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Early Retirement Extreme Forums » Housing Questions

1. 

   JasonR
   

   Master
   Joined: Feb '11
   Posts: 334

   Does anyone have experience making the switch?

   I'm in the midst of closing on a 2 unit where the first floor is electric baseboard and the 2nd is currently oil with a blower/furnace (as in duct work not radiators and expansion tanks). The current owner has sent out a letter advising tenants that the new owner may switch up the heating arrangement.

   That would be me. I do not wish to pay for oil heat or any heat. I can still turn a profit if I pay for the 2nd floor heat (how it's currently handled) but I'd rather not since not paying it can increase my monthly profit 200%. My first option is to lower the rent and shift the oil heating responsibility on the tenant. My other option is to put in baseboard heat. I can price out the six units but I have no clue on labor. My third option is...

   Either one of these may cause the tenant to freak and flee so maybe you have some opinions on that as well.

   Thanks.

   Posted 1 year ago #
2. 

   chilly
   

   Journeyman
   Joined: Dec '10
   Posts: 275

   I'm confused why the form of heat makes a difference in your plans? You sound like you have 2 zones... isn't that all that matters?

   When you say baseboard heat... that's not mutually exclusive with oil. Do you mean baseboard electric? I would never switch to electric for any reason - that's one of the biggest albatrosses a property can have around it's neck when time comes to sell.

   If you mean to upgrade to a gas furnace and baseboard radiators (again, the fuel and the delivery system are really independent), I wouldn't do that either. I doubt you could charge a higher rent on that basis alone, so what is the incentive as long as the oil works.

   If you're looking to save $$ on a place you intend to live in, then that's a more complex question.

   Posted 1 year ago #
3. 

   jacob
   

   Expert
   Joined: Jul '10
   Posts: 3,304

   When houses are constructed to be airtight and regulated by central heating like many US homes are, I would be careful in handing over control of that aspect to save money. Turning down the heat requires very careful management of the humidity when the windows don't open and the house doesn't breathe (like older designs do). You could end up with people heating with their propane stoves or some other crazy scheme.

   I'd suggest an arrangement where you pay some minimum of the heating bill with the intention of keeping the indoor temperature at least T degrees and then let the tenant pay the rest. E.g. you could pay enough of it to keep 65F but if they want to wear shorts indoors in the winter 85F, the tenant pays to bring it from 65 to 85.

   Posted 1 year ago #
4. 

   Hoplite
   

   Master
   Joined: Dec '10
   Posts: 489

   I recently passed on (ran from) an apartment I really wanted because of the baseboard electric (which is uncommon and actually crazy in NYC). No way I would go to electric. The present tenant may leave, the value of the house may decrease as mentioned, and you will be having a lot of turnover once the tenant sees the winter electric bills.

   What to do depends on a number of things such as market custom in your area; do landlords typically provide heat? What does the current lease say? Who controls the thermostat for the FHA oil heat? Is there a housing regulation in your area on temperature to be maintained? And, what kind of water heating is there; if the furnace is also providing hot water, it may be efficient to continue the present arrangement.

   If you can control the thermostat, I would suggest 68F where the temperature outside is below 55 to avoid complaints, but if you can reduce the temperature at night, say between 11pm and 6am, this shouldn't cause a problem.

   Posted 1 year ago #
5. 

   George the original one
   

   Expert
   Joined: Jul '10
   Posts: 1,943

   Wow, the differences in parts of the country are showing!

   Around here (Portland, Oregon), most duplexes have electric (very common) or natural gas furnaces (less common).

   Oil furnaces are the albatross due to leaking tanks. There are a few propane furnaces out in the boonies where there aren't natural gas lines (e.g. my rural neighborhood).

   Tenants here would not be surprised by electric baseboard heat (or natural gas) and would expect to pay that utility. Only in an older 10+ unit apartment building (pre-1960) would there be central heating that's included in the rent. Most tenants would freak if they had to deal with an oil truck delivery.

   Interesting local note:
   I doubt any of the sawdust burning furnaces are still around... we used to have one that was switched to natural gas about the time I was born (early '60s).

   Posted 1 year ago #
6. 

   JasonR
   

   Master
   Joined: Feb '11
   Posts: 334

   @ Chilly - yes electric baseboard. I forgot there was another kind. No I don't plan to ever live there unless...no I'd never live there. The incentive for switching to electric baseboard was getting rid of the oil bill and putting the onus on the tenant. This place is in Reading PA and if a property has utilities split it's usually due to having electric baseboard heat since most of the 2-4 family buildings were conversions. That being said I've never really heard of electric baseboard being a deal breaker when selling. I'll have to check it out.

   @ Jacob - This place was built in the 20's and probably leaks very proficiently. Hence my hesitance to keep my tenants in shorts during February. I don't know how I'd meter that out with oil so I think I'll try just leaving all the heat on them instead of me and dropping the rent 15.5%. I'll make about 2x what I lose in rental income by not paying for oil.

