To replace the ac and furnace or not........

[Kyle Godbout]

Hi there. 

I'm in the process of rehabbing a couple houses to then refinance and rent out. I want to get a good appraisal value , but the current ac and furnace older, but working wonderfully.

I was wondering if it's worth it to replace these. Will the $6,0000 to replace them earn me a higher than cost appraisal value?

Thanks for any input!

[Michael Noto]

In my experience it probably will not impact the appraisal too much. 

One thing to consider though is the strategy you want to employ when rehabbing properties for us our strategy is as follows:

• rehab any large cap ex issues in the rehab phase of the project
• Make the units a little nicer than the competition to attract above market rents 
• Ride the cash flow and lack of cap ex related repairs for 5-7 years and then take all of the equity we captured in the rehab phase and sell. 

Our goal is to not be around for the next round of cap ex but still give the next buyer a property that cash flows and is still in overall good enough shape for us to get top dollar on the resale.  To me, your overall strategy dictates the type of rehab you perform on a property.