Is replacing central heating a good real estate investment strategy?

Roofing, kitchen, bathroom… Many improvements come to mind for multi-family property buyers before the heating and hot water system when evaluating the potential of a building. Nevertheless! On the market, a building that still has an old central system is a real goldmine!

Are you surprised by this notion? Over the years, our team has seen more than one client significantly increase the market value of their building by simply replacing the heating and hot water system with a high efficiency unit. Here’s why

Reducing heating costs to increase the value of a rental building

When comes the time to sign the contract to buy the building, the presence of an obsolete system – whether it is functional or not – should not leave you with a bitter taste. On the contrary! If you are lucky enough to find one of these buildings (they are becoming increasingly rare), jump at the opportunity.

After the broker and the notary, your next call should be to one of our experts. As soon as you purchase is completed, we will be able to provide you with a plan of action. Installing a high efficiency heating and hot water system generally results in a 30% saving on the energy bill – and when you consider that this is the most important expense in the operating costs of a multi-residential property, it is not negligible!

You might say: 30% savings, it’s tempting, but you have to pay for this system! Of course, it is an expense that is added to the purchase price. But considering that it will have a direct impact on it’s market value, and that our experts are masters in the art of searching for grants, the ROI will not be long in coming.

Let’s talk about this market value affected by heating. The calculation is quite simple. As an investor, you probably know that the market value of your multi-residential property reflects the net income that can be generated by it. The higher this value, the more attractive the resale price.

If, when you get the keys, you immediately replace the old system with a high efficiency unit – your building operating cost will decrease. Lowering these costs will increase revenue, and therefore increase market value. After one year (if the market remains stable), your property will already have increased in value. You can then have your building re-evaluated, with proof of increased revenues in hand, and refinance it. Who would have thought that a heating system would allow you to free up funds to further expand your real estate portfolio?

Central heating at the service of your real estate strategy

Consider one of our clients: he bought a building and immediately called us to upgrade the central heating system, even though it was still working. After one year, he had his multi-dwelling building re-evaluated, while taking into account the increase in revenue of his building. The result? The value had increased by $160,000, while the change of system had only cost $50,000! Talk about a truly advantageous and above risk-free investment.

Even if it is less impressive than a new kitchen, this improvement has a direct (and immediate) impact on the revenues generated by a building. As a bonus, such an investment reduces the ecological footprint, which is an effective argument to attract tenants or buyers!

Looking for a building with a heating and hot water system from another era is a good strategy for visionaries. Especially when you have a team of people who are passionate about heating, plumbing and real estate appraisal on your side. If you think you’ve found a gem, give us a call!

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