How to split the utility bills

4 Replies

I want to buy a property in Granada Hills California, which it has two separate houses (4/2 and 3/3, but only one address and meters.  If I rent the two property (or if I live in one) how do I split the utility bills?

Before I make an offer, how can I find out what is the total monthly utility bill?

Please help me to calculate if it is a good deal or not.

Usually, this type of arrangement spells disaster. You could include utilities into your price but then run the risk of them abusing that. Then if you try to split the bills one tenant might complain about the other using more. There is no win here, just a rolls of the dice. 

If the property is listed by an agent, you might be able to ask and get a range. But in reality, asking may not always result in answers. I would suggest conservatively factoring utility costs in your budget.

Regarding how to split the utility bills, I would suggest paying for it yourself and budgeting that into your potential rent. There are creative ways to "split" the bills (for example, each occupant pays a proportionate share, so if there is 1 occupant for each room in your property, then the 4/2 pays for 4/7 of the water bill and the 3/3 pays for 3/7 of the bill). However, to do this with 2 units may be challenging to monitor and enforce indefinitely.

Once you feel comfortable enough, you may be able to make a contingent offer that allows you to back out during your due diligence period.

In my part of California, a 2 unit (or 2 home) property with only one meter is a red flag that one of the units/houses is not permitted. For example, if I own a huge lot with only one house, I can build another house on there if I want. But getting permits for it, especially if you make the mistake of building it first before worrying about getting permits, can cost a LOT of money, so some people just don't do it.  And my understanding (I could be wrong about this though) is that utility companies will not put multiple meters if the property is not recorded as a multi-unit or multi-home property, which is why only having one meter is a red flag for this. Unpermitted additions are not the end of the world, but you should understand the implications.

I'm not saying this is the case here, but you should definitely take a close look at the permits, zoning, and recorded property description if you are genuinely interested in this property.

You get a submeter installed just before the supply wire to the electric panel of the second dwelling . You read the meter and then do the math