Electricity bill is skyrocketing to $450!

[Jane Kim]

Hi,

I'm not sure if anyone else is going through this in Los Angeles/Moreno Valley so I'm reaching out if this is normal. I have a 2000 sqft home with 5 rooms that's currently being rented out by tenants. Utilities are included in the rent price. My gas, water, and waste service come out to a steady/normal amount, but only my electricity bill skyrocketed to $312 in January for 3 tenants and is estimated to be $450 in February for 5 tenants. Previously, it was $100 for December when there was only two tenants in the house. Is this the amount of electricity bill that I should be exacting for a 5 people household during this cold weather?

I know that one of my tenant uses an oil filled radiant space heater for 24/7 because it helps her fall asleep and keeps her warm. It didn't realize that this would make the electricity bill come out to $300-450. I have to admit that the house does get really cold, but I'm able to endure it if I wear a jacket and fleece pants, but I know that my comfort level is different from others. I was thinking of a few ways to approach this situation, but it would help me greatly if you guys can give me some advice on this and how you guys would approach this situation. 

In the lease agreement, it states that a tenant must get a written permission if "changing the amount of heat or power normally used on the property as well as installing additional electrical wiring or heating unit." so I have rights to ask the tenant to pause her space heater. I was thinking about first asking her if she's open to contributing to only the electricity bill. Her contract ends on June 10th this year so it's only a few months away, but I'm okay with terminating the contract early if she must have her space heater on 24/7. No one turns on the central heater at home so should I install a smart thermostat to keep the house at a consistent temperature? What if I install the smart thermostat and the electric bill goes even higher? Or should I no longer include utilities for my next tenants? What would you guys do in my situation?

[Wendy S.]

@Jane Kim

Another thing could be to do an energy audit. How good is the insulation, windows and doors. You could check if the house is losing heat via these areas.

It seems you also occupy the home so it might be fairly easy to assess electricity/heating in the general areas.

For example, I had an older tenant that would constantly open the kitchen window while cooking and the central heat was on. Had another that liked to open his window to let fresh air in his room (he was a smoker). Some people take excessively long hot showers, leave all the lights on, TV etc.

You might want to call a 'house meeting', get everyone on board to manage expectations then document after the meeting with addendum to your lease for increased utilities beyond an agreed wattage use.

Finally, see if there is a fixed payment plan offered by your provider or reduced rate for a agreed term or switch providers.

I once had a bill for over $550, I asked for consideration, turns out there was a one-time allotment. I paid almost half the bill, the company paid the rest and then I went on budget billing at $125 monthly.

Goodluck

[Dan H.]

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I would call the utility company to see if rates are going up. For example So Cal Gas upped their rates temporarily. 

I agree with @Theresa Harris, you shouldn't have to wear a jacket in your own household.

When I include utilities, I always put a cap. For example, "if utility costs exceed $X, then tenant pays the difference." We have had an unusual winter so how you define "normal" is very subjective and if I were a tenant, I would push back.

 What are your thoughts on solar for your property as well?  Considering you are also in California, this must have come up in your thought process at some time I'm sure.

 I have looked into solar. Here are my thoughts:

1. Tenants don't think about utilities when renting and I don't want to pay utilities for tenants. If they stop paying rent, I'm still on the hook to keep their lights on. For utilities that are shared, I do a separate fee. For example my ADU pays a $50/month water fee on top of their rent.

2. Solar only makes sense to install when you put on a new roof. The cost of removing to fix a roof is in the thousands. 

3. In my agent experience, I have never represented a buyer or seller that paid for or received a premium for having solar panels. When I ask my buying clients who bought a property with solar, they said it was nice but would never pay a premium for it.

4. Google has a free, what appears to be unbiased, feature that shows how many years it would take to get your money back. For my property, it said 10 years. I have no intention of living here for 10 years (we are actually now planning on selling in the next five years). Here is the link: https://sunroof.withgoogle.com...

I'm all for being environmentally conscious, but it has to make sense.

 let's simplify the conversation a bit. 

1. Everyone pays rent every month, with solar each payment is cutting down on that rent and is counted towards ownership like a mortgage. 

2. Electricity rates are always going up, not just due to inflation but also an increase in demand from the grid. So the price you can pay today for electricity will always go up. 

3.  Only 6% of homes in the US are solar, meaning the probability of actually meeting someone who has successfully been through the process is low.  Improving but still low. 

I would love to discuss this further with you however, as a realtor it could significantly boost your portfolio.  I'm sure you will have many questions that are hard to answer in a chat. 

 To your points:

1. Still not my problem as a landlord since the tenants are paying utilities. 

2. Again, still not my problem. Eventually, yes, I will have to go with solar. But I don't need to today and I would never add it to a rental unless it is state required. 

3. I'm in Los Angeles, there are plenty of people with solar. People like it, I'm just saying from a resale and rental perspective, it hasn't moved the dial in my world.

I do not have any questions at this time.

It doesn't have to be a problem, but it could be an answer.  The added equity that solar gives is a bonus.  Knowing that each passing year you are also owning more of the utility cost that your property will generate is a bonus.  As you go along passing on those savings to your tenants will be something that I'm sure they will smile about.  

If you know you will have to go solar eventually, why wait till you have to rather than see how you can monetize it today?  I think your resistance from your tone of voice is in being pushed in a direction you don't feel comfortable with, so I would rather urge you to explore what would make it a need for you so you can get yourself prepared for the curve. 

The biggest problem with solar is financing it is costly upfront, but again use the same principles for why we buy a home, and apply that to buying your energy. 

