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Amy A. · Answer

It sounds like you need the advice of a buyer broker.  One thing to keep in mind when changing the heating system is the market.  In the markets I know, Lewiston and Auburn, most tenants won't pay heat so you will not make your money back.  I've even had tenants balk at paying heat for a single family home (which, to me, their paying all utilities is the biggest advantage of renting a single family home.)

Mike Roy · Answer

Nice idea, I will definitely look into that.

Roy N. · Answer

@Mike Roy

Ugh! Kerosene space heaters ... I'd be pulling them out as well.

What are electrical rates in the area?   Regardless, I would have a serious look at the Mitsubishi Mr. Slim (MSZ-FH series) ductless heat pumps before putting in a gas or propane space heater.   Costs will be similar to what you quoted above for the Rinnai heaters, but the operating costs will be much lower and they double as air-conditioning in the summer months.

Mike Roy · Answer

The current system is Monitor heating units fed by K-1 fuel.  The plan would be to switch to Rinnai heaters fed by propane, as that is what is heating the fourth unit.  I have one quote for the conversion, $7,500, though I think I can get that down a bit.  If I could get it done for $6,000 and fully pass along the $250/mo heat cost, the thinking is that it would take 24 months to pay off the project.

Roy N. · Answer

@Mike Roy

Even if the norm in your area is for the landlord to carry the heat as suggested by @Michael Noto, that is most likely only as a result of the building stock being either conversions from SFRs or built in the era when central boilers were the norm.

You did not mention whether the central heat is hydronic or forced air.  If the latter, I would also plan to separate the heat as common forced air is a conduit for pathogens, allergens, noise, cooking aromas and fire between units - tenant relations are usually better when those things are not shared.

If the system is hydronic (baseboard or radiator), then the key bit of information will be whether each unit is plumbed as a separate zone from the others.  If this is the case, then separating the manifold in the mechanical room and placing each zone on its own, smaller, boiler is relatively simple.   If domestic water to each unit is also separate, then you have the option of sub-metering water.  If at least the domestic hot water run to each unit is separate, you will be able to place the cost with each individual tenant.

Mike Roy · Answer

Thank you all for the input.  In this market, some tenants pay for heat and others don't.    The fact that the one separated system is paid for by the tenant leads me to think I can pass along the cost, even if I have to reduce rent a bit such that I'm partially passing along the cost.  However, the building makes money without the conversion, so I think I'm good either way.

The units are in very good shape, so I'm hoping the $200/mo estimate for repairs isn't low balling.  I'm also estimating 5% vacancy, which my broker says is fair for what she's seeing in the market.

I too would be curious to hear from more Maine landlords on the forum.

Best,

Mike

Jesse T. · Answer

Overall it looks like a solid deal.

Will you have a chance to vet the tenants?  Tenants who are likely to cause problems are worse than vacancies.

Is 5% vacancies typical for the market?

Michael Noto · Answer

@Mike Roy Before you separate the HVAC see if it is typical in the area you are buying in to have tenants pay for heat.  You do not want to be the only landlord in the area who has the tenant paying for heat.  I would think that would make it tougher to fill vacant units.

There are several people from Maine here on the forums and the consensus I have heard from them is that the landlord typically pays for the heat. Hopefully they chime in on this thread.

Michell P. · Answer

Looks good to me - mostly just make sure the unit is in good condition (how old is the roof, etc) and make sure the rents haven't been inflated above market rates, and you're good to go.

Congrats

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