Rent by the room: Utility strategy

17 Replies

I am actively searching for my first house hack deal (western MA, > 4 bed 2 bath, single family/duplex, <250K).

I am wondering if anyone has experience dealing with utility expenses while renting by the room. I understand that, generally, the owner takes utilities, as it is impossible to measure usage while renting by the room. 

I'm interested in any strategies to mitigate this cost (other than building into the rent). One strategy that I'm aware of is utilizing coin-operated washer/dryer to offset some electric/water costs. I'd love to hear of other strategies!

Thanks - Zach

@Zach Wright hey Zack, lets talk. all i do is rent by room. i can help you.

i actually prefer to include utilities with the rent but for the last 7 years i have had separate utilities in my rentals.

i simply take the total cost for the unit and divide by the number of tenants in the unit. never had an issue. never had anyone question it.

happy to help. love this strategy. let’s make it happen.

also i write for the BP blogs. check out my blogs as i have done a few on rent by the room. i think you’ll find it helpful.

@Ryan Deasy this makes sense - thanks. As my first investment, I'm worried about tenants having no visibility or accountability for actual utility cost - but seems like this is unavoidable when renting by the room. Thanks again, I'll be checking out your blog!

@Zach Wright yes i agree that can be quite a worry. you may want to look into lockable thermostats. i have thermostats that are locked at a certain temperature and cannot be changed without a code.

each city/state has laws on what that temp needs to be, but maybe this is an option for you.

@Ryan Deasy what thermostats do you use if you don’t mind me asking? Also what software do you use to bill them?

I’ve tried programable thermostats and the tenants ended up getting space heaters.

We charge $90 per room towards utilities and in our lease we put that if utilities are above normal and the cost doesn’t cover them then we bill the difference to the tenants. We divide the difference by the amount of tenants/rooms and bill the difference.

@Artem Belayev @Ryan Deasy Have either of you considered offering amenities to tenants while renting by the room? Thinking that offering wifi, tv services in common areas, etc for a flat monthly fee would be a win win (cheaper for tenants than buying themselves and profitable for me)

Thoughts on this strategy?

@Zach Wright i offer wifi in the units. ive been back and forth on this alot. i rent my rooms for 595 per month. thats a good rate in my opinion. i dont want to milk them for everything so i include utilities in that price. i know some people that put TVs in the unit, furnish them etc. i have done that but do not do that anymore. i also know people that cater to traveling professionals and deck those places out too and charge a premium. 

@Artem Belayev i use LUX. they have been awful. do not buy them. my contractor cant figure them out. its been a mess to be honest. i am going to put the old ones back on and put the thermostat cages around them. 

i have to admit that is smart with what you are doing with the overage. i may need to implement that. thank you for sharing that. 

@Ryan Deasy thank you for the heads up! I heard people using landlordstat thermostats there programmed so that every few hours the temperature drops to 68 degrees Incase the tenant raises it up to 74 and leaves the house or forgets to turn it down before going to bed.

Thank you! Yeah with making them pay the difference there aware not to leave the windows open or abuse the utilities.

What do you use for software management or rent collecting?

Thank you!

@Zach Wright I would check what others are doing in your area. Search rooms on trulia or craigslist and see. A lot of co living company’s include everything into the lease even bi monthly common area cleaning. I would say do what suits you best and as you build your portfolio you’ll see what works and what doesn’t and change it.

I don’t think there’s a right or wrong way to do it.

@Zach Wright Since you will be living in the property I would think this would be easy to coordinate with your roommates. Just tell them utilities will be split evenly based on the number of occupants in the home. Post the bills in a common area when they come in and let them know the per person cost and as long as you are transaparent and people know the deal going in you shouldn't have any issues. 

Also, if you install coin op washer/dryer then you will be paying to do your laundry in your own house which doesn't seem to make much sense. 

@Zach Wright

I have a list of the cheapest solutions with the best returns.

Aerators and shower heads. Replace all bathroom aerators with 1.0 -1.2 gpm bubble flow (not less though). Kitchen with 1.5 gpm.

Showerheads from Niagara 1.5-2.0 gpm. Advertise these to your tenants as NEW fixtures, not water saving or they will complain even if they are getting better water pressure than before. 

Attic insulation, this is typically the cheapest option to add insulation to your house because it is very easy to add and it is also one of the most effective. The more you add the more you will save (blow-in), don't skimp. 

Keep your home at a comfortable temperature if you have cheap natural gas, you don't want tenants electric space heaters running all the time.

Last thing would be toilets, and I'd do these only if you've already done everything else I've listed since they are either super cheap (aerators) or very effective (attic insulation). If you have the very old models upgrade these to 1.2-1.6 gallon flush toilets from Glacier bay at home depot. These are the best toilets and they are very cheap. Don't believe the $300 toilet scam.

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