City Utilities vs Private Well/Septic for a Rental

City Utilities vs Private Well/Septic for a Rental

Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes

My goal is to soon house hack a small multi-family. One of my original preferences is for there to be city utilities instead of private. After analyzing a handful of properties I am already seeing that this preference is making it hard to find a property that meets my other criteria (location, flood zone, price, etc). 

One of my main reasons for that preference is because I would prefer for the electricity to be in the tenants' names. With a sewage treatment or septic, my parish (county to non-Louisiana people) requires a permit to turn the power on once it has been turned off or even transferred. I don't want to involve the parish continually as they tend to cause additional headaches. Even with flips they have failed the septic for non-issues which were eventually corrected on their end but caused further delays.

A solution to that could be keeping the power in my LLCs name but enforcing through the lease that failure to pay for electricity will result in a 5-day notice and therefore being ground rules for an eviction. I don't prefer this but it's a possibility that I could explore with an attorney.

What has your experience been with keeping electricity in your name?
Any tips or tricks?

What about private utilities? Any thoughts on those? 

Appreciate any input. Thanks!

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  • Member since 2018 · 46 posts · 43 votes
    8y

    We currently house hack on 5 acres outside the city in Texas.  We have septic and a well. City electric.  We were mostly able to separate the electricity for the three other units, but not completely.  One unit, we cover all utilities b/c of this issue and it is 700sf.  We added a couch, tv, refrigerator, W&D, and some other things and it rents for 1k/month as furnished. The other two rentals are unfurnished.  The others pay for their utilities as we had an electrician separate the power. 

    The main thing is we absolutely do not miss the quarterly septic inspections and we have a guy for the well that can be here quickly if the pump stops for the well. The reduction in the property taxes for not using these city utilities more than covers these costs. I don't think we will ever move as we are building a 5 plex on the property, but if we did, I'd put the electricity for the well/septic in the LLC and to make sure there is no interruption.

  • Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes
    8y

    Thanks for the input Rich!  Best of luck on building that 5-plex. Sounds like you are on your way to a small apartment complex on that property. 

    Given that the parish is a hassle, I'm leaning towards the limited hassle of a tenant that can be evicted over non-payment rather than dealing with a finicky government entity that can be slow and fails inspections for silly reasons rather than actual issues. 

    Upside to these units are that they are separately metered. 

  • Realtor · Chicago, IL · Member since 2014 · 137 posts · 103 votes
    8y

    Hi @Courtney Fricke ! Congratulations on your decision to house hack! We are on our third house hack and ran into a similar issue here. Although there are three gas meters for each unit there are only two electrical meters. We are on the top floor and have our own meter while the tenants on the lower two floors share one. We were not able to have the meters submetered. I searched the internet but from what I was able to determine, triplexes are too small to submeter. If someone knows anyone in the Chicago area that can submeter please let me know. Anyways, we put the account on a "budget" plan so that every month the bill is the same until it is rebalanced around the 3-month mark and then every 12 months. Both tenants then split that cost equally. It is also written in their lease. I would say to ensure payment do a thorough screening process. At the end of the day that is what's going to ensure you always receive payment, especially since you'll be living there. I give them a copy of the bill on the 20th of the month and have them pay it when they pay their rent on the first. Good luck! 

    Even if you have to keep it in your name or pay the bills yourself buy a house hack anyways! Just build the average utility cost plus a cushion into your numbers.

  • Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes
    8y

    @Michelle Bright Thank you for the insight! Although our issues are different, the solution may be similar. Also, third house hack? Awesome!

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