What are your CAPEX Projections for SFH HVAC

[Bryan Mitchell]

I am currently reviewing the performance of one of my single-family homes. I bought during when the market was very low. I've seen excellent appreciation and it's performed well, producing anywhere from $200-$400 net monthly. Built in 2005, bought in 2014, the HVAC needs to be replaced. Quotes are anywhere from $4000-$5000, When I break it down it comes out to be $23 per month ($1000 rent and 15 years HVAC lifespan ). That is approximately 2% of my rent. For this property I anticipated 15 to 20% total CAPEX but didn't itemize each key item. I'm curious what y'all anticipate in capital expenses for HVAC.

[Mitch Messer]

Hey @Bryan Mitchell. When I run my numbers for a rental acquisition, I consider how old the existing systems are and factor that into my repair estimate. For example, if the existing HVAC is 12 years old, I'll budget for replacement even if I don't replace the unit immediately upon purchase. I'll often ride out the existing unit until it eventually fails, but I'll still set aside that budgeted money in the CapEx account for when I'll need it later.

I also try to replace borderline systems up front as part of my initial rehab. I've learned that any minor savings gained from trying to squeeze one more season out of a dying AC unit is more than blown when the unit dies on the hottest weekend of the summer and emergency measures have to be taken to accommodate a ticked-off and overheated tenant!

I don't separate out HVAC from other CapEx items, but I know from experience that my Big Four Systems are roofs, water heaters, HVACs, and plumbing. I inspect those very carefully.

In all, I estimate my total annual maintenance + CapEx expense as equal to between 3/4 of 1 month to a full month of rent (or, 6.25-8.33% of annual rents).