Potential properties that pay all utilities?

2 Replies

I'm looking at buying quads here in Phoenix.  Some of the properties I look at note they pay all utilities.  When I run the numbers only paying sewer/water/trash they cash flow well.  Paying everything seems to make them only cash flow at $1k per year. 

My question is are these propertiee red flags in and of themselves?  I know I could buy the property and stop paying for utilities once the lease is up.  I just don't see the need the current landlord would need to pay them.  It makes me wonder if there is some added reason they might not disclose on the listing.

Am I being paranoid, or is this a legitimate concern?

Originally posted by @Bud Dwyer :

I'm looking at buying quads here in Phoenix.  Some of the properties I look at note they pay all utilities.  When I run the numbers only paying sewer/water/trash they cash flow well.  Paying everything seems to make them only cash flow at $1k per year. 

My question is are these propertiee red flags in and of themselves?  I know I could buy the property and stop paying for utilities once the lease is up.  I just don't see the need the current landlord would need to pay them.  It makes me wonder if there is some added reason they might not disclose on the listing.

Am I being paranoid, or is this a legitimate concern?

On the 4 plex building that I own in Phoenix, I pay the water/sewer/trash. The tenants, not having to pay that bill, don't care how much water they use, so they don't call and let my PM know about a leaky faucet or toilet. As a result I got hit hard by water bills in June and July. My bill averages $220 per month in the summer. Well in June my bill was $440, and July it was $336. A few water leaks cost me several hundred dollars. If it wasn't for the fact that none of the other buildings in the neighborhood charge for water, I would get the place sub-metered. 

Imagine a tenant leaving the AC on 60 degrees 24/7, and think about your electric bill. Since they don't pay the bill, they don't care. Normally I will not consider buying a property where the landlord pays all utilities. Now if it was an unbelievable deal, and there was the ability to sub-meter, then I would consider it.

It does set off a red flag for me. I imagine the property being located in a warzone, built in 1948 located in the backyard of an SFR. All the units are probably studios or 1 bedroom with transient types living there.

Funny you mention it, it was all 1b/1ba.  I normally look for 2b/1ba, but this deal caught my eye since it was only $150k, and near Scottsdale.