Triplex - To add separate furnaces or not.

[James Maggs]

I`ve just recently purchased a triplex which is set to close in a few months. The place currently has 3 separate gas meters, but there is only one furnace fed by the meter for the main floor unit. The other two meters feed gas stoves in the other two units.

Currently the owner pays all 3 gas bills and the heat for all 3 units is controlled by the main floor unit. In order to give the other tenants control over their own heat, as well as remove my accountability for paying the gas bills, I was thinking of having a separate furnace installed feeding each unit and was wondering if the cost would be justified in the long run and if the idea makes sense.

Gas bills for the year are over 3k, so if I went with 3 new mid-efficiency furnaces at approx 3-4k each, it will take me approx 3 years to recover the cost, but in the long run, that`s an extra 3k/year in my pocket.

The existing furnace is pretty much end of life as well, so I`m probably going to have to at least put in a new furnace in the next year anyway, so I may save some money but buying 3 all at once.

Anyone ever done this and have any suggestions? I`m obviously going to have a few companies quote on the job, but just wanted to get some feedback from other investors.


Thanks!
James

 

[cooldennis]

Personally, I would pay the main gas meter, and put a lock box over the thermostat. Your rent prices should reflect the fact that heat is included in the price. I too do not like paying gas or hydro for tenants as it often leads to misuse, overuse or intentional overuse. But adding two furnaces is alot of work, and come selling time you are isolating your buyer market to investors only as most families would want one furnace.

 

[James Maggs]

QUOTE (cooldennis @ Jan 3 2010, 06:21 PM) Personally, I would pay the main gas meter, and put a lock box over the thermostat. Your rent prices should reflect the fact that heat is included in the price. I too do not like paying gas or hydro for tenants as it often leads to misuse, overuse or intentional overuse. But adding two furnaces is alot of work, and come selling time you are isolating your buyer market to investors only as most families would want one furnace.

I did mention it was a triplex right?

Not sure how many single families would be interested in buying a house got 3 fully separate units with 3 separate entrances and 3 hydro/gas meters. I`m betting that only investors will ever buy this place.

 

[MikeMcC874]

Funny, I am considering the opposite at the moment. I just took over a triplex on Dec 22nd and it currently has 2 furnaces and electric heat upstairs. The 2 furnaces are 25+ years old and the house has all very old windows (in some cases they are barely what I would consider windows). I considered geothermal (see other thread) but think the cost may be prohibitive. I think I am going to replace all the windows to get a handle on the short term and then may consolidate to 1 furnace and include the heat. All the tenants are inclusive at the moment and it may be have moving them on for a while...

Mike

 

[James Maggs]

@ MikeMcC874 - Doesn`t it make sense to have the tenants pay their own heat? Sure you could include it in the price of the rent, but i really doubt you`re going to recover all your costs, especially if the house is older with poor windows and insulation. In my situation, I would have to charge all 3 tenants a 100$/month premium over similar places just to cover my costs to heat the place, and I`m pretty sure it will make it difficult to get tenants.

In the 3 furnace situation, I would be out some money up front, but would immediately start saving the 300/month in gas bills (on average)and after 3 years, would be pocketing an additional 300/month after paying off the furnaces. And it`s not really a lot of work for me personally. Not to mention the rebates I would be eligible for.

I am taking over two existing tenants with the purchase, however they are month to month, which means while I cannot increase their rent to account for the heating, I CAN (from what I`ve read), start making them pay their own gas once separated.

Am I missing something here?

J.

 

[fumbrunner]

QUOTE (Jmaggs @ Jan 3 2010, 10:13 PM) @ MikeMcC874 - Doesn`t it make sense to have the tenants pay their own heat? Sure you could include it in the price of the rent, but i really doubt you`re going to recover all your costs, especially if the house is older with poor windows and insulation. In my situation, I would have to charge all 3 tenants a 100$/month premium over similar places just to cover my costs to heat the place, and I`m pretty sure it will make it difficult to get tenants.

In the 3 furnace situation, I would be out some money up front, but would immediately start saving the 300/month in gas bills (on average)and after 3 years, would be pocketing an additional 300/month after paying off the furnaces. And it`s not really a lot of work for me personally. Not to mention the rebates I would be eligible for.

I am taking over two existing tenants with the purchase, however they are month to month, which means while I cannot increase their rent to account for the heating, I CAN (from what I`ve read), start making them pay their own gas once separated.

Am I missing something here?

J.

Get quotes and see how much it would be. There are two big advantages to having them separated out. First, you will save money by not having tenants irresponsively using gas (ie.. open windows in the winter etc). Second, it will be much more attractive to investors when you are in a position to sell.

 

[MikeMcC874]

I may be going down the wrong path and I appreciate all opinions.

I am definitely going to get the windows dealt with and see where I can go from there. I do want to try and maximize my eco-grant and reduce my ongoing costs as much as possible.

Mike

 

[GaryMcGowan]

It always best to have your tenants pay their own utilities.

As you mentioned you could start seeing the rewards after 3 years. My first question to the HVAC company is;
Is it feasible to provide two extra furnaces in your building? Meaning some new duct work will be required and do you have the room to install the furnaces? Will they be able place them in a maintenance room or will they be placed in the individual units?
Do you have ample hydro to run the furnaces? You will need a min 200 amps which I hope you have as it is a three plex. Remember you have three stoves that draw up to 40 amps and you may also have dryers. Typically furnaces run on 15 amp feeds if they are gas.

Again if you can do it, its a great idea.

 

[James Maggs]

Thanks, I hadn`t thought of the electrical requirements. ill make sure to ask when i have the quotes done!

All 3 stoves are gas, so that should help.