8 Pros & Cons of Including Utilities With Rent for Your Investment Properties

by | BiggerPockets.com

One of the many factors that must be analyzed when considering an investment property is the cost of utilities. Usually with every investment property, there will be some utility costs associated with it. Sometimes these costs may be minimal, as they may be with a single family rental. Other times, they may be significant, such as with a 24-unit apartment building with a central boiler for heat and hot water.

As landlords, we want to maximize our cash flow. Maximizing cash flow often means passing on those utility costs to the tenants who use them by including utility costs with the rent. But should you include utilities with the rent? The answer to that question will depend on many factors. Here are some thoughts on the topic.


Related: The Not-So-Obvious Problem with Billing Back Utilities to Tenants

Why Include Utilities?

1. Your building is not separately metered.

I find this a lot in older buildings, especially those that were single family houses that have been converted into multifamily units. It is simply cost prohibitive to retrofit and meter all of the units separately.

2. You don’t want the double hassle of sending out utility bills and then collecting the utility payments.

A utility reimbursement program that divides up utilities on square footage can really be a pain, especially when tenants complain that “they did not use that much heat/water/electricity,” etc.

3. You can potentially make a little more money.

I have talked with landlords who include the utilities in the rent and charge a bit more for the service, even if the units are separately metered. This can improve their cash flow.

4. You can’t charge a “per person” fee.

This may be construed as discriminatory against larger families.


Related: Why Landlords Should Reallocate Utilities to Improve Net Income

Why Not Include Utilities?

1. It makes your life easier.

If you can require your tenants to get utilities in their own name, you do not have to bill, collect payments or take the phone calls. It just makes your life easier.

2. Your utility expenses will increase.

When utilities are included, there is no incentive for the tenant to conserve. I have seen it time and time again where the tenant has the heat turned way up and the window open to cool it off.

3. You might get better quality tenants.

It has been our experience that those tenants who can get utilities placed in their names are simply better tenants. They pay their bills and are generally more responsible. Your local market may vary.

4. You spend less time dealing with the local utility.

This can be a real time and headache saver.

While you can potentially make a little more money including utilities, their inclusion can be a real killer of your time and can increase the level of stress in your life. For me personally, I am looking for more free time and less stress, so it is a no brainer. I will rarely look at buying non-separately metered properties anymore, nor do I generally include utilities in the rent. But that is just me.

Your market or your style may be different. You may have to include utilities, or it may be common practice to include them. Either way, that is one of the beautiful things about the real estate business—there is no one or right way to do it.

We are republishing this article to help out our newer readers.

Do you include utility costs with the rent? Why or why not?

Let me know what works for you with a comment.

About Author

Kevin Perk

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.


  1. Kevin, Another good reason to include some of the utilities is the policy of the utility service provider. Some municipal providers will go after the owner and lien the property for unpaid utilities. In this case, it is a pretty good idea to include them in the rent, otherwise you may find yourself in a bad position if you happen to end up with a scammer in one of your properties. I had this happen with a SFR and was lucky enough to catch the unpaid utilities early when I suspected some issues with my tenant. I got the back utilities paid before our landlord/tenant relationship came to an unpleasant end, but I could have easily been stuck with several thousand in water and sewer bills alone if unchecked for the duration. I’m sure there are many horror stories like this out there.

    • Kevin Perk


      We have similar issues here. The key is to document everything to be able to demonstrate to the utility company that you as the landlord were not responsible for the unpaid bills. That usually means taking leases and other documentation down to the utility company offices.

      Thanks for reading and commenting,


      • rich urban

        Lol.. In Miami-Dade they will put a lien against your property if a water bill is not paid or closed out properly. They don’t give a shit who’s bill it was 🙂 That’s why we pay the water & they pay electric.

    • Curtis Bidwell

      Our municipal water provider will send me a courtesy bill so I can keep tabs on what is happening. It’s worth asking if you let the tenant pay directly, which I do. Also, don’t send their closing statement until you’ve contacted the utility company to make sure the bill is current, including the final billing!

  2. Dawn Anastasi on

    If you have a service such as water that is lienable to the property owner, instead of the bill going directly to the tenant (and them ignoring and you not finding out unless you are monitoring the bills):

    a) Have the bill go to you and pay the bill then remit to the tenant for payment within X days. Then the tenant knows you know when they have paid. If they don’t pay, they can be evicted if you put that as a condition into your lease.

    b) If a bill comes quarterly, then have the tenant pay a set amount each month toward the bill. (Example: $150 average quarterly bill; have the tenant pay $50 each month). Then when the quarter comes up, have the tenant “settle up”.

    c) Some utility providers include fixed amounts and variable amounts in their bills. You could include the fixed amounts as part of the rent, and just bill the tenants for the variable amounts.

