What Expenses do you pay for in Philadelphia
Hi All,
When i run the numbers on properties in Philly, if its a SFH, i usually don't include Water, garbage, electric etc. becuase that can be billed back to client: at least i think.
Can somebody please confirm what costs i can expect to incur on the operational side of a rental of a SFH, and even a 2-4 unit in Philadelphia. Are their laws that i need to become aware of?
Thank you,
Jason
@Jason Appel I own a duplex in Manayunk and pay for water, sewer and trash. This is with inherited tenants, and since our water is separately metered, once their lease expires we’ll have tenants pay water as well, as many other landlords in Manayunk do
@Matt Alrutz
Thank you! And is there a standard trash price you pay? Is that generally handled by the landlords?
Hi @Jason Appel and welcome to the Philly market. The operating expenses you can expect to spend on a rental property in Philadelphia are you maintenance, management, and vacancy. Generally there's a range of 6-10% of your monthly income. For SFH I would stick to 8%, for the 2-4 multis if your getting a property manager you could factor in 6% for management and vacancy since there multiple doors.
Like@Matt Alrutz said tenants generally pay the majority of the utilities (gas, electric, heat, and hot water). It's very important for multis that the utilities are separately metered. But, you will have to pay common electric.
Other expenses to consider are the taxes (probably the only good thing about philly besides the cheesesteaks, the low taxes), municipal, insurance, and licenses. For the most part I have seen trash handled by the landlords to answer your question.
I hope this sheds some light on what you could expect to pay for a property, if you have any more question feel free to reach out.
Dan Powers - Real Estate Agent
@Dan Powers Thanks for the clarification! how much does garbage usually run on a monthly basis?
@Jason Appel for reference I recently sold a 5 unit multi in Norristown, and the annual trash cost was $1100, for SFH its so minor that it shouldn't be a factor in whether or not you move on a deal.
Dan Powers - Real Estate Agent
Originally posted by @Dan Powers:@Jason Appel for reference I recently sold a 5 unit multi in Norristown, and the annual trash cost was $1100, for SFH its so minor that it shouldn't be a factor in whether or not you move on a deal.
Dan Powers - Real Estate Agent
You can’t compare the suburbs to the city when it comes to bills.
I believe that the following website for Philadelphia will have the trash bill explained a bit. There is a link to an information letter there.
As @Steve Babiak mentioned, you should not compare properties in the city with those in suburbs.
The answer to most of your question will be it depends on a few factors. We manage quite a fe 2-4 unit properties and here is the break down:
- If you have a 2-unit aka duplex you do not have to have common electric and separate meeter for it, nor fire alarm system.
- if you have 3-4 units you must have a fire alarm system and you have to have annual inspection/certification of it. Cost of the inspection depends on the system itself and numbers of the fire extinguishers runs between $220-$400 a year. If the building is newer or has sprinkler system you will have to have inspection for that as well (that's pretty rare with most philly properties).
- Also for 3-4 units if you have common entrance (meaning that access to at least 2 units is through the same main building door) you have to have common electric meeter for those common areas that you will be paying for. Common meters depends on what they connected to for 2-4 units run anywhere form $26 to $50 a month.
- trash aka refuse collection bill is $300 a year for 2-4 unit property.
- the cost of the utilities will depend on if you have separate meters for the units. In Philadelphia you always have 1 water meter. But you can bill the cost back to the tenants if you include that in your lease.
Hope this helps.
Cheers,
Yuriy
@Yuriy Skripnichenko - good post there.
The only point I would make is that if the duplex has common areas and tenants are paying the electric, then you should have a separate electric meter for the common areas that is billed to the landlord / owner. That avoids any “foreign load” issues.
That's correct. There's a work around that if you have a separate light fixture in the common area that can be turned on/off from each unit individually. This way you don't have to have a 3rd meter installed.
However, if you have a common meter it is always easier to use it to avoid foreign load as Steve mentioned.
Cheers,
Yuriy
Originally posted by @Yuriy Skripnichenko:That's correct. There's a work around that if you have a separate light fixture in the common area that can be turned on/off from each unit individually. This way you don't have to have a 3rd meter installed.
