Duplex Furnace Dilemma

[Jordan Malara]

Hi all, I'm a new real estate investor out of Colorado Springs and I just acquired a duplex a few months back. The property was a SFH that was legally converted into a duplex some time ago and we knew when we bought the property that the 2 furnaces would need to be replaced soon since they are 40+ years old. When I had a contractor come out yesterday to give me an estimate he found out that the thermostat in the lower unit was controlling and sending heat to a few of the bedrooms in the upper unit.

After talking with the contractor more we discussed a few different options:

- Replace both furnaces and reroute the existing system so the thermostats correctly heat the units. Each furnace would cost about $3100 and the rerouting would be costly and depends upon further analysis of the overall duct layout ($8000+). 

- Replace both furnaces and leave the duct system as it is ($6200).

- Replace the two furnaces with 1 large furnace for the entire property and have only 1 thermostat ($4100).

- Replace the two furnaces with 1 large furnace for the entire property and also add A/C to the property and only have 1 thermostat ($8000). I've noticed through my tenant screening that A/C is becoming a bigger factor with higher quality tenants. I haven't had any issues filling vacancies so far, but I think it could help me fill them easier, would allow me to charge a bit extra per month, and would be better for resale in the long run. However, not a necessity.

Would love to hear if anyone has any experience with an issue like this or can offer up any advice. Thanks!

[Colin Smith]

@Jordan Malara 

Pikes Peak Regional Building Department does not allow for two units to have one thermostat. Every unit must be able to control their own heat. 

You could get away with having one boiler with two zones which would allow for each unit to control their zone. While the is an option I do not believe it is your best as that would be expensive in itself and not make practical sense for A/C in the future. 

Just my opinion here, leaving the ducting system as-is, is also not an option as it still violates their rules. Now that you are aware of this problem, if you wanted to sell the property in the future you would need to disclose this to any Buyer which would drastically effect your final sales price. 

My opinion would be to fix the deducting and ensure the thermostats are operating the proper furnaces. I would also wait to replace the furnaces until they are truly dead. Just have a couple space heaters on hand for when they do go out. Replacing the furnaces now is not going to improve your ROI. Hopefully utilities are being paid by the tenants so you're not decreasing your expenses, and if they are not, the higher efficient furnace probably is still not going to improve the ROI enough to be worth consider. They may go out tomorrow or they may last another ten years. Might as well try to get everyday you can out of these by continuing to do annual servicing and frequent filter changes.

Side note: I do recommend changing out water heaters at the end of their lifespan. You definitely do not want a flooded unit.