How to proceed with non-separate utilities

Albuquerque, NM · Member since 2016 · 57 posts · 9 votes

Can anyone help me with this dilemma? So I have two units, that the electricity for both is under one meter. How do I proceed to rent out these units? If I pass the electricity costs to the tenants, then I leave the burden to them to discuss and negotiate how much each tenant used that specific month. I know that If I was in this situation I would not want that responsibility, because there is room for one or the other to take advantage of the situation. On the other hand, if I as the landlord take the responsibility to offer a flat rent with utilities included. I am in a vulnerable position with the tenants using the electricity without the fear of the consequences of high energy consumption. Has anyone else had this issue, and how did you mitigate the situation?

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

Do not put tenants in charge of utilities. That's a recipe for disaster when Tenant A complains Tenant B uses more or that Tenant B hasn't paid their share for the month.

Contact the utility company and ask them for an average use for the past year. They will typically give you a high month, low month, and an average. If the average is $200, add 10% then split it equally among the tenants ($200 + 10% = $220, each tenant pays $110). Some months you won't collect enough to cover the bill but other months you should collect extra. After 6 - 12 months, compare what you've collected with what you had to pay and then increase/decrease accordingly.

Put this in writing. Also put in writing that you will evaluate actual use vs. funds collected and adjust their bill up or down based on actual use.

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Penny ClarkPro Member
Sacramento, CA · Member since 2014 · 513 posts · 319 votes
8y
@Jesus Moreno, If it were me, I would build the cost of the electricity into the rent. Unless your tenants are growing a pot farm inside, you can figure an average use on the high side from past bills. If you put the tenants on a month to month agreement, you can institute rent raises ( or any other change in terms) in a timely manner.
Good luck in your endeavor!
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Jesus MorenoPro Member
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Albuquerque, NM · Member since 2016 · 57 posts · 9 votes
8y
@Joe Splitrock @Penny Clark Thanks for the suggestions. I will check my states laws on splitting utilities. Also, I agree, an average consumption with some margin would be the best route, and a contingency to protect my self.
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