SFH Utility Billing Rules NC

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Hello,

I have recently closed on my first deal in Charlotte, NC. It is a single family home with a walkout basement that has been finished to be used as a separate dwelling unit (has full kitchen, bathroom, & bedroom).

To start, I will be living in the basement and renting out the main level. I intend to move out in the future and rent out the main level and basement separately.

Would love some feedback from NC investors who have experience billing tenants for utilities in single family homes i.e. what's allowed as far as splitting the cost between tenants? do you have to meter them separately in order to bill or can the cost be split equally? do you have to get approved by the NC utility commission to bill? Metering the units separately doesn't seem to make sense from a cost perspective (unless someone reading this has had success submetering a basement unit?).

Thanks for reading!

Hey Christina! I don't know if you got all the kinks worked out yet but I'll share my experience with you regarding house hacking and utilities.

First:   -you have to identify the KIND of house hack you are pursuing:

Remember the three basic ways to house hack are (you can always get more complex)

1. Living in a multi-family residence with 2-4 units under the same roof (EG duplex, triplex, quadplex)

2. Live-in flip

3. Living in a single-family residence where you rent out your extra rooms.

Although you're living in the basement, you would technically be executing house hack type #3.

Why?

Yes, you're living in the basement but unless you sub-meter the property (probably not cost effective or may not be allowed legally but you can always check with your local county agency) and create 2 separate addresses, you are technically "renting out rooms" or space within the same unit.

Second: -you can now identify your utility strategy

Since you're using the third house hack strategy, assuming you are NOT sub-metering, you can now identify your utility options. The only reasonable option I see is splitting the utility cost into a percentage with your upstairs renters.

I highly recommend 2 things when splitting utility costs:
1. Put the utilities in your name for the sake of control (imagine if they didn't pay electric bill and now you're out of electricity or even worse water!)

2. PUT THIS PAYMENT AGREEMENT IN YOUR LEASE AGREEMENT WITH YOUR RENTER! If they are late on utilities you want to be sure that this is considered rent due! If not paid start the eviction process immediately as if they weren't paying rent. (at least that's how I'd handle it)

And finally Third: Make sure you are ready to evict your next door neighbor or roommate if they don't pay.

Yes this is not only possible but this has happened to me. I lived in a duplex with my tenant next door.  I was just hours away from driving to the courthouse to file for eviction when she finally came up with the funds. And yes I had already tried paying her to just leave so I didn't have to file for eviction but she wouldn't because she was sure she could come up with the rent. Talk about living on the edge lol

Neither of us were offended at the other because I explained ahead of time that I would be her next door neighbor most of the time but when it came to collecting rent it was all business. I also let her know the process I would follow if she didn't pay on time. She stated that she understood this so when I followed that EXACT process she wasn't offended. And if she would have been... oh well. Just always be sure to keep it professional don't get emotional.


EXTRA TIPS:

If you are buying a Single Family rental property and basing the numbers on having TWO tenants you are cruisin' for a bruisin'. Don't do it. However if "the numbers" work for renters to just live upstairs, go for it. 

Also, consider the fact that when you rent out the basement, there will probably be high turnover as this is not a long term place most renters will stay, especially if renting to one person. 

Lastly, TAKE ACTION. If you're afraid to make a mistake, great. We all have that fear but those kicking butt and taking names are the ones taking action and learning from their mistakes. The experts in the room are the ones who have made the most mistakes. PERIOD.

"A coward dies a thousand deaths, but a courageous man only dies once."

Think things through but don't let fear stop you. 

Blessings!

Chad