Owner Covers Water/Trash?

Question

I tried searching up these key words but couldn't find much of a straight answer... if any BP members have 'owner pays' properties how do you/did you do the pros and cons analysis?

I'm currently thinking of house hacking. On the market for 280k. Rents are currently $650 and the owner pays water/trash. Any tips? I'm trying to not let a deal slide for something small like this.. i don't think it is a complete deal breaker and i'm trying to get my foot into the door already instead of waiting on the sidelines.

Any advice is appreciated.

Joe Splitrock · Answer

@Brandon I Garcia it is very common for multifamily in my area for owner to pay water and trash. Water is sometimes on a single meter or there are less water heaters than there are units. There could also be outside water spigots or common area water like washing machine. It is hard to split the expense fairly, so owner pays it. Trash should be paid by the owner in multifamily too, otherwise you have four separate trash cans in a fourplex. Odds are good one tenant throws garbage in another tenants can and then boom, you have a big argument. It is just better to pay it.

Just remember that nothing is really owner paid. You are passing the expense on to the tenant regardless. So they may pay $600 with water and garbage included or $550 and they pay $50 for water/trash. Either way the tenant pays the same thing.

As far as not being able to look inside the property before an offer is accepted, that is getting more common in some areas. Showing properties with occupied units is very difficult and alienates tenants. Half the people marching through are just "lookers" so requiring an accepted offer filters out the wannabe investors. Just make sure your offer has an inspection contingency, so you get to look in every unit before moving ahead. Also make sure on your offer that you request copies of the leases to review during due diligence period.

Nathan Gesner · Answer

I'm with Theresa. Either we're missing some very pertinent information or you're about to make a mistake. A property priced at $280,000 should be pulling in $2,800 in rent per month as a general rule of thumb. There are exceptions, but $650 isn't even close. You would have to rent out five rooms at $650 each to make those numbers.

Either you've failed to explain the situation correctly or you need to walk away.

Frank Chin · Answer

@Joe Splitrock

I own a triplex next to another triplex. The owner next store had each tenant take care of their own trash by assigning individual pails. Unfortunately, back then with recycling, each unit get 3 pails, one each for for regular, paper, plastic and metals, with the unit number on each pail. On garbage night, there's 9 pails out front. These days, we would need another pail for disposable foods, making it 12.

What's the problem? There's not enough sidewalk space to walk by as these triplexes are attached. With the small amount of garbage in each pail, a light wind would blow it over. With no one in overall charge, not every tenant pulls in the pails in the morning, on windy days, the empty pails would blow over the neighbors sidewalk, or halfway up the street, causing traffic problems. City inspectors seeing his pails on my sidewalk can write me up a ticket. And the tickets don't indicate what unit in which building, just that it's blocking the sidewalk. You literally need your own garbage inspector on your block.

I give one tenant a rent concession, and we normally have one can of garbage for each type. They are thus heavier and doesn't blow over. The tenant in charge pulls it in early in the morning, clearing the sidewalk. Having tenants take care over unit's own garbage are good in theory but a horrible nightmare in practice.

Anthony Angotti · Answer

It's a cash flow analysis pretty plain and simple.

Even if tenants pay water/sewer usually the owner pays and then bills the tenants back because it is generally lienable if not paid.

It's pretty typical for landlord to pay water and sewer in Pittsburgh. Even if submetered you'll see most active rentals only charge electric and gas if you take a look at your competition. Exception being single family homes.

Theresa Harris · Answer

Is this a single family where the total rent is $650 on a house worth $280K?  If so, that is not a deal.  There is no way you'd even cover your mortgage.

Where I am the trash is covered by property taxes.  Water is attached to the house, so for my places, I pay the bill (it can't go in the tenant's name) and the tenant reimburses me for the water.

If you re house hacking, base the bills on how many people there are.  So if you and one other person lives there, split the bills 50:50.

Michael Robbins · Answer

If the water/sewer/trash is a part of the HOA bill that the owner pays then I would bill back a reasonable fixed amount to the tenant on top of their rent.  I would contact the water company and find out what the average water bill is for the size (# of bathrooms etc) house.  So you charge the rent + water = total rent the tenant pays each month.

Darius Ogloza · Answer

One water meter is feeding the entire property.  You, as owner, will have to foot the bill.  Ask your seller for several months or quarters (some agencies bill monthly, some bimonthly some quarterly) of bills to see what the charge has been historically and this will give you a good idea of what to expect.  For trash, find out if the charge is paid along with taxes, which is customary in most places I have invested.  If it's a separate bill, same drill.

Jill F. · Answer

In my area, in SFR, the tenant usually pays everything, however in the city of Akron, if the water/sewer/trash is the responsibility of the property owner so if the tenant doesn't pay the owner must. We take a deposit for last 45 days of water and monitor the bills. In duplexes it's kind of mixed in this market, in small multi family the owner usually pays water/sewer and you have to have private trash for more than 3 units. That rent seems low for a property in that price range; is there just a small rented apartment and the owner space is must larger?

Jon Kelly · Answer

@Brandon I Garcia Ideally the tenants cover water/sewer and sometimes trash. Water/sewer is typically billed by usage, so if the tenants are NOT responsible for it their usage will go up. I've heard numerous stories of landlord paying for water/sewer and it turns out the tenant is doing laundry for the entire block, all on the landlord's dime.

Water/sewer/trash in the landlord's name should not be a deal breaker. Make sure your rents are high enough to take on the extra expense. Is $650 market rents? If so, $2,600/mo in rent and paying water/sewer/trash for a $280k may not be a great deal. See if there's an opportunity to increase to $750-800.

Alecia Loveless · Answer

@Brandon I Garcia Where I live it varies from town to town but I can get the water and sewer bills all in my name, none of it ever goes to the tenant.

In two towns I am in the trash is paid for by taxes both of which have curbside pick up. The third town residents buy town approved trash bags and take them to the town owned transfer station. The cost of the bags pays for the running of the transfer station.

Owner Covers Water/Trash?

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