Jamesville, NY · Member since 2015 · 55 posts · 34 votes
I have a duplex (I live in half) with completely separate utilities and fuel oil furnaces. I'm tying to figure out the best system for my tenant to pay for his fuel usage. The way I see it I have two options:
1) Work with the oil provider myself and then bill the tenant. This seems like the best way to ensure the tank stays full, but it is also extra work on my part, and then it becomes my responsibility to check my tenant's oil level and call when needed.
2) Have the tenant deal directly with the oil provider and be billed by them. The tenant would be responsible for seeing when they needed it and paying the oil company, and I'm out of the equation. This is the simpler, easier method but what's to prevent the tenant from using their last month of oil, not having it filled, and then leaving it for me or the next tenant to deal with? I know I'm not likely to see any money come after a tenant has moved out.
How do you guys normally handle something like this?
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
@Allen Clark Thanks for the advice. I hadn't thought of prorating based on their usage. Its obviously tough to predict the weather, but how close do you think I'd need to be? I'd probably plan on evening up when I return the security deposit.
Funny you mention natural gas, I'm actually having a line put in next week to hook my furnace into. Unfortunately I can't convert the existing furnace to natural gas, but once that's reached the end of its life I will be converting.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
10y
Dip the tank when the tenant moves in , measure the inches in the tank , you can find a chart online that converts the inches to gallons . Charge them for the oil in the tank . When they move out , dip the tank figure out how many gallons in the tank , reimburse them for whats there .
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
10y
I would choose option 2. After they vacate, the next tenant could also deal with setting up service. Why does it matter if the tank is empty or not? I would assume they would want to use up the oil before they left since they paid for it.
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
@Jassem A. I think the problem is they haven't paid for everything in the tank, since it will be at least partially full when they move in, unless I do what @Matthew Paul is proposing and measure it when the unit turns over. That's something I could consider doing - charge them for what's in the tank when they move in, have them deal directly with the oil company while they live there, and then reimburse them whats left when the move.
Thanks @Al Williamson, I agree with getting myself out of the equation. The goal is to set up systems so the business works for me, not the other way around, and to have everyone be responsible for themselves.
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
10y
@Account Closed
I would personally feel like I am nickel and diming them if I were to charge them for the oil that was already in the tank. If it were a big enough concern for you, I would transfer the oil from the rental tank to your tank before move in or after move out.
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
@Jassem A. Yeah, I see what you mean. That's another reason why I'd like to find a way to not have it be my responsibility - they just pay for what they use, but I'm protected from being ripped off.
Rental Property Investor · Allentown, PA · Member since 2016 · 33 posts · 18 votes
10y
I would treat it like a rental... I would go with option 2 with a twist. It's up to them to set up and pay for and it's also up to them to make sure it's full when they move out. (You will be responsible for the initial fill up). You'll then add it to your move out check list and charge them for whatever it takes to fill if it's not full and deduct from deposit and give them the bill with the remainder (if there is any left). Just make sure it's in your lease that it has to be full and add to move out inspection.
Rental Property Investor · Allentown, PA · Member since 2016 · 33 posts · 18 votes
10y
When I said rental I meant car rental... Bring it back in what it was when you got it or be charged xx.. You can even add a service charge for your time
Real Estate Agent · Berlin, MA · Member since 2013 · 130 posts · 95 votes
10y
Check the laws/codes as well on what you're required to do as far as reimbursing them when they leave, if a tenant wanted to push you they probably could. Easiest hands free option is to have tenants pay their own utilities. If they run the tank dry and it causes damage have a lease clause that makes it their financial responsibility to maintain oil and repair/prime when run dry. They may not pay, but record it for security deposit deductions. Between tenant move ins/outs it's the owners responsibility to keep the heat on to protect the pipes etc. I call all utility companies before I hand over keys at move in to confirm they turned utilities on and I'm no longer paying them come move in date. If I was a tenant and paid $900 for oil in March and then moved out in May I'd want a refund.
If you can convert to natural gas then I recommend you do it, don't wait, take the expense hit if you can. It gives you peace of mind and improves your marketability for the unit. South of Boston we can get high efficiency FHW units installed for much less than the "new heating systems will sink you $10k and wipe you out" scare tactic excuse people use for not investing, not sure how that cost translates to NY. We converted our final units to gas prior to this year and let me tell you, what a peaceful heating season....We used a 0% energy company subsidized loan for it too, 3 new HE units, so it was very manageable; you may have access to a similar program.
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
Now there's an idea @Jason Clinton. A car rental is a good analogy, I knew there had to be a similar business model out there. I gave it to them full and I need it back full, everything in between is up to them. Having it in the lease and adding it to the move out inspection are the keys I was missing. There's still the risk that the tank will need more than their deposit will cover and they'll disappear but I guess that's always the risk with tenants.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
10y
Think about how you would do it when you're no longer living in the property. Then do that. When possible - tenants should have completely separate equipment and billing.
