Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
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 ?
Involved In Real Estate · Palm Springs, CA · Member since 2011 · 144 posts · 78 votes
12y
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.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
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. :)
Rockford, IL · Member since 2013 · 330 posts · 62 votes
12y
If you (the landlord) is paying those bills they are already rolled over into the rent. If the rates for those services go up, then raising the rent to cover the increase is justified. Just be sure to include a brief explaination with your notice of rent increase. IE. Unfortunately the city has water and sewer costs forcing us to raise the monthly rent by $10/month. We hope you understand and will continue as a tenant at XXXX. (blame the increase on the someone else, the government, big business, etc.)
Involved In Real Estate · Palm Springs, CA · Member since 2011 · 144 posts · 78 votes
12y
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.
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
In my area I've seen both ways. I actually prefer to not put the water/sewer on the tenant and pay it myself to make sure it gets done and doesn't get liened on the property (one less thing for the tenant to take care of). I've done once where I lowered the rent and had the tenant pay the water/sewer/garbage. The tenant eventually paid everything, but they were slow on those bills, even though they paid me on time. So it was a hassle for me.
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
12y
@Buddy LaRue is my guy. It sort of depends on your market tenant but I would offer this observation. 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. My goal is to keep the rent price as low as possible to get the most qualified applicants. Utilities are extras. I also upsell an number of other extras (pets, yard care and washer and dryer). I consider including utilities in the asking price like including sales tax in the asking price for cloths or other retail items. Everyone knows it's there but it varies (depending on where you buy). It gets added on at the end.
I know some buildings include heat but only because they have no way to bill the tenants individually. Lienable items like water and sewer, I still make tenants pay. In 12 years of land lording I've never been stuck with a bill and just think of the amount of money I have saved over the years. I do get copies of the bills each month so I can see if they get behind and give them a gentle nudge if need be. It only makes sense if you are paying for something that you will be a little more thrifty with it.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
12y
@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.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
I see the "trusting them to pay it" as part of my due diligence in leasing to them, if I can trust them to pay expenses in their name that can become a lien on my property, I don't lease to them, it's a credit issue. Otherwise, you can continue with them reimbursing you, the pain is just part of it to avoid issues later on.
No one can be a landlord on a risk free basis, all you can do is manage the risks through your operations. Sorry if I misunderstood, and forgot, I did pay water at one property as we had a coin op washer dryer there, separate elect. , it covered the water bill +. :)
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
12y
All,
We have a midway position between "all dressed" and "tenant takes utilities in their name" which we refer to as our "Utilities Budget".
Our Utilities Budget allows the utilities such as water/sewer, gas, electrical, etc. to remain in our name {for the reasons @Dawn Anastasi raises above}, but has the client assume responsibility for their utility consumption.
We execute the Utilities Budget in a separate agreement to the lease itself (but it exists as a schedule to the lease). The Budget details which utilities shall be taken over by the tenant in their name and which shall remain in the name of the Landlord. It also establishes an amount that is payed monthly into the Utilities fund to cover those utilities held in the landlords name.
We provide the tenant with a copy of all bills for the utilities in our name so they have visibility into their consumption the same as they would if they held them in their own name.
Every quarter (3-months) we reconcile the amount paid into the fund with the actual cost of the utilities consumed. If there is a surplus we give the tenant the choice of: a) leaving the surplus in the fund {always our recommendation this time of year with winter heating bills approaching}; b) apply the surplus towards their next months rent; or c) refund the surplus to the tenant {this option is only available at the end of the lease term}. If there is a deficit, the tenant is billed for the shortfall. {A deficit has only occurred twice; we typically set the monthly budget amount to ensure there is never a deficit, but twice we have had tenants surprise us with their resource consumption}
We have been using this approach for 2-years with success {especially amongst our student tenants}.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
12y
In our SFR rentals, we insist the water/sewer bill be in the tenant's name when they sign the lease. The reason is that if the tenant doesn't pay it, the city has the right to shut them off. If those utilities are in my name as the landlord, I have to pay them, no matter if the tenant refuses to reimburse me. I cannot shut them off if they're in my own name.
The lease states that not paying the utilities is like not paying rent. So if they don't pay, we can start an eviction...or wait for the city to shut them off. Either way is long and expensive. Of course, if they move out and don't pay it, we get stuck with it anyway. It's lienable.
In our SFR rentals, we insist the water/sewer bill be in the tenant's name when they sign the lease. The reason is that if the tenant doesn't pay it, the city has the right to shut them off. If those utilities are in my name as the landlord, I have to pay them, no matter if the tenant refuses to reimburse me. I cannot shut them off if they're in my own name.
The lease states that not paying the utilities is like not paying rent. So if they don't pay, we can start an eviction...or wait for the city to shut them off. Either way is long and expensive. Of course, if they move out and don't pay it, we get stuck with it anyway. It's lienable.
Trash removal is included in our property taxes.
Sometimes things are different in different states. For example, in WI, trash removal is separate and included with the water/sewer/plowing
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
12y
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.
@Bill S. 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 W. 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.
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
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.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
12y
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.
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.
Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
12y
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.
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.