Mother in law apartment in my home

1 Reply

Hello everyone!

I have purchased my first home and rental property which is a single family home with a mother-in-law apartment in the basement.  My husband and I occupy the top unit which has 4 bed 2 bath and the mother in law unit is 1 bed 1 bath with laundry and kitchen. It has a separate entrance as well.

The dilemma I have is how to treat the utilities. The home does not have separate meters for gas/water/electric and all the ducting is connected to the same furnace and A/C... the thermostat for the air conditioning and heater is in our unit.  What were were planning on is stating in the lease how the AC and heat would be programmed automatically.

There is a gas "wood stove" to help heat the basement unit that the tenant would have exclusive control over. It does a really good job heating the place but definitely could get really expensive if a tenant was not concerned with conserving.

It is a fairly old home and we have done a lot of repairs and updates on it. We are ready to rent it out starting in November. 

Would you guys mind giving me your advice as to how I should go about charging the utilities for the basement unit? Should I average a flat fee and add that to the rent advertising (utilities included) or should I charge a flat fee additional to the rent? Or should I come up with a system on how the utilities will be divided every month so that the tenant is more mindful of usage? 

I appreciate your feedback. We are definitely beginners!!

I would either charge the tenant 40% of the monthly utility bills or get a estimate of a full past years utility costs and increase the tenants rent by 50% of that cost. If you are going to include utilities in the rent you have to increase their portion of the amount since tenants are notoriously wasteful when they are not paying the bills.

You also need to see if you can find a market rent for your type of unit. You may not be able to charge for utilities at all if it is not customarily done in your area. Market dictates.

Is it a legal apartment or a mother in law suite. It may not be legal to rent if it is a mother in law suite.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you