Increase rent by $100 or charge $100 for internet?

Question

Hello BP. Need some direction, please. I'm getting ready to enter into a lease for a detached ADU and I'm wondering if I should increase the rent by $100 OR leave the rent as is and charge $100 per month separately for internet. The incoming tenant will agree to either option but I need to figure out what is best for me from a tax and future income perspective. Thoughts? Thank you, Chris

Chris Sanchez · Answer

@Scott Mac Thank you for the reply. My internet provider only allows one account per address so I have to get another line installed in the ADU. Fortunately, it will not cost me anything. I'll just have to pay for the extra service.

Nope. Not marking it up. Just want to get reimbursed for it.

Based on the comments from @Chris Seveney and @Bill Brandt I'll just increase the rent and make it easier on myself. Chris

Chris Seveney · Answer

This should not matter for tax purposes, either case its income. I would add it as rent vs. internet because if internet goes down then I would request a credit against it.

Scott Mac · Answer

Why can't they get it themselves, in their own name?

Are you marking it up double or something?

Karl B. · Answer

One bonus about you paying the internet and owning the equipment is you can more easily add security cameras and/or a security system to the router/modem as the tenant won't be taking the modem/router when they move out as you will be owning that equipment.

Chris Sanchez · Answer

@Bill Brandt 2 more excellent points. Thank you sir. Chris

Bill B. · Answer

Another vote for rent. 2 more reasons. 1) They decide they don’t want internet, get it free from work, see it advertised everywhere for $50, or your version isn’t fast enough, so no longer pay for it. 2) you suddenly become subject to rent increase caps and you’ve set the rent below market forever.

Karl B. · Answer

That's illegal. I suggest you work on those reading comprehension skills.

Mary Oz · Answer

Am I reading this right - you would add security cameras to monitor a tenant inside their home?

Chris Sanchez · Answer

@Karl B. Thank you. Great point. It makes sense to just have the modem in place and create a separate network for the ADU. When the next tenant moves in, I won't have to deal with this all over again. Chris

Increase rent by $100 or charge $100 for internet?

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