All Utilities or No?

Question

Would it be best to include all utilities and allow a tenant just to pay a flat fee that covers everything for a SFH?

Example: Mortage payment is $600 a month which is fixed rate which includes everything in one payment. If the Tenant Pays 850-900 a month. That includes Paying down The Mortage, Gas & Electric, maintenance cost, insurance, and Lawn work/snow removal. Would I make out In terms of a decent cash flow opportunity?

Kyle J. · Answer

I prefer to have the tenant pay all the utilities, but I definitely wouldn't want to pay any utility that wasn't a fixed cost. There's just no incentive for the tenant to conserve if they're not paying the bill, and your costs could end up varying wildly.

Also, I'm not really sure how much of a selling point it would be when you go to rent it. I mean, I'm sure a tenant would appreciate not having to pay any utilities, but I think when they're looking for a place to rent most of them just look at the total rent amount and compare that to other available rentals. So your $900 rental might not look  so attractive in a $600 rental neighborhood. Just something to consider.

Chris K. · Answer

I don't think there would ever be a situation where I would choose to pay utilities if it was possible to make the tenant responsible. Your utility costs wouldn't be fixed so you're risking them using much more than you've calculated in your payment.

Scott Weaner · Answer

For a single family home, I would put all of those costs on the tenant. All utilities and yard maintenance along with snow removal.

John D. · Answer

If the mortgage payment is $600, and the tenant $850-$900 per month, and you pay all utilities, you will not cash flow.  Factor in taxes, vacancy, maintenance, CAPEX, and utilities and you will be losing money.

Elizabeth Colegrove · Answer

What does your area support? What does your competition do? I have all single family homes, and I pass on as much to my tenants as possible because that is normal for my area. Be careful about trying to absorb costs as you would be surprised how people suddenly don't "care" as much when they have no skin in the game!

James Wise · Answer

We have tenants pay gas & electric. Owner pays H20 & Sewer. This has to do with water company policy.

All Utilities or No?

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