How can I pass utility costs to the tenants?

Question

In most of my buildings the tenants pay for their own utilities. However, in one of my multifamily buildings (24 unit) I pay for both the water and heat (gas) which is costing over $55/month/unit. It isn't cost effective to install individual water meters or individual gas meters. What have you implemented to have the tenants share the responsibility for water and/or gas usage? What has or hasn't worked for you?

Peter Falk · Answer

I'm in Madison, WI and have a 2 flat heated by 1 furnace and 1 water meter. I just divide the gas bill up and each unit pays a % based on unit size and I divide the water bill by # of occupants and bill each unit accordingly. It does take me a bit of time each month to calculate and scan and email the tenants copies of the bills, but has worked well and covers the building utilities (electric is separately metered).

You could also just collect an average/estimate and hope it's close enough or maybe in the lease say at the end of the year, you will total things up and collect or credit any balances due/owed.

Kim Meredith Hampton · Answer

@Steve Yoder RUBS is the best way, there are local providers that do this, It’s a Ratio Utility Billing System that can put their own meters that read consumption. OR you could simply increase the rent to “account” for that $55

Eliott Elias · Answer

Charge a set rate to each tenant no matter the usage. You don't want to lose money on this.

Peter Nikic · Answer

you've already done the math, just start adding it to the rentals. start with new rentals and lease renewals.

I would start slowly, you don't want your tenants getting riled up and making a mass exodus. Sometimes people need to be pushed to move. You could have a few tenants on the fence and this may be the push that makes them move out.

Galen Ikonomov · Answer

@Steve Yoder I would add a conservative number to all the rents and market it as (utilities included ). If you are calculating $55 per unit, I would add $65-70 to their rent. It is way easier that way. I have never used the RUBS system. If you have the knowledge and you calculated approximately how much it is, you don't need someone else to tell how much it is.

I am also in Wisconsin and knowledgable of the Tenant/Landlord rules in the state and the law does not state that the utilities have to be covered by the landlord on MF properties. However, make sure you check your city/county laws on that matter.

Good luck!

Marcus Auerbach · Answer

Hi Steve I have seen a number of different approaches to this when we review leases. Some owners bill it back to tenants, usually quarterly. This also encourages using a bit less. From a marketing perspective I would keep it separate from rent.

We charge extra for garage parking, I noticed that when I included it for a higher rent the number of applications went way down, took it out, offered it for an extra $50 - everyone was content with that. Funny how that works.

Taylor L. · Answer

Ratio Utility Billing System, or RUBS, is a common solution. Be sure to check local laws. There are a number of companies who can assist with that.

How can I pass utility costs to the tenants?

How can I pass utility costs to the tenants?

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