Existing tenants and utilities

[Rick Thompson]

Looking to buy first multi-unit building. Existing tenants in place. Currently seller is paying majority of utilities (including cable). Based on my analysis this is killing cash flow and ROI. What options do I have if I move forward with the deal to move utility costs to the tenants? Can I make these changes once I close or is this based on existing lease agreement? Obviously, if they are good renters I don’t want to chase them away but I don’t want to pay for their utility usage either. Thank you for your time and knowledge! Rick

[Walter Roby jr]

First see what the area standard is at other units. Do the tenants normally pay or do the owners (call rentals)? If the tenants pay then that should be a plus for you! Offer based on actual NOI and cap rates, not the seller's price. Then you can add value by sub metering the utilities back out etc.