I recently purchased a two family house, the person living downstairs has been there from the previous owner. The upstairs is vacant. The tenant downstairs says his utilities were included in his rent. As the new owner I have recently found a new tenant for upstairs. I would like to split the utilities between the upstairs and downstairs tenants. Unfortunately the renter downstairs has been having his utilities covered in his rent. What would be a viable solution to having the upstairs tenant and the downstairs tenant split the cost of utilities? I am trying to come up with a solution that makes both tenants happy..
It sounds like the downstairs tenant isn't so much concerned with the cost as he is with the hassle of splitting utilities every month. I recommend you check with the utilities companies on the cost from the past year, add it all up (total cost of utilities for a year), divide by 12 (average cost of utilities per month), divide by 2 (number of tenants in the building), and add this amount to each tenant's rent + a small factor of safety if you want.
You're happy because you know you aren't getting shafted by utilities every month (and possibly making a little extra if you estimate a little on the high side), and your tenants are happy because they don't have to worry about splitting utilities. Win-win.
Let us know what you decide to do!
You're going to have to physically split the utilities between the two units. That means two different water heaters, furnaces, and electric meters - each run separately and correctly to one unit and not the other. This will be expensive.
The new tenant who will occupy the vacant unit will have to sign up and put the utility bills in their names.
For the inherited tenant - you cannot force them to do this mid lease. You will have to continue to cover their utilities for the time being. But you can require it with proper notice upon lease renewal. If they don't want to play ball they can move out and you can find a new tenant who can.
I would put utilities in Owners name. Increase rent to cover all the utilities, it's not that hard to figure out.
Let current tenant know rent is going up so he's prepared upon lease renewal time.
The only thing usually easy to split for utilities is Electric.. check with a electrician to see what the cost would be for that and you'd probably need 3 meters 1 for each apt and one for the exterior and basement and hallway lights.
Keep everybody on a month to month lease until you get it figured out..
Thanks guys been super busy! I appreciate the feed back, its been a huge help. If anyone need any opinions contact me. To let you know what we are leaning towards doing is what @Jared Mastley idea was it fits our tenants and us the best, but all the ideas were AWESOME!
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing