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swampwiz_gw

Costs benefits dilemma with upgrading heating system

swampwiz
14 years ago

I have an earlier thread concerning my situation of having to upgrade my heating system so that I can get cheaper insurance for my home. There is also the side effect of having a more marketable home by doing an upgrade, as well as the possibility of getting the tax credit.

Here are the facts:

It seems that I can get insurance at $1380/yr if I upgrade to central heat, or $2050/yr without, or a difference of $670/yr. If I didn't have a bad credit history, I could probably get it even cheaper at about $900/yr, but because of the poor history, I am being hit with a 60% penalty by most carriers (this seems like discrimination, but I guess it's the way it is ...)

I can get a bare bones central gas heat system put in for $2950, but it would entail no tax credit.

I can get an upgraded central gas heat system put in for $3700, but I would get the tax break of $1100, for a net of $2600. (I should say at this time, that due to my income situation, I may not actually have enough income to take advantage of the break (i.e., it is a non-refundable tax credit, so I would basically need to have the $1100 in net tax due to be able to take advantage of it), but I suppose that I could take additional money out of my IRA to get up to that level if I were not to have enough income.)

I could get a bare bones heat pump put in for $5100 (the reason it is so high is that I have bare minimum electrical, so it would cost $1K to get that upgraded enough for the system), but that would be without a tax credit.

I could get an upgraded heat pump system put in for $6100, in which case I could get the full $1500 tax credit, which would net out at $4600.

The climate is Gulf Coast, and in any case, I won't be around much to take advantage of the energy savings that any of these systems would result in. In fact, if it weren't for the insurance, I would just do nothing.

The question then becomes how much extra resale value would result from installing the central air system. Right now, there are hokey window units. The house is quite small (820 ft^2) and in a community of very low housing values (I am buying the house, which is in good cosmetic and otherwise working condition for $39K.) I could forsee selling the home to someone who would want to rent it out (or perhaps I would rent it out), in which case I don't think the upgrade would matter all that much. But then again, it would have to be worth something, I figure. I can't say how long I will be in this house - I will be declaring bankruptcy soon, so it appears that I will not be buying a new house for some time.

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