Lesson learned - food for thought . .

13 Replies

I just thought I would relay my costly lesson in 'fairness'. I have a SFR in Milwaukee. This is the first year I am managing it myself having burned through 3 property managers in about as many years - costing me more $$ than it was worth. I don't live in Milw or WI so a PM seemed to make sense.

So I got the package of rental forms from WI Legal something or other, and on the initial agreement (M-M) I only required tenants to pay for "water"; not fully realizing that the Milwaukee water bill also has "sewer" and "muni" charges - which are far more than "water".  I was trying to be "fair" -

Well - I changed that agreement in November, requiring the tenants to pay "water", "sewer" and 1/2 of Muni - that seemed fair too.  

Unfortunately I did not word my rental agreement modification carefully enough. I got a notice from Milwaukee Water telling me that the water use for this quarter was 4 times higher than 'normal'.  I sent an email to the tenants inquiring about a possible leak, which is when they said the toilet was 'making noise'.  

So this quarter's water bill was $663 instead of the 'average' $250.  Since my rental modification did not specify that I would pay 1/2 of the "normal" "Muni" charges (which includes some sewer, so it's also based on 'water use) - I am ending up paying $175 this quarter instead of $50!  Ouch!  This in addition to having to fix the toilet (I need a cheaper handyman too!)  

I would love to only pay for "normal" use, but that's not what my rental modification says.

Longer story than I anticipated, but . . .  when writing/modifying rental agreements - the devil IS in the details.   I'll be preparing a modification to my modification!

Sorry to hear ...

Originally posted by @Kelly G. :

I just thought I would relay my costly lesson in 'fairness'. I have a SFR in Milwaukee. This is the first year I am managing it myself having burned through 3 property managers in about as many years - costing me more $$ than it was worth. I don't live in Milw or WI so a PM seemed to make sense.

So I got the package of rental forms from WI Legal something or other, and on the initial agreement (M-M) I only required tenants to pay for "water"; not fully realizing that the Milwaukee water bill also has "sewer" and "muni" charges - which are far more than "water".  I was trying to be "fair" -

Well - I changed that agreement in November, requiring the tenants to pay "water", "sewer" and 1/2 of Muni - that seemed fair too.  

Unfortunately I did not word my rental agreement modification carefully enough. I got a notice from Milwaukee Water telling me that the water use for this quarter was 4 times higher than 'normal'.  I sent an email to the tenants inquiring about a possible leak, which is when they said the toilet was 'making noise'.  

So this quarter's water bill was $663 instead of the 'average' $250.  Since my rental modification did not specify that I would pay 1/2 of the "normal" "Muni" charges (which includes some sewer, so it's also based on 'water use) - I am ending up paying $175 this quarter instead of $50!  Ouch!  This in addition to having to fix the toilet (I need a cheaper handyman too!)  

I would love to only pay for "normal" use, but that's not what my rental modification says.

Longer story than I anticipated, but . . .  when writing/modifying rental agreements - the devil IS in the details.   I'll be preparing a modification to my modification!

 For my rentals I require the tenants to have the utilities in their name. Is there a reason why you are agreeing to pay any utilities or have these in your name?

Maybe a requirement of some sort for you?

@John Underwood - In Milw - trash and winter snow removal are tied into the water bill.  I've always thought that paying trash ensured it gets picked up - but that may be a carry-over thought from my California days. so I pick up a small part of the water bill.  


@Dawn Anastasi   Good idea!  thanks

@Jorge Ruiz   yes, I 'manage' it from CO; as I still have family in Milw and make 2-3 visits a year, this gives me a chance to check in personally.  It's been 1 year now and - aside from the water issue - it's worked out OK - but I also have pretty good tenants.  

thanks all for the input

@Kelly G. I guess you are far more generous than I. With a SFR, tenant pays all utilities. Not sure how you decided it was "fair" that you should pay part of the utilities when ALL of the utility expenses are controlled by the tenant. In the future, take a page from the lawyers' playbook. Prepare the agreement so that it spells out what you pay and everything else is the tenant's responsibility. If something unexpected comes up it's on the tenant, if you are felling overly generous then you have the choice to pay or not.

@Kelly G. You say it’s gone well for you but I have a hard time thinking you sleep well at night. God forbid something major were to go wrong in the middle of the night then what? How long do you think you can keep this up? I’m curious because all I keep hearing is if you invest out of state it makes more sense to hire a PM.

I state in my lease that tenants are responsible for the "municipal services bill."  Milwaukee has shifted a bunch of stuff from the tax bill, where it probably belongs, over to what is commonly called the water bill, but includes snow removal, garbage and recycling, and all of the water related fees.  

Rental in Ohio but had same issue with a tenant letting water run for over a week outside and not telling me about running toilet. I was paying both water and sewer at the time and going forward tenants pay all utilities. I also did put something in lease that if there’s a repair needed, we would pay the amount or the water and sewer bill during that time above the average bills for that tenant as we felt that was fair. Not sure if we will regret that.

It's a SFR, the tenants should be paying for water and sewer as a standard condition for renting.

I've converted all my SFR to tenants paying water and sewer. MF little trickier to do as they dont have individual water meters.  

Greetings

I appreciate the continued feedback.  It seems I have an 'out' on paying the excess in the water bill.  I checked my original agreement and there is a clause which states the tenants are required to notify me 'immediately . . . if toilet continues to run."   As they did not notify me - and I had to inquire about an excessive water bill, seems I should be able to pay my share based on 'normal' water use.  

@Jorge Ruiz   - not sure what I would/could do differently if I lived in Milw or not.  I have family there who could/would act if necessary - i.e. emergency.  If there's fire, the tenants would call the fire dept; anything broken would be handled by a call to a service company or handyman.  My only concern is a power outage during a rain event - in which case the sump pump in the basement would overflow and flood the basement.  Anyway . . 

I certainly appreciate all other comments.  thanks

Kelly

I require my tenants to have all the utilities in their name.  But, as a courtesy, I specifically warn about a constantly running toilet and the financial havoc it will cause on their water bill.  And to call me immediately to remedy the problem.  How do I know that?  I got an $800 water bill one month for my personal home for a toilet that would run constantly for an hour, here and there.  Not even 24/7.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.