What would you do - financial advice please

[mind_business]

I would take care of the furnace only, as it seems to be more of a necessary expense. A/C is just a nice-to-have, however most of the students will be renting in the winter months when they don't need A/C. They'll make due. Throw some paint on the cupboards to spruce them up, but don't waste too much money on a student rental place ... especially since they will likely see some serious abuse from students.

For these types of decisions, you really should develop a priority list, and a payback period analysis.

Btw, I agree with TRM. You're planning to make a big change to your life in the near term. This will add lots of joy, but also stress to your life. There's nothing like having money in the bank as an emergency fund to help reduce some of that stress.

[Spidey]

I would take care of the furnace only, as it seems to be more of a necessary expense. A/C is just a nice-to-have, however most of the students will be renting in the winter months when they don't need A/C. They'll make due. Throw some paint on the cupboards to spruce them up, but don't waste too much money on a student rental place ... especially since they will likely see some serious abuse from students.

For these types of decisions, you really should develop a priority list, and a payback period analysis.

Btw, I agree with TRM. You're planning to make a big change to your life in the near term. This will add lots of joy, but also stress to your life. There's nothing like having money in the bank as an emergency fund to help reduce some of that stress.

Good points. There's no need to do everything at once. The furnace would be a good place to start, and then the OP can see if the financial situation allows further improvements in subsequent years.

[Cal]

I too would only do the furnace. Central air for a bunch of students does sound a little too much.

You are cash flow positive....so why can't some of that money be put back into the property for the furnace. Do you have another job too, or is this your only source of income?

I did snicker a bit when you typed 'ouch' in regards to the mortgage rate. Statistically anything under 6% is pretty good. We have been in a low rate environment for so long, we are getting spoiled, you are doing the right thing by locking in for a longer duration.

[donald]

It sounds like your rental is very close to needing a lot of revamping-windows,kitchen,furnace ect ect(and you don't want to be a ''slumlord"The market is still hot and it is close to the peak?(esp if you live in t.o or van)Why not sell?depending on when you bought it of course,you should have a healthy profit.Sounds like you want to simplify and you are starting family ect.Could do that and than map out another plan going foward in your life-Sounds like your hinting you don't really want the rental anymore-so selling might be the answer.

[slacker]

My bad, I didn't phrase it quite right.

This is what I meant to say, but failed in my original post:

1. Borrowing to invest is quite normal. In fact, you're already doing exactly that with your mortgage rental property.

2. I meant to say, borrowing to purchase consumer items like big screen TV or vacation, is not smart.

On whether replacing a furnace and windows are consumer items, sounds like you already decided it's a necessity. Just make sure it's not one of those "I want a granite counter top because it's a good investment" cases. (I'm sure it's not)

[marina628]

Assuming you have the proper licenses to convert oil to gas and have factored in the cost to have the oil tank removed .Environment Canada and your insurance will need proof it was done correctly by licensed professionals.My husband worked in this business for many years and holds many licenses and has seen many situations where people try to remove oil tanks without knowing what they are doing.Best story was when homeowner was in process of disconnecting the tank to remove himself,oil truck came and filled up his tank and it all went into the basement.That was almost a 2 million dollar situation!

[thebomb]

Interesting comments, thank you. To clarify a couple of things. No I do not want to sell and yes- aside from this rental income I have a full time job with a healthy salary + bonus.

Maybe I should pose the question a little differently.

If you had the cash in your bank account or you could put it on the mortgage at renewal time (as per my original post) would you drain some of you savings at a time when you are thinking about starting a family (give or take a year down the road) or would you put it on the mortgage at a lower interest rate, still earn monthly income on the rental and claim the interest on the mortgage.....maybe that is a better question to be asking.

[Four Pillars]

I thought I could at least try Four Pillars ....

Haha - some things in life are inevitable.

This thread has brought up a lot of interesting topics - most of which you weren't asking advice about.

To answer your last question (assuming I understand it correctly), I would add the reno cost to the rental mortgage.

With respect to your concern about being like other people who borrow to do renos - You can't compare borrowing to do renos on an investment property with doing renos on your personal house. You have a $400k business that needs some capital infusion. As the chief shareholder, you have to provide that capital and it only makes sense to borrow it. Rental houses are all about leverage and if you have to borrow a bit more, then borrow a bit more (within reason). There is no reason that capital improvements to a rental house have to affect your lifestyle. Ie you shouldn't have to end your mat leave early or cut back on things because you are doing these improvements to your rental place.

And even though this isn't what you asked - I too tend to think that maybe the furnace should be prioritized over the other items you mentioned. Will things like a better kitchen/windows really raise the amount of rent you can get? It's been a while since I've been in school, but back then - most students wanted crappy places because they were cheap. If you improved them and raised the rent - they would go elsewhere.

One more thing about the heating - do you know what the insulation situation is in the house? If the attic insulation is old or non-existent - that could be a fairly reasonable cost improvement that would help the heating bills regardless of the furnace type. I know you can get walls insulated, although I have no idea of the costs.

[Assetologist]

Why would anyone pay full retail price (ie. dollar for dollar) for 'emergency funds'?!

This most likely one are of investing where it is prudent to use leverage.

Businesses use LOCs to balance the ups and downs of cash flow and we should treat our personal finances as businesses.

Sitting on cash or cash equivalents whilst waiting for investment opportunities makes sense but sitting on cash as insurance makes no sense to me unless one has so much free cash that a chicken little fund can easily be segregated it is nonsense!

[Young&Ambitious]

I'm going to be mostly against the grain here and say do the furnace, kitchen and windows. These will all need to be done at some point and if I were you, I'd rather get it out of the way before kids come into the picture. Based on your budget I'm assuming the kitchen will offer all the bare essential functions without being expensive so that sounds great.

Four Pillar's post on leveraging I second.