    There are many ways to structure such things to get a happy relationship with the tenant.

  3. Kevin:

    You also need to know your market.

    We decided early on that we were not going to rent with utilities included in the rent, but we still wanted to provide our tenants with a single payee option. We have several student rentals and first implemented this programme for our student tenants, many of whom cannot obtain a utility service without posting a substantial bond, due to lack of credit history {either due to age, or being from another country}.

    We execute a separate agreement with the tenants which is included as a schedule to the standard lease. In this agreement we identify the utilities – and recently, services – to be included and set a monthly contribution which is paid in-advance at the start of the month (along with rent).

    The utilities remain in our name and we pay the invoices when received. We also forward a copy of the invoice (electronically) along to the tenant, providing them with direct visibility of their utility usage.

    Every three months (quarter), we reconcile the Tenant’s contributions against the actual cost of utilities consumed. If there is a surplus in the budget, we provide the Tenant with a choice of a) leaving the funds in the budget to be used against future bills (i.e. winter is approaching and electrical or gas costs will be increasing with heat); b) applying the surplus towards the next month’s rent; or c) refund the surplus to the tenant (this last option is only offered at the end of the lease when the tenant will be vacating). If there is a deficit in the utilities budget, we invoice the tenant for the outstanding amount which is due at the end of the month in which it is invoiced. We have only had a deficit twice – we have a very good handle on what utility usage for given property will run. The key to avoiding the deficit is setting the monthly contribution a little higher than the average monthly utilities costs.

    This is not a reimbursement plan, so we are not chasing the tenant for utilities already consumed. Another advantage of this plan is it allows us to collect operational data on our properties {Canadian privacy laws prohibit the utilities from disclosing a tenants utility account information to us, even though we own the property}: this has been very useful to measure the real world impacts of the energy efficiency retrofits we have been carrying out on our properties.

  4. Well, for a different perspective- when I was a renter, I found it extremely appealing to have a landlord paying at least some of the utilities. Now, I am certain that all the landlords on here are honest and work hard to ensure that your homes are working at peak efficiency. But to be frank, I don;t know a one potential landlord from Adam, and I know there are plenty of slumlords out there who just don’t care unless it hits them in the pocket book.

    At my last rental home, I found a very good landlord. He paid the water and natural gas (which provided heat and the cook stove) whereas I paid the power bill. Under this arrangement, we both worked to make sure that any air leaks, or other inefficiencies, were fixed. If my faucet was leaking, I called and got it fixed very quickly!

    I can sympathize with tenets wasting utilities, but on the level, I think it is better if the landlord had some skin in the game. I have decided that when I start buying rental properties, I am going to cover some of the utilities. I am also going to watch usage like a hawk to catch utility wasting! (Ideas: Remote thermostat monitoring, doing regular drive-bys, ???)

    • James, if I have a tenant paying too much in utilties because of a leaky faucet or air leaks ect, I am feeling that in the pocket book. If th average utility bills for a given month are $175 but through energy efficient products and smart maintenance, I can get the average bill in my units down to $145 then I can charge $20/m more for rent and my tenant still comes out ahead as they are still saving $10/m over the competition and are living more comfortably with the energy efficient products.

    • Kevin Perk


      I hear what you are saying. We do pay water and sewer here and try to insulate our old properties as well as we can, after all, we want them to pay the rent and their utility bills, not choose between one or the other.

      Good luck with the monitoring, it is hard to be a policeman.

      Thanks for reading and bringing in another perspective,


      • It is hard- but isn’t monitoring what is going on at your rentals a fundamental key to success as a landlord? I have read countless BP posts that talk about the need to do drive-bys, know the neighbors, do regular inspections, etc. It sounds like I am going to be doing these things whether or not I am paying for the utilities. It adds one more thing to the list to check on, but it also gives me something else to use to get rid of irresponsible tenets if one sneaks past my screening process 🙂

        We’ll see how it goes! I may change my mind after doing it a while!

        • James, as a tenant yourself, how would you feel if your landlord was always driving by, checking in with the neighbors, and bugging you to do constant inspections? Besides, I don’t see how drive bys will tell you much about a tenant’s utility usage, besides maybe lights, but you’d have to be driving by A LOT in order to sense any sort of pattern, which leads me back to my first comment.

