Wednesday, November 23, 2011

A Worthwhile Investment or...Just Blowing Hot Air

The following article was written by Sam Coulter, President of Sam Coulter Service, Inc in Little Rock AR and appeared in the Residential Resource Magazine published by the National Association of Residential Property Managers. Reprinted by permission.

( In this article Mr Coulter makes a point that professional Landlords need to heed in dealing with the air conditioners at their rental properties. This is particularly true in Florida where they run for 6 months straight out of the year. This is a huge profitability issue and effects overall return on investment. )

"What is the single most expensive item in your rental property that at some point will need to be replaced? Hot water tank? Nope. Roof? Nope. Main sewer line? Not even close. The air conditioning system is, by far, the most expensive replacement item in your rental property. The average cost for even a builder's model system today is around $4,500.00. 

Perhaps the first question should be "why" should you spend your owner's money on cleaning and servicing the air conditioning systems? I'm going to explain why you should, and then you can be the judge as to whether or not I'm just blowing hot air.

There's nothing like a $300.00+ electric bill to drive a tenant to look for a new home, right? How often have you had a tenant call and complain about high utility bills? How often do you lose a good tenant over high utility bills?

 An air conditioner converts electricity into a mechanical force that drives a compressor that com­presses Freon gas into a liquid. That liquid is then pumped inside to the indoor evaporator coil where it evaporates back into a gas as air is circulated across the coil. Heat is then absorbed by this process and returned to the condenser outside. The condenser coil is then responsible for shedding the heat that is absorbed in the home.
Dirt is the enemy of both of these coils. Over time, the indoor evaporator coil can become clogged. This dramatically reduces airflow, making the system work harder and longer to cool the home. The same is true with the outdoor condenser coil. This coil becomes dirty from the dust in the air, grass clippings, dog hair, ete. Both of these coils are absolutely essential to the process of efficiently cooling a home, and if either or both of these coils are dirty, airflow will be reduced; therefore, performance will suffer greatly, and the life expectancy of the system will be reduced dramati­cally.
"So what" you say? Why should you as a property manager care if the air conditioner in your rental property has to run longer than it should, or not last as long as it should? Because it will directly affect the two groups of people who are most important to you, the property manager: your owners and your tenants!

Let's start with the tenant. You want to keep your property rented, your owner wants to keep the property rented, and the tenant loves the house and wants to stay. But what if, in addition to the rent, the tenant has to pay an excessively high utility bill? There's nothing like a $300.00+ electric bill to drive a tenant to look for a new home, right? How often have you had a tenant call and complain about high utility bills? How often do you lose a good tenant over high utility bills? What if you do not even know you are losing tenants for this reason? How much more attrac­tive would your property be if you could ensure the tenant affordable utility costs? But let's look at the more important issue ... what is this going to cost your owner if the units are NOT properly maintained?

     Air conditioning systems don't last forever-the average life expectancy is 15-20 years. It's just a matter of time before they all will have to be replaced. So here is where the argument for regular maintenance really makes dollars and "cents."

Let's assume we have two identical properties with new systems installed at the same time. We will assume that a new system will cost $4,500.00 and also assume the system will last 15 years. One property manager decides to have the unit serviced every year at an annual maintenance cost of $100.00 per year. So that's a total cost of $6,000.00 over 15 years.

The other property manager chooses NOT to service the system regularly so we have a system that will last roughly ten years instead of 15 (since it has to work harder and run longer) and will probably require at least two or three expensive repairs during that time. Now just ten years later, factoring in the cost of inflation, we have to spend $5,500.00 on a new system (or more) ten years into our pro­jected timeline, plus we have spent perhaps $1,000.00 in repairs over that same ten years, bringing the grand total to $11,000.00 in just ten years!

And if the second property manager AGAIN makes the decision to forgo regular service, we are now five years into the life expectancy of our "new" $5,500.00 system, vs. only $6,600.00 spent for the system that WAS regularly maintained when we reach the 15 year mark. And remember, for 15 years the first property manager enjoyed happy tenants with the low utility bills while the second property manager has tenants who have paid higher utility bills than was necessary!

The above is just an example - it is hard to predict how long a system will last. But it is not hard to predict that dirty coils and lack of maintenance will very quickly shorten the life of a heating and cooling system. I can guarantee you it will cost a lot more to cool your tenant's home and it will cost your owner a lot more in the long run.  So property managers-am I blowing hot air or is that your tenant on the
phone?~ "

(SML Note: during our property inspections we always check air filters to make sure they are being changed frequently to reduce the amount of dirt that can clog the coils.)

Sam Coulter is President of Sam Coulter Service, Inc. has been in the HVAC business for the past 18 years. An affiliate member of the Cen­tral AR chapter of NARPM, Sam specializes in solving the varied HVAC challenges faced by proiessionet prop­erty managers. Sam and his beautiful wife Lisa have 4 wonderful children.