Will tenants pay more if you roll costs into the rent?

Question

I saw a few people who recommend to roll the sewer/water bill in the rent costs so theoretically you could charge more rent to absorb that cost.  For  my area that works for heat but it does not seem to matter for anything else. It doesn't seem the tenants even consider if there is no water, sewer , or trash bill which are about half the time separate tenant paid costs in our area. What do other people find can you recover these costs in rent? Are your tenants willing to pay a bit more to have these services included ?

Buddy LaRue · Answer

I never include any utilities in the rents.  I've had too many tenants ask if water, sewer, cable, or electric were included.....my response has always been "The Extended Stay is off exit XX".

Asking for utilities to be included in the rent is a red flag for me.

Jon K. · Answer

YOU will be paying more if you include utilities.

Tenants WILL abuse the utilities you pay for. Leave a sink dripping, turn up the heat in the winter to 85, turn on the AC to 65 in the summer and leave the door open, do laundry every day, let their friends all dump old furniture for your trash service to pick up "free" (for them), and other ridiculousness.

Utility rates will go up, and tenants will complain when you charge more.

Most tenants don't see to realize the real cost of utilities and I wouldn't imagine would want a few hundred in utilities tacked on to rent. Unless they're renting a cheap "bills paid" bedroom.

They want "rent" to sound cheap. They'll forget about utilities and cable costs until they sign up. They probably wouldn't look at your place if it's the price is high enough to include all of that. And if they do, it's because they use a lot of utilities and will abuse your service.

Plus, utility regulation laws aren't something I would want to mess with either.

Never would I want to include utilities. NEVER.

I've done the "rent a room bills paid" thing, and got screwed. Utilities were pricey.

Tenants are incredibly careless with utilities that they don't have to pay a dime for.

Elizabeth Colegrove · Answer

@Colleen F.

I find the opposite with my rentals. My rentals are single family homes in upper class neighborhoods. I find that even $25-$75 makes a difference. I had one house, no call at $1775 and a ton at $1700. I find that people only search up to a certain point. If you are over that point. They won't even see your house. So no, I don't think that including ultilities is a good idea.

Bill Gulley · Answer

Hi Colleen, expenses for fixed costs such as those can certainly be in the rent amounts, and should be, so long as you don't go so far above market that you price yourself into vacancies.

Tenants should get their own utilities unless you can provide them on their own meter.

You can have some extreme problems if you charge for a utility and profit from it, it may be difficult to show which dollars might be profit. The issue is being a utility provider under federal and state law, without the proper licenses, you don't want to be a provider of utilities!

I have never had a property where I had to provide utilities as all were metered, but others have and some got nailed arising out of tenant issues and non-payment, so heads up. :)

Colleen F. · Answer

Those are all interesting ways to manage utilities.  My original question though is will tenants pay more for including them and the sense I am getting is regardless of area no.

@William Shaffer probably said it best   "Tenants shop mostly on price (don't we all) so even if everything is included, if you're above the number they have in mind for rent they won't even look at your place."

@Roy N.  This utility budget is interesting you have a student population like some of my rentals so it might be a promising way to manage trash/water. I have to look into that.

Bill Gulley trusting them to pay is more about trash and the fact that the trash company doesn't pick up if they forget to pay so it isn't about a lien, it is about the neighbors. It gets paid eventually. One group I even went over to tell them to put the trash out after 3 weeks. I also re-educated them on the landlord-tenant relationship.

Aly NA those were the days when for your tax dollar you at least got trash pickup, no more. At home I buy town issued bags, in the SF rentals we contract with a private company much like MF but more expensive.

@Dawn Anastasi I  also prefered not to put water in the tenants name until we got some high consumers now we either pay it and pass through the cost or include it but have an excessive use charge. Water is cheap by us and we have septic so no sewer bill at least until you have to replace the system..

It seems the best thing is to try to cost shift as possible to the tenant because you won't get included items back in the rent.

Colleen F. · Answer

Bill Gulley   we aren't talking  about rolling in actual  bills but rather the cost of service such as trash, water and sewer added as an average to the rent. The market seems to command the same rent if these are included or not.

For one town Water /sewer can be sent to the tenant but if they don't pay it is going against the property.  Trash at $170/quarter you can have them pay but I don't trust them to do it.   When you include these in the rent  you can't seem to get any more rent but if you don't include them its risky. I'm just wondering if other areas are similar. I have used a tenant reimburses me strategy in some cases but it is a pain.

@Buddy LaRue  I like that  extended stay response.  I don't include things if I feel I have a choice because I don't see a markup if I do include them.

@Edward Burns in some cases it is not about increasing rent but about letting them know the value of an included service in comparison to other properties.  I have one property with no sewer, water, or trash bill which to the tenant makes it about $150 less then comparable properties with those bills if you can squeeze $50 more rent you are pushing it. For a lot of reasons I can't send them the bill for those services but I was just trying to get a feel for if other people have found they can command a better rent for included services and if so how.

Deborah Burian · Answer

For our multi-family, water is not metered separately so as we have the opportunity, we are increasing the rents to cover the water. Tenants have been willing to pay a rent premium to cover the water/sewer/trash bill.

I have one SFH that the municipality requires that the water bill stay with the owner and we do the same thing there... got an average bill from the city and increased the rent by that much.

Therese V. · Answer

Where my rental is they do not let tenants put water/sewer in their name. It MUST in the owner of the property's name.

Aly W. · Answer

Something I've read that other landlords do is include a certain amount of the water/sewer (or trash) bill in the rent, and anything over that is billable to the tenant. This seems to work for Section 8 or rental assistance tenants who are given a utility allowance to apply towards rent; i.e., they get $100 towards utilities, and anything more than that, they're responsible for.

This might make them more aware of not wasting water/heat...or it may give them free reign to run a laundry business out of the rental, or keep the place warm enough to grow palm trees - or something else.

Dawn Anastasi · Answer

One exception in my area is that the trash collection includes 1 garbage cart and 1 recycling cart.  You can request more recycling carts at no extra charge (as the city wants to encourage recycling) but if you have more than 1 garbage cart, you pay $52 per year more.  So every time I get a new property, I tell the tenants that they get the 1 cart and if they want another one, I'm going to request $52 paid in advance for the year for that cart.  No one has ever cared that much about their garbage to pay for it.

Will tenants pay more if you roll costs into the rent?

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