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When To Replace An Old A/C

If there is one bit of advice I can give an investor, it is to ‘think big picture.’  Too many times an investor makes their decisions based on short term thinking, inevitably costing them thousands of dollars in the long run.  This way of thinking really applies to air conditioning units.

Here is how owners cost themselves thousands based on short term thinking:

1.  I manage several rentals that have 10+ year old A/C units.  Through out the summer months it is not uncommon to get 1-3 repair calls on any older unit.  A given repair can cost anywhere from $75-$400 depending on the problem.  My advice when you get to this point, is to stop putting good money into a bad, old system.  If you battle this year after year and keep putting money into it, you will eventually have paid for a new unit, which you will end up doing regardless at some point.

2.  Every summer I get tenants that come into my office and show me their high electric bill and ask that we fix their A/C unit.  The truth is, there is nothing wrong with it.  The unit is just old and not nearly as energy efficient as the new models.  When I replaced the A/C on my own home, I instantly saved 30-40% on my electric bill.  That is big money!  It is difficult to keep a long term tenant when their electric bill in August is almost as much as their rent on an 800 square foot apartment.  In the long run, this can cost an investor thousands due to the constant turnover expense and loss of rent.

When I call and present an investor with, “Would you rather spend $250 and fix your 15 year old A/C, or spend $3500 and install a new unit?”  The natural response is to spend the $250!  But I challenge you to think differently.  Instead of basing your decision on “what will it cost me today?”, ask yourself “what will net me most money over the next 5 or even 10 years?”.  If we base our decisions on the long term, we will make better decisions for our properties.  I have said it before and I will say it again, the secret to owning successful investment property is minimizing your vacancy and turnover.  Don’t give your tenants a reason to move because of the 15 year old A/C unit that breaks down 3 times a year and cost them a small fortune in electric bills.  When the time comes, replace it!  You will end up doing it anyways.  You might as well do it sooner than later and reap the financial rewards of happier tenants.

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