Do Landlords Pay Utilities?

Question

Hello all BiggerPockets humans!

This is officially my first ever question posted on the forums which is a bit nerve-racking but I have to start somewhere right?

I am in the process of buying a four-plex in Butte, Montana. My first ever multi-family unit and my third property acquisition to date. I'm hoping that this property will be the sling-shot to really fuel my real estate ambitions.

I am wondering if landlords of duplexes, four-plexes, and even larger multi-family properties usually pay the utilities for their tenants? The current owner does and I am seeing the expenses for utilites go from $300/mo in the summer up to $800/mo. in the winter with Montana winters getting pretty brutal some years. I am thinking of slightly lowering rent in order to have the tenants start paying their own utilities. I am sure they are all going to freak out about this and I might lose a few but I figured it needs to happen at some point.

If anybody has any insight into this and possibly how to ease the tenants into this new expense on their end, I would sincerely appreciate it!

Thanks everyone,

Tory

Karl Swenson · Answer

Hey guys, just wanted to say hi as another (beginning) investor in the Bozeman area. I manage Lexley Acres Mobile Home Park & Apartments in Belgrade, which my dad owns. My wife and I are working on flipping a mobile home in the park and are also renting an apartment from my dad and using it as a STR. We're dipping our toes into a couple niches and trying to save up cash for buying our first personal home. With the market the way it is now, that seems hard to do without sinking all our resources into it. Everyone keeps saying to wait for the market to crash. I hope it levels off a little but I just don't see it crashing here. Anyways, just wanted to introduce myself and say hi to some locals.

Michael Rutkowski · Answer

On the top left, click on those 3 bars, then look for notifications, then you can find them there. Set up your notifications to let you know when you get a DM, and it will send you an email as well. My number is also listed on my page on BP too.

Justin Hoggatt · Answer

I put as many expenses onto the tenant as possible. Utilizing a RUBS system (Ratio Utility Billing System) to bill back tenants if it's only one meter is advisable. There is no official formula for this and can be something that you do or pay a company to do. I've had spreadsheets in the past to do this for me and now I have Appfolio take care of anything I need to quickly and easily after I put in the ratio's. I will often take number of residents, size of unit into account and not do a complete split. Just be honest about your bills with them and some landlords will send a copy of each bill for proof, but I never have unless specifically asked.

Of course, if there are separate meters, then definitely get them on them as quickly as possible.

When a tenant knows they are billed for what they use - they often mysteriously use a lot less. :)

Of course, if there are separate meters, then definitely get them on them as quickly as possible.

When a tenant knows they are billed for what they use - they often mysteriously use a lot less. :)

Tory Brown · Answer

@Michael Rutkowski hmm I’m not seeing the DM. Maybe I need to update the app or something

Michael Rutkowski · Answer

I sent you a DM, feel free to contact me sometime. Good luck with the 4plex!

Tory Brown · Answer

@Michael Rutkowski sounds great. I completely understand the competition you’re facing as the area is growing so fast in all directions. Would definitely like to sit down and chat whenever you have time. Is there a good number I could reach you at?

Thanks,

Tory

Michael Rutkowski · Answer

I am usually doing rounds all day as well. I am always glued to my phone lately, so you can always call me if you have any questions. Weekends are usually better for meeting up, but we work 7 days a week, with maybe a few days off here and there. You can always come to one of our properties during a turnover, and you can get to see what we actually do, and if it is something you would be interested in doing. Weekends are always busy, so that may be the time to check out one of our places.

As for hiring, I'm always hiring for construction and cleaners. I'm having to compete with huge investors up in Big Sky and Bozeman, paying $50-$75/hour, and I'm in the same boat as everyone looking for workers these days. I am trying to get a project in Bozeman permitted, this summer, and will definitely need some help on that. I've also got another project in Paradise Valley I'd like to button up this summer. I don't really have any work for things like real estate investing. That is just a hobby for me, and the actual work is in the property management and real estate side of things. Feel free to get ahold of me and we can discuss more.

Tory Brown · Answer

Hi Michael,

Thanks again for your insight as I work towards getting this 4-plex up and running. It’s going to be a pretty big leap of faith but I’ve put in the legwork to make this thing a success.

I would love to opportunity to chat if you have time. I am currently a UPS driver to fund my real estate endeavors and I usually get off around 6:30-7. Not sure if you would have time during the week or if a weekend might be better.

I’m curious about what you were mentioning with tracking statistics on guests for your STRs. That sounds like a valuable thing to have when evaluating how your properties can be improved upon. I have been looking for different career opportunities into the real estate world so that I can link my everyday job with my lifelong goals and aspirations. Wondering if a job opportunity might be available with your company?

Thanks again,

Tory

Michael Rutkowski · Answer

Hi Tory, The main reason water/sewer/trash is covered by landlords is because, usually in city limits in Montana, there is one water service to a building, and it is just easier for a landlord to have 1 meter, instead of multiples. You can of course have the city install a water meter, or put your own inline water meter, with a radio frequency monitor on it, to bill tenants separately. I bought one for a property and it was cheap, like $80 or so. You download an app, and it watches and graphs your water usage. And trash is a nice little bonus to throw on the utilities for the tenants. It is usually the same, low cost/ mth and the city can bill you on the same bill as water and sewer, to keep it nice and tidy for bookkeeping. I admit though, it has been almost a decade since I rented LTR. I just cover 100% of the utilities now doing STR. And of course, stay far away from covering any sort of gas/electric costs. Cable as well.

I did once go to a REI meeting in Bozeman, and they used to be held at my brokerage actually! I don't really have much time anymore to devote to the meetings, but I still meet with investors in town from time to time. Let me know if you'd ever like to catch up sometime. We are entering our busiest season, and we forecast 2021 to be pretty killer for tourism. The main issue we are focusing on is finding enough labor to keep track with the tourists and guest we service. If you ever need any help looking for property, or talking about strategies besides fix and flips, let me know. My favorite properties are land deals, and commercial properties these days. Take it easy, and enjoy this nice spring snowstorm we had! If we don't get a major storm or two in the spring, it is fire all summer long!

Tory Brown · Answer

Also, I do want to say THANK YOU to everyone else who reached out on this post.

It’s a huge help as I leap into the unknown of multi-unit rentals.

-Tory

Do Landlords Pay Utilities?

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