How to split heat and hot water amongst tenants?

Question

I'm used to multifamilies where each unit has its own water heater and furnace. But what If there is a home with only 1 water heater and 1 boiler in a multifamily home, how exactly would one split the bill almost tenants? Metering each unit costs too much money. Could I have bills sent to me, and then every month send each tenant a text message telling them how much to add to their monthly rent? Or perhaps have them pay an extra $50 a month, and then credit them if they overpaid at the end of the year? Or is there a more efficient method to do this? I'd love to hear if you have any pro tips.

Matthew Morrow · Answer

@Darrick Lowe, We just had a situation nearly identical to this- Eastern PA. Single boiler serving a duplex- landlord paid water / natural gas because there's no way to split it accurately.

We added a second high efficiency boiler that also heats water- Brute Combi-boiler, had the HVAC contractor add lines and a new Natural gas service. In our area, the utility company will not allow water / sewer to be placed in tenants name, however natural gas, power, and everything else can be as long as its sub metered. The new boiler, all associated work, and extra items were around 7500 including permits and inspection. A 1-2 day project at most for a good contractor. This allowed us to take the heat and hot water for both units out of the landlord expenses, and into the tenants.

Matthew Morrow · Answer

Awesome! Congrats!

It would be a big job, but you could do it. These combi-boilers are very common and super efficient. Also they remove the need for a chimney and individual water heaters since the exhaust is essentially moisture. our HVAC does most of their work in the city if you want contact info- He's installed 3 for us just this last year lol

In basic terms It would involve:

-Permits / approval

-Additional Meters X 3 (all thru UGI, they coordinate with contractor)

-3 additional units to accommodate each apartment. Existing boiler can still serve one

-Additional Thermostats

-Tenants willing to add Gas to their lease terms. May be a tough pitch but can happen

This is also pending sufficient space exists to add them. Each is about the size of a large plastic container or shopping cart, and they mount right to the wall.
Here is a picture of a recent install. Super clean. And UGI will even give a $1500 rebate / unit with new installation after all the work is done.

Nathan Gesner · Answer

You could split the bill each month and pass it on to the tenants but that's just one more thing to deal with. I prefer including those utilities in the rent.

Let's say you have a four-plex on a shared furnace. The cost to heat the property runs $1,200 a year. Divide that by four and each tenant is responsible for $300 a year or $50 a month. I recommend increasing it 10 - 15% because people have a tendency to squander utilities when they don't see the bill each month. In this case, I would increase the tenant's rent $55 a month to cover the heat costs. Instead of $700 a month rent, they would now pay $755 with heat included.

Dustin Summers · Answer

I have 14 doors. I've built a system where I can drag/drop any bill into a Google Drive folder, and I have some systems set up to split the bill evenly among tenants, automatically bill my tenants, and even send them an email with the breakdown. I have one duplex that shares an electric meter, so I use RUBs to calculate the bill automatically. I have simple-sub ($5.00 a month) meters established at a few of my other duplexes to calculate water usage among my units and automatically calculate/split/bill tenants. Again, all I have to do is download my bill into a folder, and the rest is taken care of.

I'm not a fan of paying utility bills because they eat into your cash flow, and the tenant may not be as "resourceful" with their usage if they aren't getting hit by it. For instance, I've had tenants drive up the electric bill during the winter because they left HVAC window units in, which then meant the heaters were running non-stop. If you are only charging $50.00 a month for specific bills and suddenly get hit by a $500.00 - $1,000.00 bill due to tenant negligence, you have no recourse. In this case, I billed them and then sent my handyman over to figure out why it was so high, and he uncovered the issue, but fortunately I did not have to foot that bill.

Follow your local laws & find a way to sub-meter. You will earn more in the end.

If you want me to assist with setting up something similar to what I have, feel free to reach out :)

John Morgan · Answer

I pay the bills and factor that in their monthly rent. Keep it simple and just charge them an extra $50-$75/month or whatever.

Joe Hammel · Answer

I’ve done both. Sending the bill to me then billing them back is kinda of a pain for me. I prefer just and additional “utility charge” and it’s usually close enough and I prefer that convenience.

For me it’s really not about splitting hairs over $10-$20 a month..I just want things to run smoothly at this point.

Sam C. · Answer

Too much most of the time. Really depends on the units, building skeleton, what is in-between the unit and the placement of the units. EX: studio can have a split system and a water meter with little trouble. A 3 bedroom on the 3rd floor with heat system and running water lines starts in the basement.

Sam C. · Answer

Not sure if you are in PA or NY. But (in either state but not sure about NY)) you cannot split a common utility cost among each unit. Even if the tenants agree, anyone of them can file an action against you. Can be a nightmare. You can install water meters (not city ones) that can monitor the water usage but the record keeping and calculations can be a pain. I do not see how you can monitor the heat/gas use for each tenant with one boiler. Increase the rent for each on a worst case scenario (You know: the tenants that realize that not paying for heat means they can leave the windows open in the winter and not paying for water will never get a leaky faucet reported. Not matter how you do it, if each unit is not utility independent, it will always be a problem in one form.

Anwar H. · Answer

Thanks @Matthew Morrow for the reply.

I just closed on a 4-plex in Allentown, PA, which has single boiler+heating system for all 4 units. If we were to install 3 more high efficiency heaters that also boil water. Will the price be $7.5k*3=$22.5k? I guess that'll be a big upfront expense, to save on $200-300/month savings

How to split heat and hot water amongst tenants?

How to split heat and hot water amongst tenants?

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