Creative ways to post rent price when utilities are included.
Portland, OR · Member since 2016 · 22 posts · 6 votes
I'm wondering if there is a creative way to list my rent price. Currently the utility prices are included in the rent because I don't have split meters. The problem with this is that it drives up the cost of the rent – even though in reality is is less total costs per month since the utilities are included. I think I am not showing up to the potential tenants that are looking in the same price range as my listing. Is there some way that I can list the rent price differently and still be legal? Currently the cost of rent is $1625 including utilities. Could I advertise it as $1400 with a set $225 utility fee? Or is this dangerous territory in terms of legalities?
I don't know what's legal or not, but I think it sounds like a great idea. You should be able to charge whatever you want for a utility fee. I mean, what if they use more than than $225 for utilities?
But I think it's only fair for you and the potential renter if you post the rent price as rent only, so that you can compete with that market. I see it very often in Seattle that apartments will charge an additional flat $65 or more for w/s/g, and it's posted separate of the rent price.
Or you could spend a few hundred bucks on meters like a professional landlord. And yes, there are specific laws in Oregon about how much you can charge for utilities and how you arrive at that number. It is specifically illegal to profit from utilities. You need to read those laws.
It typically cost thousands to do the meters.
Total nonsense! A water meter, a power meter, and a gas meter all cost less than $100 each. It depends on the house, but a simple duplex or similar is usually VERY easy to meter.
These are the Oregon laws you must follow:
| Subject to the policies of the utility or service provider, a landlord may, except as provided in subsections (2) to (5) of this section, provide for utilities or services to tenants by one or more of the following billing methods:(a) A relationship between the tenant and the utility or service provider in which: (A) The provider provides the utility or service directly to the tenant's space, including any utility or service line, and bills the tenant directly; and (B) The landlord does not act as a provider.(b) A relationship between the landlord, tenant and utility or service provider in which: (A) The provider provides the utility or service to the landlord; (B) The landlord provides the utility or service directly to the tenant's space or to a common area available to the tenant as part of the tenancy; and (C) The landlord: (i) Includes the cost of the utility or service in the tenant's rent; or (ii) Bills the tenant for a utility or service charge separately from the rent in an amount determined by apportioning on a pro rata basis the provider's charge to the landlord as measured by a master meter. (c) A relationship between the landlord, tenant and utility or service provider in which: (A) The provider provides the utility or service to the landlord; (B) The landlord provides the utility or service directly to the tenant's space; and (C) The landlord uses a submeter to measure the utility or service actually provided to the space and bills the tenant for a utility or service charge for the amount provided (Or. Rev. Stat. §90-532). |
| If a written rental agreement so provides, a landlord using the submeter billing method described in ORS 90.532 (1)(c) may require a tenant to pay to the landlord a utility or service charge that has been billed by a utility or service provider to the landlord for utility or service provided directly to the tenant's space as measured by a submeter. A utility or service charge to be assessed to a tenant under this section may consist of (a) The cost of the utility or service provided to the tenant's space and under the tenant's control, as measured by the submeter, at a rate no greater than the average rate billed to the landlord by the utility or service provider, not including any base or service charge; (b) The cost of any sewer service for wastewater as a percentage of the tenant's water charge as measured by a submeter, if the utility or service provider charges the landlord for sewer service as a percentage of water provided; (c) A pro rata portion of the cost of sewer service for storm water and wastewater if the utility or service provider does not charge the landlord for sewer service as a percentage of water provided; (d) A pro rata portion of costs to provide a utility or service to a common area; (e) A pro rata portion of any base or service charge billed to the landlord by the utility or service provider, including but not limited to any tax passed through by the provider; and (f) A pro rata portion of the cost to read water meters and to bill tenants for water if third party service reads the meters and bills tenants for the landlord; and the landlord allows the tenants to inspect the third party's billing records. Except as provided in subsection (2) of this section, the landlord may not bill or collect more money from tenants for utilities or services than the utility or service provider charges the landlord. A utility or service charge to be assessed to a tenant under this section may not include any additional charge, including any costs of the landlord, for the installation or maintenance of the utility or service system or any profit for the landlord (Or. Rev. Stat. §90-536). |
@Account Closed was referring to.
@Jim Ehlinger exactly. The cost of re-plumbing and/or re-wiring all of the units to the correct meters is the real cost. Good luck with that on a few hundred dollars @Account Closed!
We have one property like this, the header on Craigslist is 3 BR 2 BA WITH LOTS OF EXTRAS - $850 INCL WSG and go into more detail in the body of the ad. Rent includes water/sewer/garbage (and electricity, in your case),a value of $130/month.
