We recently acquired four rental units to manage in a condo complex, within our local community. The owner
was dissatisfied with the previous management company’s operation and the
condition of their investment properties. As we inspected and made the
necessary repairs to make the units move-in ready for the next tenants, we
found an HVAC unit not working. We
contacted a vendor who was in our networking group to service the unit and what
we received was information we were not expecting nor could the owner could readily
afford. The technician advised us; he would have to remove the interior coils to
clean because they were impacted with debris and because of the age of the
unit, it required the old R-22 Freon, which is difficult to acquire and very
expensive. Along with various other
repairs, the cost to repair the unit was $1800 and it would be money better
spent to replace the unit for $4200.
The problem was; the owner had purchased the four, ten year old units, as an investment near the height of the real estate market. The rent, at the time of purchase, was barely covering the financial costs of the properties. Over the past eight years, the property values declined over half and the rental income by 30%. The owner was coming out of pocket every month, hoping to maintain ownership of their investment and appreciation values would increase over the next several years and paying $4200 to replace the system was not in the budget. To protect the owner’s interest, I inspected the unit and found the coils were not impacted and I easily cleaned them myself within fifteen minutes. I contacted a local HVAC technician to evaluate the system and what he found was surprising to me. The system was low on Freon, he charged the system and it held pressure. The cost to repair the system; under $300, the owner was ecstatic. A week later, another one of the systems went down and we contacted another vendor who we had used in the past. The technician evaluated the system and said it was leaking Freon and couldn't be repaired efficiently, (around $2700), and it would be better to replace the system for $4200. My thoughts were; a system just doesn't break overnight unless something catastrophic happens, so I inspected the unit and called my tech back in to evaluate. The system was leaking, at a valve, and could be repaired efficiently, under $400. The owner was not happy about having to pay $700 for the recent HVAC repairs, after having to pay the cost to make the properties rent-able with paint and repairs, but was excited about us looking out for their bottom line and saving them an additional $8000 in replacement cost.
The problem was; the owner had purchased the four, ten year old units, as an investment near the height of the real estate market. The rent, at the time of purchase, was barely covering the financial costs of the properties. Over the past eight years, the property values declined over half and the rental income by 30%. The owner was coming out of pocket every month, hoping to maintain ownership of their investment and appreciation values would increase over the next several years and paying $4200 to replace the system was not in the budget. To protect the owner’s interest, I inspected the unit and found the coils were not impacted and I easily cleaned them myself within fifteen minutes. I contacted a local HVAC technician to evaluate the system and what he found was surprising to me. The system was low on Freon, he charged the system and it held pressure. The cost to repair the system; under $300, the owner was ecstatic. A week later, another one of the systems went down and we contacted another vendor who we had used in the past. The technician evaluated the system and said it was leaking Freon and couldn't be repaired efficiently, (around $2700), and it would be better to replace the system for $4200. My thoughts were; a system just doesn't break overnight unless something catastrophic happens, so I inspected the unit and called my tech back in to evaluate. The system was leaking, at a valve, and could be repaired efficiently, under $400. The owner was not happy about having to pay $700 for the recent HVAC repairs, after having to pay the cost to make the properties rent-able with paint and repairs, but was excited about us looking out for their bottom line and saving them an additional $8000 in replacement cost.
What we didn't know about the first vendor; the technician
earned commissions on the sale of new units and up sales on maintenance.
Not only did the tech earn money from selling, it guaranteed him a day’s
work. The pressure to inflate price, if the owner was to accept the cost of
repair, would have put additional bonus dollars in his pocket.
The second vendor turned out to be the owner of the HVAC Company.
His focus was to sell a new system, build his customer base and not offer the
service our owner desperately needed.
We learned some valuable lessons we intend to follow
for the future, for all our customers. I want to pass on the following
suggestions to you if you are in the property management business or concerned about estimates for repairs for your personal home.
Ask your vendor;
Are technicians paid commission? If the system needs Freon,
how do they measure it, (have them show you the scale they measure with before
and after the service)? If parts were replaced, have them give you the old
parts. Do they charge a trip charge along with a diagnostic fee to come to your
home or business? How many employees
does the business have, (think about the cost and overhead of a large business
versus a small one or two man team)?
By asking these questions, you can possibly save yourself hundreds to thousands of dollars in repairs not needed, overcharges as well as looking out for your bottom dollar. Is it better to have a new HVAC system than a fifteen year old system? The answer is a resounding, YES; but if you can't afford to pay for a new system, repairing the old one may be your best bet. Get a second or third opinion before you make the choice of spending money you don't have.
By asking these questions, you can possibly save yourself hundreds to thousands of dollars in repairs not needed, overcharges as well as looking out for your bottom dollar. Is it better to have a new HVAC system than a fifteen year old system? The answer is a resounding, YES; but if you can't afford to pay for a new system, repairing the old one may be your best bet. Get a second or third opinion before you make the choice of spending money you don't have.
