Utilities and maintenance

[Faustin Hoover]

Two questions. If you were looking at a multi family and the current owner pays utilities how do you go about dividing them at least electric? Also if 2 units have a boardwalk to get out of their unit and the other has a small porch are you responsible for snow removal/ice. Here in ohio we have crazy winter weather so just curious. Thanks in advance.

[Evan Polaski]

@Faustin Hoover, splitting utilities can either be done by installing true submeters, or even calling utility to truly split them, or by running a RUBS type system, and effectively calculating estimated useage of each tenant and billing back.  I.e. if all units are same size, you could simply divide bill by number of units and bill back to tenants.  If you have 1 and 2 bed units, you would typically divide bill by number of bedrooms, and multiply back the number in each unit.

As for snow, personally, I always had tenants take care of any individual use areas, i.e. a small porch that directly access to only one unit, the tenant needs to shovel and salt that area.  Common areas, i.e. your boardwalk that accesses two units, I would take care of.  But I also know people that have say a duplex or quad and they make the tenants take care of the common walks, as well.  Again, it needs to be spelled out in the lease.

And with both of these, while I am in Ohio, as well, I would still check with a local attorney to confirm everything is legal.

[Andrew Bosco]

I would get some quotes on cost of splitting utilities. There are many variables in terms of affordability pending the set-up. 

Check local laws for snow removal. I'm in NH and I offer to plow for one property but not another due to the space being less for plow making sure. 

[Evan Polaski]

@Faustin Hoover, splitting utilities can either be done by installing true submeters, or even calling utility to truly split them, or by running a RUBS type system, and effectively calculating estimated useage of each tenant and billing back.  I.e. if all units are same size, you could simply divide bill by number of units and bill back to tenants.  If you have 1 and 2 bed units, you would typically divide bill by number of bedrooms, and multiply back the number in each unit.

As for snow, personally, I always had tenants take care of any individual use areas, i.e. a small porch that directly access to only one unit, the tenant needs to shovel and salt that area.  Common areas, i.e. your boardwalk that accesses two units, I would take care of.  But I also know people that have say a duplex or quad and they make the tenants take care of the common walks, as well.  Again, it needs to be spelled out in the lease.

And with both of these, while I am in Ohio, as well, I would still check with a local attorney to confirm everything is legal.

[Eliott Elias]

In terms of utilities, you are going to have to be competitive with your competition. If everyone else is billing utilities to the landlord, why would tenants rent from you? If this is not a norm, add separate meters to each unit. This can get costly.

[Remington Lyman]

Quote from @Faustin Hoover:

Two questions. If you were looking at a multi family and the current owner pays utilities how do you go about dividing them at least electric? Also if 2 units have a boardwalk to get out of their unit and the other has a small porch are you responsible for snow removal/ice. Here in ohio we have crazy winter weather so just curious. Thanks in advance.

 I do not provide snow or ice removal but I provide a bucket of salt for my tenants

[Mason Weiss]

I would run a RUBS system for utilities. This might be difficult to implement if tenants are already in place and not paying for utilities, but next turnover I would start charging in this manner.

[Faustin Hoover]

Thank you. I know most rentals in the area the tenants pay for utilities. It doesn't allow for much cash flow as is that's why I was curious. Not sure what the RUBS system is.

[Mason Weiss]

RUBS is charging your tenants a set amount each month for utilities to help cover those expenses.

[John Sayers]

Quote from @Faustin Hoover:

Thank you. I know most rentals in the area the tenants pay for utilities. It doesn't allow for much cash flow as is that's why I was curious. Not sure what the RUBS system is.

Ratio Utility Billing System.
A way landlords can bill back portions of utilities to tenants. Search online for more. Before implementing this system, check with the regulations of your state regarding utility companies to make sure you are allowed and, if so, what limits might exist on the amounts you can bill back to tenants etc. Consult with someone that does it and/or with one of the third-party billing companies that do it.

[Jay Chang]

Hi there! Entering the realm of real estate investment is an exciting prospect! You should exercise caution when purchasing a multi-family property where the present owner pays for utilities, particularly electricity. Examine the current lease agreements first. Do renters have to pay for any utilities? If not, you'll have to account for these costs when determining how much you could invest.

Let's now discuss how to divide those electricity expenses. Installing individual meters for each unit and letting tenants handle their own consumption might be one strategy. Although there may be an initial cost, there may be long-term benefits.

If installing separate meters isn't an option, you might want to think about using a ratio utility billing system (RUBS). This entails allocating the entire cost among the units according to variables such as occupancy or square footage.

Do your homework, though, before deciding on anything. Compile the figures, try to speak with the current tenants, and perhaps seek advice from a local real estate specialist. Making wise decisions and being well-informed are the keys to beginning your investing adventure. Wishing you luck on your thrilling endeavor!