Few questions 2 unit - discount for long term & transferring utilities

[Nick S.]

I recently purchased a 2 unit property with one existing tenant (bottom unit) that seems solid and so far pays on time and one that recently moved out (upper unit) on a month to month lease. I pay all utilities. In the new lease, I’ll be asking tenants to pay all utilities (I have $5k electric work to do to split the electric as it’s combined for the entire building).

few questions.

1) in the vacant unit (upper unit), the existing tenant’s family wants to move in. I was originally planning on converting the vacant unit into a short term unit. However the idea of a steady income for the first year+ is appealing. Thoughts on renting both units to essentially the entire family (young couple + mom, dad, brother)? Each unit has separate entrances.

2) I’ll be transferring utilities which I currently pay for. I have to do $5k worth of electric work to split the electric so the tenants will be responsible. However if I end up leasing both units to essentially the entire family, should I still split the electric as it is still split family members?

3) the existing tenant is younger and I’d like to offer a longer term lease discount if they sign a 15-24 month lease AND move into the upper unit as I figured it’s easier to rent the bottom unit. I was thinking around 8-12% discount

Thanks 

[Paul De Luca]

@Nick S.

Are you aware of the requirements for operating a short-term rental in Chicago? If not, I strongly recommend you review rules & regulations for that here. Under "common eligibility criteria" you'll see that in 2-4 unit buildings you can have one active short term rental and it must be your primary residence.

To decide between renting out the upper unit as a long term rental or short term rental, I think you should compare the potential ROI/cash flow for both options. Renting it out as a long term rental should be a lot less work though since you wouldn't need to deal with the STR regulations, no need to furnish, and less turnover. Plus, you've already gone through the effort to split the electric so the tenants could pay that directly. But with STRs, generally the landlord pays for all utilities for the unit. If you go the LTR route, the tenants will pay for their own electric at least.