4 burners. The last technician who looked at said the burners are not all getting lit at one time, which is what is supposed to happen, it lights one or two, then retries and three get lit, then retries and all four light and it starts. I have to find the paperwork on it (I just moved so it's in a box packed still) to see exactly how he phrased it.

    He gave me a quote on fixing it, but it was like $350-400 and that was IF he could find the part and then, he could not guarantee that would fix the problem. I don't really want to start throwing money at things that they won't guarantee will fix the problem.

  • Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    13y

    It is a personal choice. It is like the lawyer whose class I just took kept saying: whatever helps you sleep best at night.

    My experience with people is some believe in preventative maintenance and some prefer to squeeze out every last drop of life out of stuff. I fall somewhere in the middle usually running stuff until failure. I believe with a large operation preventative maint. is necessary.

    $350-$400 isn't a lot of money. I'd probably have spent that if I trusted the guy. If no trust then I'd keep my money in my pocket.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Jeff S., to me preventative maintenance is making sure the filters are changed regularly and getting it cleaned and serviced yearly, which I do (I know many people don't even do that on newer furnaces).

    When I go through several service technicians and none of them can tell me exactly what is wrong, and then someone comes along and says "This 'might' fix your problem, but I won't guarantee it," I'm not throwing $400 at an older furnace for a guess that is not guaranteed to fix the problem. This company had a decent reputation, but I did not interact with them regularly and I called them because they had a special on the annual maintenance. To me doing something like that is not preventative maintenance, it's tossing money at a problem.

    I had another technician try to "take things apart" to see what the problem was, and he ended up making it worse, the furnace then wouldn't start at all and it was the first freezing night of the season, and it took an arm and a leg to get him to come back and at least get it to where it was (this was a licensed company in the area as well).

    So if someone can look at it and say, "This is your problem, and it will cost X to fix it," and they would stand by their work, sure I'd fix it. But not for a guess that is not guaranteed, especially with a furnace that is working, albeit with a couple quirks, and has been rated as safe by all the technicians who have serviced/inspected it so far.

  • Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    13y

    We do quite a few rehabs, we install hi-efficiency units in all houses that need new furnaces. Our typical cost is 1,850 installed by a quality licensed installer.

    I can do a 1200 sq ft ranch all new high efficiency furnace all new heat runs and a new ac unit for 6,000. My last project was 5850.

    I could fly my guy to washington and save you a bunch of money.

    I would be getting a half dozen quotes see if you cant do a lot better.

    I recall when I was doing my HVAV contractor selection, prices for the exact same

    equipment, same project, from six different companies, ranged from 5,800 -12,000.

  • Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    13y

    I just replaced 2 working furnaces in my low income rentals. I installed 2 year old used units. I don't bother with new because there is a good chance they might walk off anyway sometime in the future. I paid $800 each (material and install)

    It killed me to have to change a working unit but both were pretty old and the heat exchange was cracked. I did not want to put any of my tenants in a dangerous property.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Well, that's what I am saying. It works with a couple of quirks that don't affect it's ability to heat the house, has always been rated as safe, so I've not had any real reason to get a bunch of quotes to replace it. If it was not working or unsafe, of course I would bid it out more seriously. Mostly have been inquiring when the techs come to service it each year. I responded to some "specials" that were going on, but when they got there and saw a petite single woman standing there, of course the "specials" didn't apply and the cost went waaaay up.

    It's like when I have to take my car in to get repaired. Sad I just moved farther away from my brother, a mechanic.

    Dell Schlabach, I'm in Washington but the property is actually much closer to you - it's just south of Cincy.

    Michael R. where did you find the used units and did the install come with it, did you install it, or hire someone separately?

  • Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    13y

    Amie D. you drive a hard bargain. That is a good thing.

  • Real Estate Investor · NY · Member since 2008 · 313 posts · 87 votes
    13y

    I have a guy that installs newer high efficiency units in the nicer areas of town. He saves the used ones and resells them for lower end rentals. He charges 800$ and that includes the furnace and install and he's licensed.

  • SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
    13y

    Jeff S., thanks, maybe why I didn't mind that part of property management when I got to say simply: "No." LOL

    Michael R., sounds like a deal, I would have done the same. That was another concern of mine, about installing an expensive unit (as well as if I were to have a central air unit sitting outside)... neither of my properties have gotten hit but a SFR 3 doors down had all their copper ripped off while vacant. After that my tenants did get the "benefit" of motion lighting around the house and a fenced in backyard...

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