1) solar is a negative value add in my market and I suspect most markets meaning it costs more than the value added to the property

2) When utilities are included in the rent a) the tenants under value the utilities and therefore it is hard to collect additional rent that fully values the utilities b) the tenants have less incentive to conserve c) tenants have less incentive to report/fix items like leaks or water heater constantly running.

3) Solar requires maintenance a) cleaning the panels 2) if anything breaks (I have had 2 invertors stop working)

4) in my market it is against the law to charge more than utility cost.  This in effect implies when you add solar, you are committed to forever having the utility included in the rent.  Which brings us back to item #2.

One of my rentals has solar because the property had solar when we purchased it.  I am not able to get enough over market rent to have justified purchasing the solar system.  This is due to item #2, but I have added a maintenance item.  The return on adding solar to a rental property in my market is pathetic.

There may be some market variability to the advantages of adding solar to a rental, but I suspect in virtually every market there are better investment options.

[John Morgan]

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

[Clement Ndifor]

Quote from @John Morgan:

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

 That's a great scenario where you should consider solar for your properties John.  

[John Morgan]

Quote from @Clement Ndifor:

Quote from @John Morgan:

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

 That's a great scenario where you should consider solar for your properties John.  

I have solar on one. But the panels aren’t working that good. And the solar panel company went out of business. I get on average $1/month back off my electric bill. Lol 

[Clement Ndifor]

Quote from @John Morgan:

Quote from @Clement Ndifor:

Quote from @John Morgan:

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

 That's a great scenario where you should consider solar for your properties John.  

I have solar on one. But the panels aren’t working that good. And the solar panel company went out of business. I get on average $1/month back off my electric bill. Lol 

 Bummer.  Have you looked to get the warranty transferred to another company?  Getting a reliable company for solar is huge as it is a long-term investment. 

[John Morgan]

Quote from @Clement Ndifor:

Quote from @John Morgan:

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Quote from @John Morgan:

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

 That's a great scenario where you should consider solar for your properties John.  

I have solar on one. But the panels aren’t working that good. And the solar panel company went out of business. I get on average $1/month back off my electric bill. Lol 

 Bummer.  Have you looked to get the warranty transferred to another company?  Getting a reliable company for solar is huge as it is a long-term investment. 

No. I bought the house with the panels and didn’t receive the warranty or any information about them. They’re about 3 or 4 years old. I just had them cleaned. I was only getting back 50 cents a month on the buyback. Now I’m getting about 90 cents a months back. Lol 

[Clement Ndifor]

Quote from @John Morgan:

Quote from @Clement Ndifor:

Quote from @John Morgan:

Quote from @Clement Ndifor:

Quote from @John Morgan:

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

 That's a great scenario where you should consider solar for your properties John.  

I have solar on one. But the panels aren’t working that good. And the solar panel company went out of business. I get on average $1/month back off my electric bill. Lol 

 Bummer.  Have you looked to get the warranty transferred to another company?  Getting a reliable company for solar is huge as it is a long-term investment. 

No. I bought the house with the panels and didn’t receive the warranty or any information about them. They’re about 3 or 4 years old. I just had them cleaned. I was only getting back 50 cents a month on the buyback. Now I’m getting about 90 cents a months back. Lol 

 you got screwed over on the purchase.  Your realtor was supposed to make sure you had all that information during the purchase.  I just sold my property with solar panels and we gave the new owner all the warranty information.  I dont know how dusty your part of the world is but I know California can get dusty, however panels don't really need cleaning as the occasional one rainfall a year minimum will get your panels clean.  A roof is significantly higher up than a ground mount and should avoid enough dust. 

I would love to help explore getting your system back under a warranty with a new company if you don't mind going down that route?

[John Morgan]

Quote from @Clement Ndifor:

Quote from @John Morgan:

Quote from @Clement Ndifor:

Quote from @John Morgan:

Quote from @Clement Ndifor:

Quote from @John Morgan:

@Jane Kim

I’ve got a few houses I rent by the room in Texas. One bill was $800 last month and another was $700. I want my tenants to be comfortable so I don’t lecture them on how warm or cold the house needs to be. All leases are month to month. I could always raise rent by $100 per person to pay for the extra energy if I wanted. I’m not going to divide my utility bills and charge them. What you see is what you get as far as room rent price. People like that. I would just raise your rooms an extra $100/month or more for each person. Keep it simple. And I’m sure your tenants will understand.

 That's a great scenario where you should consider solar for your properties John.  

I have solar on one. But the panels aren’t working that good. And the solar panel company went out of business. I get on average $1/month back off my electric bill. Lol 

 Bummer.  Have you looked to get the warranty transferred to another company?  Getting a reliable company for solar is huge as it is a long-term investment. 

No. I bought the house with the panels and didn’t receive the warranty or any information about them. They’re about 3 or 4 years old. I just had them cleaned. I was only getting back 50 cents a month on the buyback. Now I’m getting about 90 cents a months back. Lol 

 you got screwed over on the purchase.  Your realtor was supposed to make sure you had all that information during the purchase.  I just sold my property with solar panels and we gave the new owner all the warranty information.  I dont know how dusty your part of the world is but I know California can get dusty, however panels don't really need cleaning as the occasional one rainfall a year minimum will get your panels clean.  A roof is significantly higher up than a ground mount and should avoid enough dust. 

I would love to help explore getting your system back under a warranty with a new company if you don't mind going down that route?

The seller told me he stopped payments on his solar panel loan. He just decided to stop paying his 25k loan. Then the solar panel company went out of business. I got this house really cheap and wasn’t planning on renting it out by the room so I didn’t care about the mystery panels on the roof. But now that I’m paying the electric bill, I wouldn’t mind trying to figure out if I could save a buck on my electric bill. I got them registered and on a solar buy back program. I had them cleaned for $250 a few weeks ago. I just don’t know what I need to do to get them going.