The OP is considering a $225 utility charge. Even if it costs a couple thousand dollars (10 months of the fee or less than a couple months of rent for this unit) to remeter the unit I would think it would be well worth it to make the unit more marketable to the tenants the poster wishes to attract and avoiding overcharging the tenants for utilities which would be violating the laws. It might only take one complaint from a tenant that the utility charge was excessive (does the unit consume $225 in utilities in May or June?) to trigger a fine or a lawsuit.
@Jim Ehlinger exactly. The cost of re-plumbing and/or re-wiring all of the units to the correct meters is the real cost. Good luck with that on a few hundred dollars @Account Closed!
Where does the OP say that installing meters at HIS specific property would be cost prohibitive? I'm betting he hasn't even considered that idea yet.
Speculation about it costing "thousands of dollars" is ridiculous when you don't even know what house we're talking about. It rarely cost very much to install meters and is the ONLY way a professional landlord would conduct business. Even a few thousand dollars is not much when you consider the cost of doing business, and the cost of owning a house. Anything spent would add to the value of the building should you ever want to sell, the first thing a smart investor looks for in a multi unit building is multiple meters.
You can do it right or you can be a slumlord, which do you want to be?
2BR APT, UTILS INCL. $1639
It's not the rent price that sells, is the deal you offer.
If your price is right and you word your title correctly, you should not lose out on units that have utils included. In fact, many renters like to have all or most utils included as they don't have to worry about paying all those bills separately every month. Some even pay a tad more for the convenience.
It's pretty common in WA to have a separate utility fee.
You can have it fixed or prorate actual costs, or a hybrid model where it is fixed (for bills not to exceed a certain amount) and you would charge an overage if it goes past a certain threshold.
I'm wondering if there is a creative way to list my rent price. Currently the utility prices are included in the rent because I don't have split meters. The problem with this is that it drives up the cost of the rent – even though in reality is is less total costs per month since the utilities are included. I think I am not showing up to the potential tenants that are looking in the same price range as my listing. Is there some way that I can list the rent price differently and still be legal? Currently the cost of rent is $1625 including utilities. Could I advertise it as $1400 with a set $225 utility fee? Or is this dangerous territory in terms of legalities?
Jessica, I rented apartments including utilities in Silicon Valley in CA. I think you should not change your Craigslist ad - and that's what I'm assuming you are referring to. A tenant who is searching for a maximum rental amount.
The reason is, because a good tenant in Portland, shouldn't be cutting it that close to the wire as far as what they can afford. You don't want those tenants, anyway, in my opinion.
So, let's say your rental with $225 utilities included, makes the rent $1225.
Next, let's imagine the tenants who are looking for a unit max $1300. They see your ad for $1225 including utilities, and they think, wow, I could save more money! Let's just go look at it, honey.
Now you've got overqualified tenants who can definitely afford the unit. These are the guys you want, anyway.
If it is affordable, it may be worth sub-metering the building. If you go the route of separating the rent from the utilities fee, what happens if the tenant pays rent but not the utilities one month? That could create an issue in court if you need to evict. And then you are faced with the question of if you are willing to evict over utilities fees? If you are planning to hold the property for the long term, might be a good investment to sub-meter. Might even save money in the long run to avoid such a situation.
Are you implying that every property manager/owner that includes utilities in their rent is a slumlord? or that the only way you are a professional owner is that you must separate out all utilities?
I'm implying that a multi-unit building without multiple meters is the territory of a slumlord. That is not the right way to do it, even if it has worked for you. If a landlord thinks they do not want to spend a few hundred bucks, or even $2000 on meters, they are likely a slumlord. A slumlord is a landlord that only ever puts the bare minimum they have to into their property. And it's always more profitable to have metered utilities than to include unmetered utilities in the rent. It is a proven fact that when utilities are not directly metered then tenants waste them. There are other ways to prevent your pipes from freezing, this has nothing to do with submetering.
The OP never explained what type of property he has, or if he ever considered installing meters or not, or any reason they would be prohibitively expensive. From the sound of his post and the rent price I am guessing he is talking about a duplex, and they are usually very, very easy to add meters to.
If you have individual meters you will make more money monthly on rent, spend less money on utilities, and enjoy owning a building with a higher appraised value. Why wouldn't you install them?
Are you implying that every property manager/owner that includes utilities in their rent is a slumlord? or that the only way you are a professional owner is that you must separate out all utilities?
I'm implying that a multi-unit building without multiple meters is the territory of a slumlord. That is not the right way to do it, even if it has worked for you. If a landlord thinks they do not want to spend a few hundred bucks, or even $2000 on meters, they are likely a slumlord. A slumlord is a landlord that only ever puts the bare minimum they have to into their property. And it's always more profitable to have metered utilities than to include unmetered utilities in the rent. It is a proven fact that when utilities are not directly metered then tenants waste them. There are other ways to prevent your pipes from freezing, this has nothing to do with submetering.
The OP never explained what type of property he has, or if he ever considered installing meters or not, or any reason they would be prohibitively expensive. From the sound of his post and the rent price I am guessing he is talking about a duplex, and they are usually very, very easy to add meters to.
If you have individual meters you will make more money monthly on rent, spend less money on utilities, and enjoy owning a building with a higher appraised value. Why wouldn't you install them?
Ryan, saying a landlord that includes utilities in the rents = slumlord is ridiculous.
The logistics with the utility company would be a royal pain, for starters. Choosing to not have to deal with that, or shut-off utilities is smart, as long as it doesn't affect the bottom line in a way that it's worth the hassle of managing turning on/off utilities, and risking tenants allowing pipes to freeze, etc.
So, how many units are you managing with separate meters? How much time do you spend managing the utility bills, turning on/off utilities, chasing tenants down to take care of turning them on/off, or to pay the bill, or getting bills after they've moved out and you've already returned the deposit? Ever had any pipes freeze because of tenant issues with the utilities?
So, what's your time worth? And what did it cost to deal with the broken pipes?
If your reason for metering is to increase your bottom line, what makes you so different than landlords who choose to include utilities in the rent?
Two sides of the same quarter, me thinks.
Your job as a landlord is to A) maximize monthly cash flow and B) maximize the value of your building. If you do not have meters you have failed at both, and therefore, I put you in the slumlord category, because in most cases it is extremely easy and cheap to install meters.
If for some reason you think you need to keep the utilities in your name that isn't relevant, you can still have meters and use them to determine how much to charge people. In a lot of states it's not legal to charge for any utilities without a meter. In most places however you can charge a reasonable fee for reading the submeter, or, you can even hire somebody to do it if you have a bunch of them. You can also have direct billing with the utility where they take care of all the work.
Even if you think you need to include "free" utilities in your rent for some reason, you need to have a meter to prevent waste. You only include a certain amount of the utility with the rent, not an unmetered, never ending supply. It is a proven fact a tenant will waste unmetered utilities, and this only increases your monthly expenses.
There is no smart argument for not having an individual meter for each tenant. The cost is too small in relation to the savings to be had and the increase in building value. A landlord that doesn't think they need meters is not somebody I can consider a professional. A smart tenant will avoid these properties knowing they will likely be overcharged for utilities. It's a bad way to run your business, no doubt about it.
And, since you asked about me personally, I make several hundred dollars every month in profit (legally) by submetering industrial utilities and charging my own rates that are higher than what the utility charges. More than some people rent entire units for.
Another option I've heard about (but don't have experience with) is the RUBS system. I think it stands for Ratio Utility Billing System. My basic understanding is that you charge the tenants each month based on the ratio of their unit's square footage to the total square footage of the property.
I would give credit to the BP member who I saw this from but I can't remember.
For an easy example, consider a tirplex with identically sized units. Each unit would be billed for 33.33% of the total utility bill.
This system does not totally prevent waste but it does cut down on waste more so than just estimating an average utility cost and including that with the rent. It will also allow the OP to advertise the units at market rent without the amount seeming inflated.
@Account Closed has that the only way to make money is to make the tenants pay their own utilities. Well, I am glad that I looked at this property and bought it. I have an 11.37% Cap rate, and a 24% ROI and a solid 1.77 towards the 1% or 2% rule for whichever you follow. The numbers speak to themselves and the tenants do not abuse the utilities. Even as a precaution, the thermostats for the heat are programmed not to exceed certain temperatures, so that is controlled to an extent as well. While I also believe as Ryan does in maximizing profit and cash flow, my objective is to also create a property where the tenants are safe, happy, and willing to stay long term. Which seems to be working as one of tenants has been there for 12 years paying ontime every month...
Ryan, your quote of "And, since you asked about me personally, I make several hundred dollars every month in profit (legally) by sub-metering industrial utilities and charging my own rates that are higher than what the utility charges. More than some people rent entire units for" is where you are clearly in this to only make a profit regardless of anything else. Uslegal.com describes a slumlord as "A slumlord is an unscrupulous landlord who milks a property without concern for tenants, neighborhoods or their own long term interests."
There is nothing about a slumlord that has anything to do with what you are trying to explain. To me, your own words appear to show you are milking your tenants thru their utilities payments for as much as you can get..... I may be wrong, but that is what it sounds like.
I have an 11.37% Cap rate, and a 24% ROI and a solid 1.77 towards the 1% or 2% rule for whichever you follow. The numbers speak to themselves and the tenants do not abuse the utilities.
No matter how good you think you are doing, you would be making more money if you had individual meters. This is an absolute fact and you have no proof to show otherwise. The reason you probably got a good deal on the property is because multi unit buildings without meters are not worth as much and do not appraise for as much. You won't get as much when it comes time to sell and you can't borrow as much if you ever get an appraisal. These are the buildings newbies usually buy not realizing why they are so cheap.
You say tenants do not abuse utilities but if they had their own meter the usage of each person would go down. That means even if you still included utilities into the rent your expenses would go down. Even a well meaning tenant will waste extra when they are not on the hook for the bill. It has been proven over and over again.
If meters are so bad and expensive, I guess it's weird then that the majority of rental properties have them. *sigh*
Your assumptions about me are entirely wrong. You clearly don't understand the difference between residential and industrial property. And yes, I do CHARGE my tenants for absolutely everything, that's what I am in the business of doing. This is not a charity. They are aware of the utility price before they sign up. I also reinvest in the building to make the building worth the high rents and fees I charge, that's why I'm not a slumlord. If I didn't even bother to install meters I would be.
Let's say the tenant in "unit B" decides for whatever reason, he doesn't like the landlord. His goal is to charge the landlord as much money as possible, and for whatever reason you either can't evict him, or must wait at least 60 days. Not an uncommon scenario in a rental, even for the most well meaning landlord. If the tenant in unit B simply turns the hot water on and lets it run on full from every faucet for the next 60 days who is going to pay for it? You are.
@Account Closed
Thank you for your insight. I definitely agree that there are unscrupulous tenants who will try to milk you for everything and drive your utility bills thru the roof, but my feeling is that those are fewer and far between the ones that will still turn lights off when they leave a room. My unit was built in the mid 1800's and while it has two electric meters, it only has 1 furnace and gas meter in, and only 1 water/sewer meter.... so splitting my unit up for those two would be costly for me and it would take more than a few years to recoup my expenses. This property has been managed for over 30 years this way and it was just one of over 80+ doors that the previous owners managed. I have walked several of their properties, and they are definitely not slumlords. This method worked very well for them. Will I keep it the exact way going forward or convert to separate utilities? I don't know, only time will tell.
While you are correct, I do not invest in Industrial property nor do I claim to have any experience or insight into that, at no time did you differentiate between your opinions are for Ind. properties versus residential. Also, I never said separate meters were bad or good. I just said that every property and every situation was different. In most cases, yes, separate meters and bills make sense, others, it could be a big expense up front and only a marginal return of investment to convert and would or could take years to recoup those costs.
I fully understand your opinion and the points you make, I just believe there are other options for every situation, but that is what makes each investor different. There are dozens of different ways to run a successful property and everyone is going to manage their own properties based on what they feel is the best way...
I, and I am sure that many other investors who follow the forums here would not appreciate being called a slum lord just because their properties don't have separate meters or they include utilities into the rent for convenience... I think that your opinion is yours and you are entitled to it. But, I just ask that you treat others with a little bit of respect because they choose to manage their properties differently than what you think is the only way a "professional investor" should invest...
This has been an enlightening conversation to say the least and has given me thought for the future of my investing career...
I've been following the thread and it brings up more questions for me. @Ryan Roberts mentions that it may only be hundreds of dollars vs thousands to have separate meters for the property. I looked into this on my property. It is just a house and a converted garage. The cost to have separate meters was in the thousands. And it would entail ripping up the driveway. Particularly the water meter. Is there another way to install separate meters that I am unaware of? Is sub metering something different? If so, who do you reach out to for estimates on installing sub meters.
And PS, I am not a slumlord. I really care about my tenants. I am mostly on this forum to learn from all of you experts.
Hello Jessica, Thanks for the feedback, While I live in NH, our water meter is in the basement and it is read remotely, so no one has to come into the basement. But your comment made me think about my mom's house in Texas and her water meter is out by the street, so the meter readers open up a small cover at the street, read the meter, then close it and move on. So if I were to split her house into separate lines, I would have to do the same thing you are describing. So there is no cheap or easy way to put a second meter at the street and dig up the lawn to lay all new pipe and then re-pipe the house for the separate lines. All of which is pretty expensive and would take years to recoup the costs. Which is why I have repeated that every house and property is different, some times you can split the meters and others you can't... and if you can't, it doesn't make you a "slumlord".
I am by no means an expert and I am doing the same as you, reading posts and trying to learn from other people's experience and opinions, whether I agree with them or not... it is all part of the learning process.