Aren't Utilities Paid by The Tentants?
New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes
Aren't Utilities Paid by The Tentants?
Most Popular Reply
Investor 路 Provo, UT 路 Member since 2016 路 759 posts 路 626 votes
3yIt depends on the configuration of utilities.
I would never ever make any specific person pay utilities as a rule.
It is going to be property by property.
Now with that said in the Mobile Home Park Space and any multifamily space in general utilities are one of the greatest areas of increasing profitability.
26 Replies
- 3yAndrew BoscoBusiness MemberRental Property Investor 路 NH 路 Member since 2023 路 441 posts 路 417 votes
this depends if utilities are split up or not! some properties, like apartment buildings, should have separate utilities, but may not. Others, like single family homes obviously just have one set-up. It depends how you want to structure your rent as an owner. For STR/MTR - I include utilities in the rent. For my multi-family properties - I try to split up ALL utilities. More commonly, sewer/water (if public) are paid by the owner. It just depends on the building layout.
Andrew Bosco - Candor Investment Group529 Reviews - 3yTheresa HarrisPro MemberMember since 2019 路 15k+ posts 路 11k+ votes
I have mine pay utilities, but for some I have to keep the bill in my name and the tenants pay me. These are things like water that if the tenant doesn't pay, the bill stays with the house.
- Honolulu, HI 路 Member since 2008 路 3k+ posts 路 2k+ votes3y
Aloha,
It also very much depends on how the various utils are handled in your locale. Some require them to be provided by Owner; others put a lien on the property if Tenant does not pay; and, you need to be sure that any "shared" or common area utils are either separately invoiced to Owner, or, any "splits" are clearly documented with regard to HOW they are split, and agreed to in each Rental Agreement where applicable AND where local law allows it.
- Investor 路 Miami, FL 路 Member since 2020 路 20 posts 路 8 votes3y
Currently, house hacking a duplex in Miami. Meters are split so my tenants pay their own power and light. water and sewer is not split but it is added in their rent at a flat rate.
- Real Estate Agent 路 Puyallup, WA 路 Member since 2022 路 551 posts 路 379 votes3y
If it's a single family investment property then the tenant should always be paying their own utilities. Multi family, more often than not the landlord will usually pay water and sewer just because it's more rare to find that utility separated between the units.
- Morris County, NJ 路 Member since 2020 路 5k+ posts 路 2k+ votes3y
who even knows what this book is talking about and the context (no I don't keep up with this stuff as I'm "not buying what they are selling")? Is it talking about flips? is it talking about worse case scenario if its not rented?
- 3yMelanie ThomasBusiness MemberReal Estate Broker 路 San Antonio 路 Member since 2022 路 1k+ posts 路 489 votes
Yes however, depending on the meter situation sometimes LL's will pay them to make it easier regarding billing and avoid having to do complicated calculations each month. Good luck & happy investing!
RentWerx Property Management4.73300 Reviews - 3yNoah BaconPro MemberProperty Manager 路 Lansdale, PA 路 Member since 2021 路 826 posts 路 1k+ votes
Quote from @Hendra Wijaya:
Hi Biggerpocketters,
I am currently reading Brandon Turner's book 馃摎 and I have noticed that he kept saying when it comes to expenses that need to be paid each month, he would include utilities.
Aren't utilities paid by tenants? I am a newbie, so I apologize in advance if this a a stupid question but I am learning.
Thank you in advance! 馃憤馃徏
You decide who will pay the share of the utilities as the landlord.
For a SFH, it is pretty straightforward on who will pay the utilities since the utility provider will likely provide Electric, Gas, Water/Wastewater on the property. Personally on my SFH rental, I instruct the tenant to put the utilities in their name as it is their responsibility to pay their usage.
For Multi Family properties, I would follow the same advice as the above for SFH for the individual Unit meters. The utility responsibility on a MFH is a bit more complicated, because you have the common shared meter bill that will continue in the owners name. This bill is typically for the expenses of common areas (example: the electric bill for the laundry room if you have one in the property) and sometimes the water bill for the entire property. You can decide if you pay that bill monthly as the landlord, or split it between the tenants in the property. - 3yAlan AsriantsBusiness MemberReal Estate Agent 路 Philadelphia, PA 路 Member since 2019 路 1k+ posts 路 1k+ votes
As someone mentioned here, it all depends what you invest in.
