Should You Upgrade Your Rental to Central Air?

The decision to upgrade a rental home to central air conditioning is one that must be made on a case by case basis. Upgrades bring both pros and cons, and because each situation is different, the question of whether to upgrade or not depends on a number of factors. Location, cost, repair and replacement costs and the expected return on the investment must all be considered before deciding to upgrade.

Man installing air conditioner outside a house

Cost: Central air conditioning units are one of the largest ongoing costs for a rental property. For investors with limited cash flow, upgrading a rental property with central air will place a heavy burden on an investment budget. However, if your rental is located in an area where central air is a common and expected feature, deciding not to install it could severely impede your ability to attract quality, long-term tenants. Long vacancies and lower rental rates may result, potentially causing income losses in excess of the new unit’s upfront cost. For this reason, the decision to upgrade to central air must include a careful assessment of all of the costs involved.

Location: In some parts of the country, central air conditioning is considered a luxury item. In areas with temperate summers, adding an expensive central air conditioning unit to a rental property may not always strengthen your rental property’s appeal. Tenants in these areas may not be willing to pay more for what they view as an unnecessary add-on. But in other locations, central air conditioning is not only expected but necessary. Certain climates, particularly those in the South, will make having an air conditioning unit in your rental property an essential part of attracting quality tenants. Few tenants in these areas will be willing to suffer through the heat in a rental home that cannot maintain a comfortable temperature.

Repair and Replacement: In many states, once you place an air conditioning unit you will be responsible for maintaining it in good working order for the entire tenancy of a renter.  Many state laws and local health codes have this requirement in place, so if you are thinking of placing air conditioning as a trial, make sure you understand your local laws to see if these codes and requirements apply to your investment property.

External air conditioner outside red brick building

Expected Return: Along with location, cost, and maintenance aspects, it is important to weigh the pros and cons of upgrading to central air in terms of the expected return. Central air conditioning units are a significant investment that require ongoing maintenance and repairs. Installing one may be expensive in the short term, but the increased property value and appeal, not to mention the ability to charge higher rent, may ensure that the upgrade pays for and sustains itself within a relatively short time. However, if the market doesn’t weigh heavily in favor of upgrading to central air, deciding to do so anyway could make it impossible to recoup the original cost of installation and ongoing maintenance.

Ultimately, the decision to upgrade your rental property with central air relies on carefully weighing the pros and cons, gathering good information, and gaining a solid understanding of your rental market. The professionals at Real Property Management have market expertise in over 300 locations in North America. We offer our property owners market evaluations for each property, a valuable service that can help you make the decisions that are right for your particular situation. Visit our Real Property Management office locator to find your nearest location.     

Check out these other helpful stories