However, if you have a common meter it is always easier to use it to avoid foreign load as Steve mentioned.
Cheers,
Yuriy
For those using the workaround mentioned in the quoted post, you have to have two separate lights in those common areas, with the switch for each only accessible within the one unit. So if the tenant leaves that common area light on when they go out, the light can't be switched off until somebody inside the unit does that (could be that must wait until when the tenant returns unless there are multiple persons residing in that one unit).
@Steve Babiak what do you mean by common load? (Great posts btw)
Originally posted by @Eli B.:@Steve Babiak what do you mean by common load? (Great posts btw)
I think you mean “foreign load”.
A foreign load is one where a meter is registering use but that use is not within the unit that is paying for the meter billing. Typically arises when a landlord has a building with a common area that has lighting, such as a foyer or hallway, but the wiring for that lighting is connected to a tenant’s electric panel and meter; it can also be something that consumes even more energy such as a laundry area that is available for all tenants in a building but the wiring goes to a single tenant’s electric panel and meter.
That is why when utilities get separated in a building that the owner needs to realize that an extra panel and meter must be installed for the common areas, with billing for that common area meter going to the landlord.
Some BP links that discuss this a bit more:
https://www.biggerpockets.com/forums/84/topics/75044-installing-common-area-electric-in-a-3-4-unit
https://www.biggerpockets.com/forums/52/topics/107306-triplex-without-seperate-utilities
@Steve Babiak
Thanks for clarifying
@Jason Appel, I have several properties, both SFH and Duplex/Triplex in Philly.
In Philadelphia, water is lienable if the account goes delinquent, which is why most landlords do not make it the tenants responsibility and instead either cover water utilities or do some sort of bill back. I've done it several different ways. For my SFH's, I simply just bill the tenant the entire water bill. For my multi-family properties, I charge a fixed amount ($30/mo/unit) to them each month. To give you real numbers, the average cost per unit per month for my portfolio has been ~$34 over the past 12 months.
For other utilities, I have the tenant sign up and manage those accounts on their own. This is very typical for the area. The one exception is garbage for multifamily properties. The city mandates this be paid by the owner and is $300 annually. This I typically don't bill back to remain competitive.
Happy to share more numbers from my portfolio if you'd like! Best of luck.
HI all,
Just received an update on the refusal fee that went up significantly. It is $500 a year now.
Cheers,
Yuriy
@Steve Babiak and @Yuriy Skripnichenko,
Great Dialogue over here. Very informative information, lots to digest. Thank you!
Thank you! Is the sign up process simple for tenants on those separate utilities? Is it maybe worth charging more rent, but covering those expenses? I think not, because they may not be careful of their usage.
Originally posted by @Ross Yeager:@Jason Appel, I have several properties, both SFH and Duplex/Triplex in Philly.
In Philadelphia, water is lienable if the account goes delinquent, which is why most landlords do not make it the tenants responsibility and instead either cover water utilities or do some sort of bill back. I've done it several different ways. For my SFH's, I simply just bill the tenant the entire water bill. For my multi-family properties, I charge a fixed amount ($30/mo/unit) to them each month. To give you real numbers, the average cost per unit per month for my portfolio has been ~$34 over the past 12 months.
For other utilities, I have the tenant sign up and manage those accounts on their own. This is very typical for the area. The one exception is garbage for multifamily properties. The city mandates this be paid by the owner and is $300 annually. This I typically don't bill back to remain competitive.
Happy to share more numbers from my portfolio if you'd like! Best of luck.
Natural gas in Philadelphia is also liensble unless you are enrolled in the PGW Landlord Cooperation Program.
Best to do so if you have tenants who pay their own gas in Philadelphia. You also want to have some lease clause(s) that cover the PGW LCP.
@Steve Babiak that’s a good point. I signed up for the landlord program for gas (only one of mine uses gas utilities) but totally worth mentioning as it’s not necessarily obvious.
@Jason Appel sign up for utilities is pretty straightforward (same as if you had to). People are generally pretty motivated to sign up to avoid gaps in utilities coverage. My property manager also provides info on how to do it all.
If you have a 3 unit home, you also need to get the fire escape inspected.