How do I decide whether to continue maintaining an old heating/cooling system or upgrade to a new one?

Whether it is a good idea to install a new heating/cooling system rather than continuing to have an old one repaired depends on (1) your future plans for the property; (2) for a rental where you pay the electricity, the reduction of operating expense expected; (3) for a rental where the tenant pays the electricity, the expectation of what higher rent might be obtained with a new system; (4) the current annual expense for maintaining the old system; (5) what tax benefits might be available from federal and state governments that are of value, taking into account your particular marginal tax bracket; and (6) what cash or credit rebates might be available from utility companies at the time.

However, a new high-efficiency heating/cooling system can result in substantial savings in energy costs over the medium-to-long-term., this particular improvement, usually a bad investment just before a sale, can be very profitable over a longer term. If you are experiencing high maintenance costs because of the age and condition of the system, the reduced expense resulting from installing a new system will increase the return on investment. If tenants are responsible for electricity costs, a highly efficient HVAC system can be an attractive feature to prospective applicants.

Major renovation projects are seldom a good idea if you’re getting ready to sell the property. While many improvements provide a significant return on investment over a number of years, the return on investment due to immediate increased value is usually low for many renovation projects. For example, installing a new heating/cooling system typically increases the sale value of the property by 40 to 70 percent of the cost of the system. According, it is probably not a good idea to upgrade if you might sell the property within the next year or two.

Finally, even if planning to soon sell, it can be better to replace it before a sale simply because the buyer may discount the price he’s willing to pay by more than the cost of replacement when the system is very old or is found to have serious problems when inspected by a potential buyer or his contractor.

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