Oil to Gas Utility Conversion

[John Knisely]

I'm looking at a multi-unit deal in Delaware County right now where the current owner pays all utilities except in-unit electricity. According to numbers I've received from the listing agent, the annual heating/oil expense is just shy of $11,000 a year. The property has 2 above ground oil tanks and 1 in ground oil tank that has supposedly been "inerted" (if that is the correct term) if that matters.

Is anyone experienced in converting utilities like this? Seems like there could be a noticeable increase in cashflow if I could convert away from oil. I even wonder about the possibility of doing electric heating (baseboard?) in some fashion in order to put the expense onto the tenants completely. I am confident (will verify with PECO of course) that the property has a street-side gas main so there would not need to be costs associated with extending a main.

The property has central air, oil heat and oil hot water. Looking to understand general cost of conversion (ballpark) and if anyone has any recommendations on contractors or companies I'd be happy to contact them.

[Steve Babiak]

Originally posted by @Alfred Harrison:

Sounds pretty intense!

There are lots of smaller details too - thermostats for example - that I omitted to try to hit on the biggest cost factors.

It is a doable project, the difficult decision is whether it is financially feasible to do it. That involves investigating all of the associated costs of the conversion itself, the time to complete that conversion during which no rents will be coming in but there will be the usual carrying costs, and the potential reduction in today's cost the landlord pays for the centralized utilities, and even the possibility of having a difference in rent. The rent might have to go down because tenants expect certain things (like heat) to be included if rent is high. The rent could even go up a little if tenants prefer to be able to have better control over HVAC temperatures.

One other potentially big cost that I omitted, but the OP didn't think would be an issue, is the lack of gas main directly outside the property. If PECO has to extend a gas main to reach a property, the cost will be at least $100 per linear foot of added gas main  on non-state owned roads, and at least $125 per linear foot on state owned roads. If you have to go 100 feet, that's a quick $10K extra that needs to be added to the cost of doing the conversion. 

So it really makes sense to see if any public records show gas heat somewhere on that block of that street. I looked at a few properties in different areas where there was gas heat on one block but not the block for the house I was looking at - PECO confirmed that there was no gas main on those blocks; it can literally be block by block.