Repair or Replace? (furnace)

[Shawn Rana]

Hi everyone,

I created an account on here about two years ago, forgot about it, then started meandering around the forums again a week or so ago since I bought my first property.

Anyways, I recently bought an REO condo and the electric furnace is very old (about 20 yrs) and very poorly taken care of. I was quoted at approx. $700 for repairs, and $1700 to replace it. I plan on selling or renting out the property in 2-3 years.

Please tell me what you would do in both a renting and flipping situation.

[Mark Yuschak]

My brother owns his own HVAC company so I'm fortunate in that I know most a lot of the ins and outs of how they make their money.

They all mark up the equipment. Period. The general rule of thumb is to mark up about 40%. An average consumer cannot walk into a supply house and buy a furnace or air conditioner. Only licensed contractors can.

And, like Scott already said, every job is unique. Since every job is unique, quotes become unique so it's tough to price compare. It's even harder to see how much the equipment is marked up since you don't know what the contractor paid for it. Volume discounts come into play too.

What I would do is look for service vans around town - specifically ones that are stopped for lunch, or working on another job. Chat with them for a few minutes and see if they'd be interested in doing a side job. 99% of the time, they'll jump on the opportunity. If those guys work for bigger company, they typically have a good raport with the supply houses and can still qualify for the volume discounts that their employer would get even if it's a cash sale.

If you are able to get someone to do it as a side job, ask him about installing scratch and dent equipment. For a rental, scratch and dent is the way to go. The equipment is still functional and carries the same warranty yet has a scratch or dent on it and costs 10-30% less from the supply house. I only use scratch and dent equipment. And, also offer to pick up the equipment for the contractor (again if it's a side job). He can have the materials on will call and paid for in advance. All you'd have to do is have it loaded and take it the job site. This is another cost saving avenue.