   @ Hoplite - If the value of the house drops any more it'll be free. I'm not concerned with selling so much (I say that now) since I always buy for at least 10 years out. I am concerned with turnover since I lose at least one month per year for the property manager. Water heat is Nat Gas. The regulations I believe are for heat in all bedrooms, not a certain temp although I'm no codes expert.

   It's interesting that everyone hates electric. I've honestly not heard this before. I always prefer the utilities to be split and usually that's easiest to achieve with electric baseboard.

   Posted 1 year ago #
7. 

   chilly
   

   Journeyman
   Joined: Dec '10
   Posts: 275

   Ha, I think George is right... it sounds like there's quite a different standard across the country.

   In New England, when you are shopping around for houses and one seems a little cheaper than the others... often it's got electric or it's on a slab foundation. Electric gained some popularity in the 70's and early 80's around here... but it's relatively uncommon and a huge drawback in the market. It's not for vanity either... electric is by far the most expensive per BTU. People will upgrade their systems from oil to gas to save some money... but even oil is much cheaper than electric.

   Again, in New England, it's typical to have the tenant pay utilities. If that's gas, oil, or electric, it's really no difference. Sometimes places include heat, but I'd guess the tenant pays more often than not (I've only lived in one apt. when it was included).

   Interesting... but nonetheless, if I were renting your place, I'd rather pay for oil than pay for brand new electric, as it should still be cheaper. Jacob makes a good point about having the tenant pay vs. paying yourself... that's true for whatever heating source you use though.

   Posted 1 year ago #
8. 

   Hoplite
   

   Master
   Joined: Dec '10
   Posts: 489

   Another yes for George's observation; things sure do change in different parts of the country. But in the Northeast, electricity is, as Chilly says, the most expensive way to go. Mentioning slab houses brought back memories of it; the radiant heat in those houses(electric resistance) was buried in the concrete pad on which the house was built, and the house was not designed for ductwork for air or piping for forced hot water, making the retrofit an expensive proposition.

   And another slam on electricity; a decent snowstorm can (and will) knock out electric power, sometimes for days. No heat at all; frozen, burst water pipes come as a bonus.

   The trend everywhere, though, is putting utilities on the tenant as much as possible. In NYC, the landlords just cheat; no heat or minimal heat for days or weeks since every bit of delay increases profit. But sticking a tenant with electric heat is not a selling point, at least not here.

   Posted 1 year ago #
9. 

   Hoplite
   

   Master
   Joined: Dec '10
   Posts: 489

   And another good point that George raised; the liability from oil tank leakage. It's not the tank itself, it's the cleanup, fines and penalties that can be assessed if the tank leaks. Much bigger trouble if the tank is outside the house (as far as I know, most are located in the basement). If any changeover is desired, since you already have a gas connection, that's what I would look to first.

   Posted 1 year ago #
10. 

    dragoncar
    

    Expert
    Joined: Oct '10
    Posts: 1,289

    Chilly- way to completely not read the op - I'm pretty sure every question you asked was already answered.

    Hoplite wins the thread... Natural gas is the way to go here. Electric heat is too expensive in PA. Changing an oil forced air to a natural gas forced air should be pretty simple, too.

    Posted 1 year ago #
11. 

    chilly
    

    Journeyman
    Joined: Dec '10
    Posts: 275

    Ah, I got confused about the baseboard and had imbibed a few beers. I deeply regret the error.

    Posted 1 year ago #
12. 

    Riggerjack
    

    Journeyman
    Joined: Jul '11
    Posts: 158

    The only real advantage i'm aware of with electric heat is the cost of installation. but that can vary with house design. it's cheapest if you have an appropriate sized panel on the floor below the attic, or above the crawlspace. look at how the wiring will route.

    another option not mentioned is heat pumps, more efficient than either gas, oil or electric, but spendy, and the are issues in the cold north. "split unit" heat pumps are the heat pump equivalent of base board heat, and usually mounted on exterior walls if you have wiring issues.

    geothermal heat pumps get past the cold north part, but can be CRAZY spendy. nothing i'd put in a rental, let alone a cheap rental.

    if you are buying a cheap rental, i'd mainly think in terms of minimal changes to existing systems, if possible.

    Posted 1 year ago #
13. 

    JasonR
    

    Master
    Joined: Feb '11
    Posts: 334

    Closed on the 2-unit yesterday. Second floor tenant is too savvy to take a reduction in rent to pick up the oil bill. He used to pay the oil bill before the past owner picked it up.

    I have a nat gas line and two meters in the basement about 6 feet away from the furnace/blower. Not sure how pricey it is to convert. Quite a few variables to consider and options to negotiate (removal of tank, convert water heaters, cost of oil per gallon vs nat gas per cubic ft, parts and labor for conversion--do I need a new burner or a whole new furnace?, reduction of rent since tenant now pays for heat, McCarthyism) plus the fact that every estimate from a contractor is at least 2000% off--the wrong way.

    Plan B is to see if I can set the thermostat at a certain point and if the tenant chooses to raise it, he pays the difference, ala Jacob's point. No clue how to test that and make sure it's fair to both of us, but he may go for that.

    Plan 9 is to create zombies...

    Posted 1 year ago #

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