Utilities Not Included

[Rik Shaw]

Hi BP Community,

Does anyone have any advice on how to handle collecting on utilities from tenants when they are Not part of the monthly rent?

Any advice would be much appreciated.

Rik

[Nathan Gesner]

If you have multiple tenants, there is a high likelihood that at least one of them will leave during the lease. If the utility is in that individual's name, it will create confusion and a lot of work on your part.

Your best option is to keep the utility in your name and pass the cost on to your tenants. The best way to do that is to include it with the rent. If utilities average $300 a month and you have three tenants, each of them would be responsible for an extra $100 in rent to cover the utility expense. I would consider putting a cap on what is included. For example, you bump the rent $100 and tell them that includes utilities up to a combined total of $300 in actual use. If the bill jumps because of neglect or abuse then you will pass that additional charge on to them. If they are heating the home with windows and doors left open and the utility bill is suddenly $400 then you could charge them the extra $100.

A couple more suggestions:

1. I always add a buffer to the utility. If actual use is $100 per occupant then I bump it 15 - 20% to cover fluctuations or waste.

2. Consider charging a premium on the rent because of the additional work involved with multiple unrelated renters. For example, a 3-bed house normally rents for $1,500. Instead of charging $500 per occupant, consider increasing the rate 20% to $600 each. That additional $300 a month will help compensate you for the extra work and stress involved.