Utilities

[Aaron Smith]

Hey BP gang,

I'm looking at a 15 unit property in Detroit. The price is decent, as is the rent. However, the landlord pays for everything but electricity. So last year, the utilities came to $17k!!!! Which of course, kills the bottom line. 

If I were to buy this property, how do I go about billing the tenants for water usage? It's a small apartment complex but it doesn't sound like each unit is individually metered. Essentially, I'd be adding $100/mo to their rent. It's not the nicest part of D-town, and it's at 75% capacity. I don't want to chase away the current tenants if I can help it but an additional $17k in expenses is way too much. 

Any thoughts, questions, or comments are greatly appreciated!!!! 

All the best!!!

Aaron

[Michele Fischer]

So when you look on Craigslist for vacancies in the area, is water included in rent or not?  If included, are the rents higher than what is charged at this property?  It's important to understand what the norm is for the area and what true market rent is.

Also, do you know how much it would cost to separately meter?  Do you know if the water utility will put a lien against the property for unpaid amounts?  Mine does, and tenants have left us with hundreds of unpaid bills, so we prefer to keep it in our name.  If it isn't metered we have to keep it in our name and market it at a higher price with water included.

If they are separately metered, we advertise it at the lower price then give the applicant the option of adding water to rent for the average amount or to provide a higher deposit to help offset the unpaid amounts we get stuck with.