How to rent out basement and split utility?

Question

Hi,

I am interested in buying a house as rental property. It has 2 kitchens: first floor and the basement. The basement leads out to the back yard as a separate entrance. I would like to rent it out to two separate tenants (upstair and basement), but it is built as a single family with one utility meter. My question: is there a solution to rent out to 2 separate tenants and still find a way to spread the utility bill? I am opened to any feedback. Thank you!!

Ola Dantis · Answer

You have a couple of options:

1. All Bills Paid: You upcharge the rent in the front end so that the tenant basically pays the bill included in the rent.

2. Bill Back Method: You bill back the tenants based on usage on split the bill in half. Believe some tenants will try to negotiate with you by saying one unit is bigger or the other unit has more people in it. So, be prepared to be flexible and be fair.

Either approach works but it really depends on the market and on you dealing the bills every month.

Although what has worked for us in the past is that when a new tenant moves in, we look for patterns in the bill for the first 3 months, and when we spot that we just tell both tenants to pay the same amount going forward.

This way we are not sending an email every month telling the tenants to X amount, as that becomes an unnecessary administrative chore.

Many people have gone with the lower rent plus bill approach because it helps to lease the unit quickly.

Theresa Harris · Answer

If the basement has half the square footage and you have a similar number of people on each level, I'd just split them 50:50.  Rent it as $X excluding utilities.  Then when you get the bills, give the tenants a copy and they can pay 50% to you.  For two of my units, I pay water directly (they won't let tenants put it in their name), so when I get the bill every 3 months, I let them know the amount and they add it to the next rent payment.

Mckenzie Goulding · Answer

@Thomas Moran

We are converting our basement to a livable space and are going to do the exact same thing. What is your future goal with the property? Will you try to rent out both floors eventually when you move out? I have friends that have done this but I have also heard it isn’t always technically legal. Trying to figure out if I can still do it. What’s your take?

Thomas Moran · Answer

@Vinh Nguyen My Fiance and I are doing something similar with our primary residence. 2 bedroom 1 bath floor plan in the basement with a separate entrance. Our first house hack. We figured we would build the average utility split into the cost of rent; mainly to avoid any tenant arguments like "I can hear you guys taking 6 showers a day and not turning the TV off" etc.

Our utilities are about $140 a month when it's just us, so we conservatively add $110 to the rent. Assuming you have a desirable property it shouldn't be much of a problem. Just my .02

Frank Chin · Answer

It just means to include, or build it into the rents. So when you rent, you say "utilities included".

Cody Benedetto · Answer

as in increase rental rates to account for Utilities, which you'd then be responsible for

Vinh Nguyen · Answer

@Cody Benedetto thank you! what does bake utilities mean?  I don’t plan on converting it into a duplex

Cody Benedetto · Answer

It's probably worth looking into zoning laws in your area. It may be hard to turn into a legal 2 family so you'd need to "rent by the room" and bake utilities into the rent, or rent as a single family.

How to rent out basement and split utility?

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