Best way to bill a tenant for fuel oil?

Question

I'm a complete newbie to landlording. I just rented out half of my two unit two months ago (I'm living in the other unit).  The units are on separate utilities, each with its own fuel oil furnace. I just replaced my furnace and in doing so I switched to natural gas since it will be a lot cheaper to run.

Now that I've done that I have a couple hundred gallons of oil sitting in my basement not hooked up to a furnace.  I was thinking I could pump it over to the other unit and fill that tank up pretty easily. Now the question I have is, what's the proper way to charge the tenant for that oil?

Eventually the oil supplier will come periodically, fill up the tank, charge the tenant directly, and I'll be out of the picture, but since I've already paid for the oil in my tank I would want to charge the tenant for what he's using.

Any advice on the subject would be appreciated.

Account Closed · Answer

@Mike Gannon @Max Tanenbaum

Thanks for the response. The tanks do have gauges, and I was originally planning on using that to determine about how much is there and pumping it over. The problem is they aren't very accurate. You get an idea of how much is there within maybe 20 gallons, but i don't know that its accurate enough to charge the tenant that way.

I actually tested using buckets to transfer it, but frankly that was a little too tedious and time consuming for my liking haha.

I think I've found a win-win situation here though. I spoke with my oil supplier (who unfortunately doesn't want to buy the oil off me) and he's willing to use his equipment to pump the oil from one tank to the other. Since the unused tank is in decent condition, he can resell it to another client and he'll take that as payment.  That way I can make some money back by charging the tenant for what's pumped into his tank, I get the huge tank taken out of my basement, and no money comes out of my pocket

Mike Gannon · Answer

Sounds like a win!

Ralph R. · Answer

Account Closed  get the truck ready. But bring it up this summer and we can fill  it up with salmon and we will call it even😄

Nicholas W. · Answer

This is an interesting problem you have here. I would think the best and cleanest way to do this would be to ask if the supplier will credit back unused oil. Naturally they won't give you a full credit but something is better than nothing. Unless you have a way to definitively confirm the amount I think you'd have a hard time just billing the tenant. The first thing I'd try is to approach the tenant and ask if s/he'd like to buy the oil from you and settle on a rate which will be mildly to severely discounted before you sell if back to the supplier. You're going to take a loss, no doubt about it, but I don't see why a reasonable tenant wouldn't be willing to pay you 50-75 cents on the dollar for something he's going to have to purchase anyhow.

Account Closed · Answer

Ryan R. Huh, I never would have thought of the incentive idea. That would help get it rented quickly in the winter months. Maybe I'll just keep it as a reserve for now in case I need to play that card.

Account Closed · Answer

Putting it up on Craigslist might be an option, I'll have to look into that. I'll see if I can find others selling in my area

Account Closed · Answer

Haha I'll load up my truck now, I'll be to Alaska by Monday. I think in order to avoid the trouble of selling it, buying it, and selling it again I would fill the tank up now. Since the tank was full when he moved in I would just be charging him for what he's used thus far (assuming I could accurately measure what I'm tranferring). He hasn't purchased any of what is in the tank now

Account Closed · Answer

Thanks for the responses guys.

@John Zoulis Ideally the tenant would have an account directly with the vendor, that way I'm not involved at all and it's the tenant's responsibility. I'm just not sure what to do with the oil currently left over in my unused tank.

Nicholas W. said, my biggest hurdle is measuring the amount being transferred.

I guess my first step is discussing it with the tenant.

Account Closed · Answer

I like that idea, you could save it to "give" to a tenant, either now or later, as some sort of incentive.

You could also post a for sale ad on craigslist. Back when fuel oil was $4/gallon I would see a bunch of adds from people offering to come empty your fuel oil tank, and give about 50% of retail cost. Not sure how much the fuel company offered you. Might not be as popular on craigslist now that fuel prices have gone down.

Account Closed · Answer

At a minimum, you will have to invest in a meter to measure the oil dispensed. Even just a few gallons. That will likely cost as much or more than the oil you have...especially where prices are at right now.

And really, until diesel goes back over $2/gallon, natural gas isn't really much savings either.

Best way to bill a tenant for fuel oil?

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