How to have tenants pay for oil

3 Replies

We are about to close on out second SFR and it has a relatively new well working oil burner for heat. We have the tenants pay their own utilities but when it comes to getting oil delivered I'm wondering how we should handle that. I think they won't be happy to have to lay out 1500 bucks to fill the tank when the time comes. Also what, if anything can we do about charging for the oil that is currently in the tank that won't be used for a few months. Anyone dealt with this before? Our other house has gas so it's very easy to send the bill and have it taken care of. This is for a student rental by the way not for a family. Thanks for any thoughts.

Not sure if this helps, but if there is already gas service to the property, you can swap out the oil fired burner unit of the current furnace for a gas fired unit.  You will also have to install a chimney liner.  I've done this in a house that did not even have gas service...had it run from the street to the house (no charge) by the local gas utility.

Assuming there's no natural gas available, you can either absorb the oil cost and charge it into the rent or let them take care of it themselves. Whether they are happy about laying out the money makes no difference. Some oil companies will allow customers to be on budget billing, wherein they make up the difference (or get a refund) once per year based on average usage at the location. If that is not an option, you can either figure out how much gets delivered every year, and divide it out monthly and add it to the rent, or tell the tenant to set that much aside every month for winter heating. 

As for what's in the tank already, the only realistic way is to know how big the tank is, when it gets filled whatever shortfall is there (ie the tank is 1,000 gallons and a refill takes 750 gallons, there was 250 in the tank) gets charged to the customer so that they are always paying for the initial 1,000 gallons, or however big your tank is. One caveat - if you weren't already paying for heat, then some other customer already paid for that oil, and it would be unethical for you to collect on money paid by another tenant. If you paid to fill the tank, that's another story altogether. 

Some people don't have a problem with it, they budget for it but it does limit your pool of renters.  Our last rental was oil, we were getting push back on that very problem so we calculated the cost over a year, divided by 12 to get a monthly cost and bumped the rent up that much per month with new ad saying "heat included", got a renter shortly after.  But, next vacancy, we put in a gas furnace for $2900.  For our other property that still has oil and there was oil in the tank, I just had them add, I think it was, $100/mo for 4 or 5 months.

You say it is for student housing, if you have parents consigning, perhaps it won't be a problem, or try the cost average payments.

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