I am currently looking into a duplex that unfortunately is not separate metered and has electric baseboard heaters. As anyone who lives on Ontario, Canada will know energy costs are now extremely high and it's really cold in the winter! Which brings me to my question, if I was to purchase this property, is there anyway of creating an incentive for the tenants to turn down the heat and use less? Thus lowering my cost of utilities and increasing cash flow :)
I recommend getting separate meters, but I have no idea what that will cost you.
I doubt there is anything you can do short of financial will make a difference. Unless they are things like energy saving appliances and bulbs, better windows, plugging insulation leaks etc...
Its a duplex so even if you have an energy conscious tenant as soon as the other side uses more they will turn the heat up so as not to lose out.
Ask them to pay for utilities, prorated by square footage, or pay for utilities but have a cap, like if total bill exceeds X the tenants are responsible for the overage, or if bill is under X, a rent credit of a certain amount is earned for the following month.
Is everything else separated? Water heaters, laundry, irrigation, outside lighting etc? Metering is an option but if everything is tangled up its hard.
Sam brought up a good point. Large apartment communities often use a system called (RUBS) Ratio Utility Billing Systems. You can develop a formula based on square footage and number of occupants per unit, i.e., the % of the bill paid by a person occupying a one bedroom unit will pay a smaller % of the overall bill as 4 persons occupying a two bedroom apartment.
Here is an article for your review:
Also, if you choose this type of plan, you will need to revise your lease agreement to explain that monies paid are first applied to the utility bill and the remainder is paid for rent. At least in Illinois, we can do this and if needed go to eviction court over unpaid RENT. A renter can try and argue that they have paid the rent and not the utilities; however, your lease will reflect your updated policy. You may want to contact an attorney in Ontario regarding the lease contract.
Before you spend too much effort with apportioning utilities, verify that you are allowed to do this in Ontario.
The best way to address the matter is to get a quote for separating the utilities for the two units and work that into your analysis for acquisition.
Updated about 4 years ago
BTW: Welcome to BP!
I agree with @Roy N. , build the installation of separating utilities into your initial ROI analysis. I would also look at converting the electric heat to forced air natural gas---of course this might not be feasible depending on the age / design / construction of the building but it's worth getting a quote. I recently converted a property from electric to furnace for about $6000 so it could be worthwhile for you.
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