Recently I visited a nice lady about selling her home. The house was less than 15 years old and she informed me that both her furnace and A/C units were brand new and rentals. She was shocked to learn that buyers are often turned off by rentals in a home and that she would likely have to “buy out” the rental on closing. The cost? Over $10,000! Yikes.
There were a couple things that upset me while speaking with her. First, I find it hard to believe that both units broke and that she even required a brand new furnace and A/C considering the age of the home. Sure, it is possible but not probable. Previous to the installation she had a maintainance service contract with a well known company. For a small monthly fee the company would send a technician to service her units every year. While I do not know the specifics, it sounded like they convinced her to have them install brand new units and rent them from the company after a visit from the technician. They sell this rental product on the premise that you get “free” care, maintenance and parts/labour should anything happen. This comes at a cost somewhere between $160-$199/mth. At that high cost, it’s no wonder a prospective buyer does not want to assume the rentals.
The sales people who push the rentals on consumers NEVER tell home owners that these rentals are not commonly assumed by a buyer in the event you choose to sell. They also rarely mention the hefty buy out prices either. I have never had a buyer willing to assume a rental furnace or A/C. In fact, some buyers are becoming more weary of assuming hot water heaters which is a more common practise in Ontario.
Aside from the fact these rentals are not desirable to prospective buyers, moneywise they are just not worth it. You end up paying double, sometimes triple the amount that a unit costs by the end of your contract. I understand it can be difficult to come up with the money to pay for a furnace up front but I recommend looking for creative finance solutions before agreeing to rent. You could look to a family member or your financial institution for a loan or there are reputable companies that will offer financing options for their installations. Of course, to avoid the anguish of finding money for unexpected house costs, it is a good rule of thumb to set aside 1% of the value of your home every year for expenses that can arise with upkeep and maintenance.
Are you currently renting your A/C or furnace and are thinking of selling? Are you looking to buy and want to learn more? Call or text me at 519-859-7792.