          The best way to be efficient as a landlord is to properly screen tenants and have a solid lease. Normally if you do those two things, the rest will fall into place. As an out of state landlord, I don’t have the option of driving by, and frankly, I’m glad. Once a year inspections performed by my property manager provide all the peace of mind I need 🙂

        • @Sharon (Sorry, BP comments don’t nest below 3 levels)

          It would depend on the landlords attitude! I always enjoyed having him or the maintenance guy check in to see if I needed anything. At my last place, the landlord owned 3 properties right next to each other, so I saw him around fairly often. He would always say howdy and ask how things were going, ask me if I needed anything. He or a maintenance guy would come by quarterly and replace the filters and check the smoke alarm batteries. They always asked if there was anything needing repairs.

          I always appreciated these visits. It made me feel like he was really on top of things and that he cared about his property- and my health and comfort. He had great attention to the little details that made the house comfortable.

          Obviously, I would find it strange if the landlord was constantly going door to door and asking the neighbors about me! But if he introduced himself and gave them his card in case there was ever any trouble, I would not mind that.

          Driving by, you can see things like if windows and doors are left open with the heating or cooling on, for example. Lights being left on is not a huge deal if you use energy efficient lighting. I am far more worried about heating and cooling expenses and leaking or running water. I plan to monitor power and water usage remotely, to catch leaks or other problems as quickly as possible. (With automated software, so it takes none of my time).

          All of these things can be done by an effective and properly trained property manager.

          NOW, obviously, this is only my theory- I am not yet a landlord, so I may find out just how foolish I am once I get my hands dirty!

        • Kevin Perk


          What you say is very true. We do drive by and check in but still trying to be a policeman will make you pull your hair out.

          I like less stress so I just do not include them. Try your system though, if it works for you, that is great. There is no one way to do real estate.

          Thanks for adding to the discussion, I do appreciate it and good luck,


    • Tom Sylvester

      James – There is not a right answer, but a few bad tenants might make you change your mind, especially if you grow your portfolio. It’s takes time to “monitor like a hawk”, and the reason that many of us get into real estate investing to generate somewhat passive income and not have to spend a lot of time monitoring.

      Also, we have had 2 tenants (right around the same time) had toilets that were constantly running and did not inform us because it did not impact them. Because water is billed every 3 months, we did not know until we received the water bills. One was $800 and the other was $600.

      • Wow! I have never been in an area that billed water every 3 months, so that would be a real bummer. I wonder how difficult it would be to install a water meter that could be read remotely, to keep tabs on water usage?

        Like I said in a reply above- I think keeping an eye on things is necessary whether or not you pay for utilities. If you aren’t doing it yourself, you should probably have a property manger doing it for you. But like you said, there is no right or wrong way- whatever works in your situation!

        • James – It is definitely a possibility. I have only recently looked into sub meters for water, but obviously remote monitoring ones are going to cost more money. Everything is possible, it just depends on what make sense for your business.

          I’d be interested in hearing your take after being a landlord for a few years. Although some people are great, there are also a lot of not great people out there. It doesn’t take many mistakes to be out thousands if not tens of thousands of dollars in this business.

  5. Sara Cunningham on

    Kevin very timely article for me. I have never included utilities in any of our rentals. However saying that I am in the process of closing on a property that has been converted into a triplex from a SFR. The water here is not separately metered. When I saw this it made me think about the deal a little bit. If I’m honest I really still don’t like the idea but the numbers look so good on paper that the positives outweigh the negatives on this deal. If it came down to having a choice though I wouldn’t do it. When we were younger we lived in housing that included utilities and if I am totally honest we didn’t think about being conservative since we weren’t paying, so I tend to assume that everyone else will exhibit the same kind of mentality.

    • Kevin Perk


      It is typical here for there to only be one water meter and thus typical in our market for the landlord to pay the water bill. Water is cheap here so it is not a deal killer. We just budget it into our analysis when looking at a property. Since we are billed monthly we can generally find out pretty quick if there is any leaks. Don’t run away run a good deal because of a little water. 🙂

      The bad part these days is all the stuff they now tack on to a utility bill (which we get due to water). We also get billed for sewer, storm water, mosquito control and street lights. I see this fee trend only going up in the future.

      Thanks for reading and commenting,


      • Sara Cunningham on

        You are right Kevin. When I got a copy of the last water bill it wasn’t the usage of the water but all the add ons like sewer, trash pick up etc. It isn’t going to scare me off, I just got the inspection reports back and it still makes sense from a monetary point if view. We will close the deal next Tuesday.

  6. Well if my units were separately metered, I would never bother with any of this. I would just let them pay their own utilities. However, since I’m looking at apartment investing, it seems you almost never find water separately metered, so some of these tips are quite handy. I like the idea of the RUBS system a lot, or how Roy does it too. Very helpful article and interesting subject, Kevin!

