What type of heat is the best for a multifamily unit?
I hear a lot of investors campaigning on either side of the aisle about different heating systems and which one is best for landlords. The reality is that every option has pros and cons, and the right answer often depends on the property, the tenant base, and who’s paying the utility bill.
Let’s look at some of the most common heating systems found in multifamily properties and the advantages and disadvantages of each.
Electric Baseboard Heat
Electric baseboard heat is popular with a lot of landlords because it’s cheap and easy to install.
In most cases, the tenant pays the electric bill, so the operating cost gets passed through directly to them. If a unit fails, replacement is simple and inexpensive. You can usually just pull the old one out and put a new one in.
The downside is that tenants often don’t like electric baseboard heat because it can be expensive to run, particularly in buildings that are not well insulated. Because of that, it may not be as attractive to tenants and could potentially impact the rent the property can command.
Gas Furnaces and Heat Pumps
Another option is a gas furnace or a heat pump connected to a ducted system.
If the building already has ductwork, these systems can be a very good option. If ductwork does not exist, however, installation can become expensive because you’re paying not only for the equipment but also for the ducts themselves.
Heat pumps run on electricity but have become very efficient in recent years. In many situations, they can compete well with gas furnaces in terms of operating costs and overall performance.
From a tenant’s perspective, both systems can be attractive because they’re generally efficient and inexpensive to operate. From a landlord’s perspective, the challenge is replacement cost. When a furnace or heat pump eventually fails, replacing it can cost several thousand dollars.
Gas Hot Water Baseboard Systems
Many older multifamily buildings in Pennsylvania and Maryland still use gas-powered hot water baseboard systems.
One of the biggest advantages of these systems is longevity. Boilers often last a very long time, which means fewer replacement costs over the life of the building.
They also provide a very comfortable heat. During the winter months, these systems tend to keep units warm while maintaining moisture in the air. Many tenants find them more comfortable than forced-air systems.
There are also opportunities to improve efficiency. In some cases, an older boiler can be replaced with a high-efficiency gas-powered water heater that serves both the domestic hot water and the baseboard heating system. Modern systems can be surprisingly efficient, even when the landlord is paying the gas bill.
Mini Splits
Mini splits have become increasingly popular with multifamily owners.
Landlords like them because they are relatively easy to install and don’t require ductwork. Since they run on electricity, the utility cost is often paid directly by the tenant.
Another major benefit is that they provide both heating and air conditioning. Adding air conditioning to a unit can make it more attractive to tenants and may support higher rental rates.
For many investors, that combination of efficiency, ease of installation, and tenant appeal makes mini splits a compelling option.
Don’t Overlook Insulation
When investors discuss heating systems, they often focus entirely on the equipment. But one of the most important factors has nothing to do with the heating system itself.
It has to do with the building envelope.
A well-insulated building with quality windows, proper roof insulation, and sealed exterior spaces will perform better regardless of what heating system is installed. Better insulation reduces operating costs, improves tenant comfort, and makes virtually every heating option more effective.
In many cases, improving efficiency through insulation can have a greater impact than changing the heating system itself.
Final Thoughts
Every heating system comes with trade-offs. Electric baseboard heat is inexpensive to install, gas furnaces and heat pumps can be highly efficient, boilers offer long-term durability, and mini splits provide both heating and cooling. The best choice often depends on the property and the goals of the owner.
Many investors we work with appreciate our guidance on more than just the asking price of a property. If you’re evaluating a multifamily property in Pennsylvania or Maryland and want help identifying opportunities to improve performance and value, reach out to us to discuss your investment goals.
