Will new water heater boost ARV

[Jake Silverman]

My Wife and I bought a rental property with the intent to use the BRRRR method. We have completed the buy, rehab, and rent portion. We are in the seasoning period to do a cash out refi. The property has an electric water heater. The tank might be a little old but it is in good condition. The house is having trouble getting hot water so it seems The element no longer works. I am debating to replace just the element of the whole thing. I know that if I replace the whole thing I will save on labor in the long term, but as a BRRRR investor will it also raise my ARV when it comes time to get the appraisal?

[Salvatore Lentini]

@Jake Silverman - couple things... If you were doing a flip I would say replace it because the inspector would note that it's old and the buyer would end up complaining because in today's age buyers expect the world.  But if you're keeping it as a rental, I'd be surprised if it affected your appraisal at all (although it wouldn't be the 1st time an appraiser did something surprising).  But, even if the appraiser decided to take money off, it wouldn't be more than what a replacement would cost so it's really six of one or half dozen of the other.  You'd be paying either way.  Paying to replace it or paying for it with a reduced appraisal.  The real question is, who pays the electric bill?  New water heaters are more efficient.  If you're footing the bill, you'll save money each month and money and time on repairs moving forward.  If they're footing the bill, the more likely they will be able to afford rent, the more content they will be because their water heats up quickly and lasts for more than one shower, and they likely won't have to call you with maintenance issues for 7 years.  There's no right answer on this one.  Because you're also just playing the odds here.  You could replace the element and it could last 4 more years without an issue, or you could replace it and find out the control board is bad like @John Underwood said and now you're out more money.  The question of repair or replace is always a tricky one.  In the past it always made sense to repair.  But things like water heaters, appliances and just many building materials in general are made so poorly now, efficiencies keep improving, regulations keep changing, and prices on these things have come down so that the repair or replace question is now a toss up.  Horrible for the environment but a reality for real estate investors.