Energy costs are a big topic of conversation in the real estate investing world, and there’s one question that dominates the others: Should you make the switch from oil to gas heating?
While gas is known for being cheaper and more efficient than oil, that doesn't automatically make it the best choice for the home you're selling or renting. Let’s take a look at both energy sources and how they affect your bottom line.
Oil and gas are two of the more common ways to heat homes; alternative heating methods include electric and propane. Both oil and gas require furnaces, though oil furnaces are far bigger than their gas counterpart. For this reason, many people give consideration to the oil-to-gas conversion: It will save space. Still, both types of furnaces do make it easy to heat a home. Note that while there are homes that do use oil to heat water, the majority of homes use it for space heating.
Month for month, oil heat is always the more expensive energy option -- and this is with declining oil prices over the years. While energy costs will vary depending on how far the mercury dips in the wintertime, homeowners with oil-powered heating systems will nearly always have a larger bill than their gas- or electric-powered neighbors.
As temperatures fluctuate throughout the winter months, so do energy bills. That is why most customers opt for some sort of budget with their energy company. For gas customers, after a period of time (usually a year) during which usage is assessed, they can opt to pay a flat fee per month based on a 12-month projected usage. Oil customers, on the other hand, can usually lock in a price per gallon of oil. This saves money per unit, but during a cold winter, that gas tank will drain more quickly. So while the unit price of the oil may remain the same, it's difficult to predict the number of units that will be needed. This unpredictability is what makes homeowners -- especially in the Northeast -- covet gas-powered homes.
According to data from the U.S. Energy Information Administration, in 2018, approximately 5.5 million homes in the United States were heated by oil. 82% of these homes are located in the Northeast, a region known for its chilly winters. The Northeast Census region consists of New York, New Jersey, Pennsylvania, and all six of the New England states. In this region, one out of five homes has an oil furnace.
When house hunters consider buying a home, they must factor in energy costs as part of their monthly budget. While everyone has to pay utilities if they want to heat their home, many homeowners view oil heat as a very expensive proposition. Therefore, a home with gas heat could sell more quickly, particularly if other comps in the area are also powered by gas. If you're looking to sell or rent in fair-weather states, you can likely keep the system as is because you won’t have to crank up the heat.