  7. When I had Section 8 properties, I included them. I did not want utilities to be cut off because the tenants did not pay,

    Responsible tenants can pay their bills, and do. Get better tenants, get better profit.

    • Kevin Perk


      Probably a wise move on your part with the Section 8, although I have no experience there.

      Totally agree with your last point. Screening is key. Better tenants equals less headaches and more profits.

      Thanks for reading and taking the time to comment,


  8. Abel Vazquez on

    Great article and plently of interesting points you mentioned. Well it seems like here in California you can offload the expense of utilities to the tenants at least it seems that way because the majority of the rentals I’ve seen do it and if the landlord doesn’t include all the utilities the usually include the ones who usually are more expensive. I will certainly be looking only at properties which are separately metered it sounds like it would save you a bundle of time. Well awesome article again thank you Kevin.


  9. Use of the RUBS System of billing does work on properties from 2 to 2000 units. It makes the tenant use of utilities responsible for their portion of utilities. You can’t always make people turn off a water when they go on vacation or lights when they leave a room. When a tenant realizes how much they can save, on a future rent obligation just by they conserving utility usage it does help make them a better tenant. JUST add the addendum to the lease before they even take possession. If you simply explain this to every tenant you should not have a difficult time with that tenant after they’ve moved in.

  10. It’s interesting how you said that by including utilities in the rent you could make a bit more money by charging a bit more. This would be especially smart to do if renting heating systems in the winter because they would be in almost constant use. I think this is a really good bit of business maneuvering without doing harm to your tenants.

  11. Stephen Shelton

    Sharing utilities seems to bring out the truth of human nature that causes socialism to fail. People will always want the maximum result with the minimal effort so taking on the responsibility of maintaining a shared utility system is bound to cause people to be wasteful at the landlord’s expense.

    My newest rental has just hit Year 2 and the tenants shuffled a bit where one left and the other brought in his girlfriend. One of the big problems she mentioned was the shared water where the landlord split the water bill among thedifferent tenants and she felt she was always getting hit with the costs of her wasteful neighbors.

  12. Howard Sklar

    The deciding factor for us has always been (given our low-income / “bread & butter” tenant profile) what our competition is doing and certainly not to put ourselves at a competitive dis-advantage. Our neighborhood has “bitten the bulet” and been paying utilities for so long that passing such costs along would entail a genuine paradigm shift. How to make that happen for the neighborhood……not that’s a real question!!

  13. matthew moreau

    I’m currently dealing with utility mangement on a 8 plex we just purchased. Luckily, the gas/electric is individually metered.

    However, the water is split between 2 blogs. 1 meter for every 4 units. Problem is the utility room is a plumbing nightmare with hot water heaters and individual boilers p/unit closely confined in a small space. I recieved an estimate of $2.5K-$3k to re-work plmbg & install meters!

    I’m attempting RUBs route now. Idk if it will be easier in the long run or not. Maybe once the tenants are acostumed to paying it but the first month was challenging with most tenants outstanidng balances.

    Sub-metering is unfortunately not a option for me. With that said, which have been better for other investors RUBs vs. including it in the rent?

  14. Andrew Syrios

    The 2 biggest problems I have with including utilities are,

    1) tenants will usually underestimate how much they pay in utilities and thereby feel like the rent price is too high. They don’t really compare like-to-like when it comes to one unit with utilities and another without.

    2) The risk that a tenant will just really bleed you since they aren’t paying for it. It could just be because they need the heat at 85 when it’s 20 degrees outside. Or it could be because they want to screw you. Say you’re evicting them and so they run the heat with the windows open. This latter case is rare, I can only think of it happening to us once. But I hate the idea of it.

  15. Damon Ng

    The issue I’m running into with this is with small multi-family home in Indianapolis, IN. I have a 4-plex where submetering companies won’t even consider managing a small multi-unit. Is there anyone else running into this issue?

  16. Brent Wiebe

    I agree. I once bought a duplex that was separately metered, but the existing leases had the utilities included i the rent. The previous owner said that he was making more money that way. The same year I bought it we had a harsh winter. I went there one day to replace a drier, and noticed the tenants in one unit had the heat up way high, and the windows open. I got soaked that year with their utility bills, and changed their lease the following year. I noticed they stayed one more winter and moved on.

  17. Alim Manji

    I always install the separate meters for hydro electricity. The other reason that isn’t already mentioned is that some lenders look at utilities expense and will take that off your income for purposes of qualifying for a loan.

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