Buying a triplex that landlord pays heat and hot water for tenant

[Adrian Vega]

Hello everyone,

I am new to real estate and myself and father are new landlords also. We purchased a nice triplex and I am a bit concerned about having to pay for heat and hot water. At some point we will figure something that is beneficial for us and our tenants but for now I am looking for some feedback on how to manage this appropriately I am scared of high heat and hot water bills due to ignorance.

Thoughts...

Thanks for any feedback.

[Nathan Gesner]

Contact the utility company and ask them for historical averages. They should have no problem providing this.

Add the utilities together and then divide by the number of units. If the units are different sizes or have different amenities then you may want to adjust up or down for each unit rather than charging them all equally.

Example:

Triplex has a 2bed/1bath downstairs and two 1bed/1bath units upstairs. Each unit has the same appliances (fridge, stove, dishwasher, and washer/dryer).

Total utility use is $400 a month or $133 per unit. Because the downstairs unit is almost twice the size, I would charge it a little more and the smaller units a little less ($150 for big unit then $125 for small units). Play with the numbers and find something that seems fair to everyone.

Once I determine the charges, I increase them by 10% to cover waste which is common when rent includes utilities.

This sounds like a lot but tenants actually end up paying less than if they were separately metered. Base fees make up a large percentage of the monthly charges and your tenants will be splitting that three ways rather than each paying their own base fees. They don't have to pay a deposit with the utility companies, they don't have to receive bills or mail out checks.

I hope that helps.