Confused on the expenses

3 Replies

Newbie here to BP community but feeling addicted to it and the tons of YouTube videos. Educating myself as much as possible before taking the first step. 

One question I have after watching several deal of the day videos when they are using the rental calculators to evaluate the deal and cash flow and such....why are fixed landlord expenses being shown as power/water/sewer/trash being shown?? 

I just recently moved to AZ and I am currently renting a house and I as the tenant pay all those expenses.....so why would a real estate investor calculate those expenses when the tenant should pay those?

Am I missing something? I completely understand setting side money every month for the repairs/cap ex repairs/vacancy. 

This might be a simple answer and if anyone could explain it that would be great. 

Thanks 

Brian 

@Brian Parker it depends on your location and the property. If the tenant is paying utilities, then you can pretty much ignore them in your calculations.

But many areas it’s difficult or not advised to switch water/sewer to the tenant. So the landlord pays. Also, if you’re dealing in multi-family, often the gas heat is on one meter and one furnace, so the landlord pays that.

It’s good to plan for it on your projections - and set it to $0 on those properties that the tenant is paying.

In many parts of the country water, sewer and trash bills that are not paid are placed as a charge either against the property tax bill, as a lien against the house, or as an unpaid bill against the owner of the property.  This action also comes with interest and penalties against the original bill charges.

So, if the tenant is responsible for the bill, once the bill is not paid by a tenant the owner gets the charge, and also gets the major hit on their credit rating score.  The utility will not tell the owner of the bill not being paid that there is a problem as the bill is not in the owner's name until they decide to take this action.  By the bill then can be thousands of dollars.

To avoid this situation many landlords pay these bills directly.  I have not ever seen electricity in this category.  Generally that and gas the tenants pay.

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