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
@Michael Totman Thanks for the detailed response. I'll definitely check local laws but I agree, the easiest option is to have the tenants pay their own utilities, and they are responsible for the consequences of not maintaining it.
I'd love to switch to natural gas ASAP, but I guess I have been believing the "you'll take a 10k hit" scare tactics. I was forced to get a new furnace for my unit this past winter when it literally caught fire in the middle of the night on a Saturday in the coldest week in February. We decided to switch to natural gas after that, so we're having a line put in now. Unfortunately the furnace in the 2nd unit can't be converted from oil so we would need a new one.
I'll have to do some research about those company subsidized programs. Can you give me any more information about that?
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
@Jason Clinton By the way, I see you're in Allentown. I'm going to be down near your neck of the woods in a couple weeks for a wedding in the Scranton/Wilkes-Barre area. How's the real estate climate out there?
I would choose option 2. After they vacate, the next tenant could also deal with setting up service. Why does it matter if the tank is empty or not? I would assume they would want to use up the oil before they left since they paid for it.
It doesn't matter in Virginia, but it does definitely matter in the North. Empty fuel tanks mean frozen pipes. And if the heating system is baseboard hot water with a boiler, it's an ungodly disaster.
This is a normal circumstance when selling houses with oil heat, which are common in the North. Or when renting. You make a decision: either measure the tank when tenants come and go, and charge them for it, or credit the departing tenant, or always have the tenant fill the tank when they leave, and charge the new tenant for a full tank. It's not nickel and diming them: When fuel is $4.00 per gallon or thereabouts, and a tank is 275 gallons, that's $1100.
Charging for a full tank is difficult for a new tenant moving in however, because adding the cost of the fuel to the first month's rent and deposit adds up to a lot of money.
Either way, whatever you decide, they are responsible for all utilities, and for paying for them, and you give them credit when they leave with oil in the tank. Always be sure to check fuel levels if you have a tenant leave in mid winter. Don't wait even a day. And if they leave and you don't know that they are leaving, you can bet the tank will be empty.
Real Estate Agent · Berlin, MA · Member since 2013 · 130 posts · 95 votes
10y
@Adam Bruce, the program we have is called MassSave, it will be something else for you, but ask the utility. Here utility customers are paying an amount on the bill toward this program that utilities run with the blessing of the state. Utility customers can then request an energy audit and receive a report on ways to increase energy efficiency. For major projects they offer a 0%, 0 down loan that you apply for with a local bank. The rest works like a rehab loan with disbursements etc. I have buildings where I have used the loan and some in towns with municipal utility companies that don't apply, but with all the rebates involved I was able to replace 3 fwh oil boilers with new he gas for less than or right at the cost of the oil to gas conversion units because there was no chimney/flu work required. I have national grid and Columbia gas that I did this with, they are multi state companies so check with them.
Investor · St Petersburg, FL · Member since 2014 · 231 posts · 221 votes
10y
all my tenants arrange for their own utilities. Some of the utility companies have programs for landlords to easily switch the account back to the owner's account during vacancies. Other than that, it's on the tenant. I don't have any properties on oil, but I don't see why it should be any different based on the fuel source.
Virginia Beach, VA · Member since 2016 · 44 posts · 20 votes
10y
As someone who has rented a house with an oil tank in VA (many years ago in college), we moved in with a full tank and were required to move out with a full tank. We were not charged for the full tank upon move in like @Ann Bellamy suggested - that would be double dipping as we paid for what we used by leaving it with a full tank. Repairs were left to the owner, unless they were related to running the tank dry.
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
10y
Yes, you're right, @Brandon Shewbridge, if you get a full tank and don't pay for it, you must pay for a full tank when you leave. I think I misspoke when I wrote the above, no need for double dipping. I have one of my units on that arrangement. The challenge with that is that if they move and leave it empty, the security deposit may not cover the cost of the fuel. I have other units where they pay for whatever is in the tank when they move, and get credit for whatever is there when they leave.
Real Estate Investor · Unionville, CT · Member since 2016 · 260 posts · 167 votes
10y
My tenants always pay for their own oil. One tenant left the tank almost empty when they left- I filled it to the cost of $600. The new tenant paid me monthly installments on that oil bill until it was paid off and ran low enough for them to start calling for deliveries on their own. The oil companies have payment plans to reduce giant oil bills. If they move out then they can get an oil reading from the company and I can buy what is left in the tank and do it all over again with the next tenant.
Jamesville, NY · Member since 2015 · 55 posts · 34 votes
10y
@Michael Totman Thanks for the information. I have National Grid now, they're running the natural gas line already, so I'll ask them about it.
@Ann Bellamy The system is forced hot air, but empty fuel tanks and frozen pipes are still a problem, so I would definitely be heating it if a tenant moves out in January. If you are using several methods, which would you recommend? Do you have problems with tenants leaving without filling the tank, or on the other hand, not being able to put the money up front to pay for a full tank they haven't used yet?
@Brandon ShewbridgeThanks, it's good to hear that this is a common way to do it. That seems like the smoothest system.