List apartment with utilities included or not?

Question

We have a duplex that has shared utilities, so we are not able to have the tenants put the different bills in their names.  In this case, do people typically list the ad with the base rent (so that it's competitive with other similar sized units in the market) and put the full rent amount with utilities included in the ad description? Or do you list the full amount with utilities included up front?

Account Closed · Answer

@Tyler Brown You could bill the tenants for their usage specific to a known factor (square footage, occupants, etc). I've previously listed in another post some of the methods that utility management companies use to determine how much of the bill goes where. I've copied it below:

Common equations to determine utility billing:

Ratio based on Square footage: = Bill total * (Unit Square Footage / Total Square footage)

Example: Unit 1 has 1000 Sqft, Unit 2 has 500 sqft. Water bill for the month is $100.Unit 1: $100 * (1000 sqft /1500 sqft) = $66.67Unit 2: $100 * (500 sqft/1500 sqft) = $33.33

Ratio based on Number of occupants: = Bill Total * (Number of Occupants in Unit / Total Number of Occupants)

Example: Unit 1 has 2 tenants, Unit 2 has 3 tenants. Water bill for the month is $100.Unit 1: $100 * (2 tenants / 5 tenants) = $40.00Unit 2: $100 * (3 tenants / 5 tenants) = $60.00

Ratio based on half square footage, half occupants (50/50 method): = (Utility bill * 1/2)*( Unit Tenants / Total Tenants) + (Utility Bill * 1/2)*(Unit Sqft / Total Sqft)

Example: Unit 1 has 2 tenants, 1000 sqft. Unit 2 has 3 tenants, 500 sqft. Water bill for the month is $100.Unit 1: ($100 * 1/2) * (2 tenants / 5 tenants) + ($100 * 1/2) * (1000 sqft / 1500 sqft) = $63.33Unit 2: ($100 * 1/2) * (3 tenants / 5 tenants) + ($100 * 1/2) * (500 sqft / 1500 sqft) = $36.67

This third method is much more complex to do, but a simple Excel spreadsheet can help alleviate the headache of doing this monthly.

There are other ones you can do, like bathroom total ratios, dishwasher vs no dishwasher / washing machine vs no washing machine if the units differ.

In the end, you recoup the full cost of the utility bills and bill it as rent + Utility usage (variable) (Check with local landlord laws to determine if you are able to do this).

A majority of the time with a single family  residence the utility company won't  install a second meter to service your property. But, because you have a duplex, it's not unheard-of for utility companies to have a second meter to be installed at the property. It costs an arm, and half a leg, but at least you can remove the liability from your shoulders and make the tenants responsible for their usage.

Some other options that  you could have is to install a water/gas/electric sub-meter system. These could be  quite pricey, and are more common for larger multi-family units with one  meter servicing an entire building. With a sub-meter ( a meter you  have installed on the property side of the provider's meter) you can track usage of  each unit, and know EXACTLY how to bill a property.

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EDIT: To answer your question, in my opinion, try to get it so the tenants can place services in their name, and make it so they are responsible for their usage. If the utility providers, or even General Contractors have issue with this, most states allow for up to a certain amount to be charged as a flat rate for utility usage alongside their rent. Check with an attorney proficient with landlord-tenant laws in your state / city and see if this is an option in your area.

Tyler Brown · Answer

Thomas S. how is he supposed to bill each tenant separately when the whole home only gets one bill?

Matt Faix · Answer

Thanks for all of the advice. We looked into having the utilities split a while ago and the code officer informed us that doing this would result in us having to update a range of other things that are currently grandfathered in. So we decided to leave it as shared utilities since these updates would be fairly expensive.

Nathan Patterson · Answer

What others have said is great, I would also look at your market and see how other investors/apartments do it.  Do they include or separate the utilities?

Deanna McCormick · Answer

I had units that included utilities, and listed as " 1br all utlities paid."  and rent was set to reflect what I was charging.. I also put lower in ad, cable / internet not included..

It would be wise to see if you can in the future split at least the electric, it's a huge savings for landlord over the years.

You can contact  your utility company and get a average bill and divide that bill per usage per unit, lots of paperwork but it's done more and more.. for buildings with shared meters. All depends on how you want to set it up.. It's never fair in this instance someone will always use more power, water, turn the heat up higher or A/C colder than the others in the building..

Larger buildings usually only have electric, and cable that isn't included as heat is usually hot water boiler system and water is not separate meter either.. so that's partial utilities included..

Thomas S. · Answer

List with utilities extra. Bill the tenants separate for the utilities monthly.

You should probably investigate the cost of setting up separate utilities to get them in each tenants name.