Many apartments don't have separate water meters but they will likely have separate gas, electric, heating, water heaters, etc.
Whatever is utility is separated - that bill can likely go under the tenant. They will open their own account and set up payment with the utility company directly.
Utilities that cannot be taken out of your name are likely lien able to the property. So you can send the tenants your bill and they will pay it.
for example, In my area water meters are not separated and water is lienable to the property. I mostly own small multi family - 2-4 units.
I receive the bill and split it between the tenants based on how many people live per unit
An investor client of mine, owns large multi family building and charges a flat rate.
No right or wrong way, but rule of thumb, if you can, have them pay
Alan Asriants - New Century Real Estate 590 Reviews - New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Thank you everyone for the replies. They have all been helpful, now I see that I am thinking of my current rental (located in LA) that I am in. I am always having to pay for my Conservice bills which include: trash, water and sewer.
Perhaps @Richard F. is right, it depends on particular management company and how they set up their leasing contract agreement. Some would state that tenants are completely responsible for all utilities incurred each month. - 3yAlecia LovelessPro MemberMember since 2019 路 3k+ posts 路 2k+ votes
@Hendra Wijaya I pay for the water and sewer or to maintain wells and septic systems which ever it may be. In 6/7 of my properties the tenants pay for the electricity but in my newest one there is currently only one electric meter. We are exploring our options at the moment because the main utility panel already has to be moved as it is located in one of the units in a bathroom which is not up to code. We will be at the very least separating out each apartment into its own panel in the basement of the building and are getting an estimate on putting in individual meters to look if the cost would weigh out over a 5-7 year period versus us paying for that much electricity.
- 3ySamuel CoronadoPro MemberInvestor 路 Huntsville, AL 路 Member since 2016 路 334 posts 路 181 votes
@Hendra Wijaya some of my properties I pay water for the tenants because it's not economical to submeter vs just paying the 250 a month for a 6 plex. You also avoid liens in certain places.
- Investor 路 Provo, UT 路 Member since 2016 路 759 posts 路 626 votes3y
It depends on the configuration of utilities.
I would never ever make any specific person pay utilities as a rule.
It is going to be property by property.
Now with that said in the Mobile Home Park Space and any multifamily space in general utilities are one of the greatest areas of increasing profitability.
- New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Quote from @Samuel Coronado:
@Hendra Wijaya some of my properties I pay water for the tenants because it's not economical to submeter vs just paying the 250 a month for a 6 plex. You also avoid liens in certain places.
Hey Samuel, I guess it all depends on the numbers then! Alright, cool! Thanks again! - New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Quote from @Logan M.:
It depends on the configuration of utilities.
I would never ever make any specific person pay utilities as a rule.
It is going to be property by property.
Now with that said in the Mobile Home Park Space and any multifamily space in general utilities are one of the greatest areas of increasing profitability.
Yeah, especially when there are times where each unit's utilities come up to $100+ per units, that's $1,200 per unit. That's costly. - San Antonio, TX 路 Member since 2009 路 3k+ posts 路 1k+ votes3y
@Hendra Wijaya Some properties the landlord pays utilities. In these types of cases, it's more of a matter of sub-metering the units which requires logistics.
Usually, these are older types of properties in my experience.
For the most part, tenants tend to pay for their own utilities for most properties that I see.
Hope that helps!
- Property Manager 路 Cleveland, OH 路 Member since 2023 路 16 posts 路 5 votes3y
Hello!
Typically, gas and electric are placed into the tenants names to pay directly. However, water and sewer often stay in the homeowner鈥檚 name. To compensate for this, you can charge the tenant a standard fee monthly (or charge back the actual rate- depending on what the lease states).
Please also note that this also depends on if you are working with section 8 tenants or not, in which case you would comply with that is depicted in the HAP.
- Member since 2022 路 405 posts 路 455 votes3y
As others have said, it really depends on the location, type of property, how the meters are split, what you structure in your lease, and even your strategy. For example, as a student rental property that is rented by the room, all of the utilities are billed together and I pay them, and then split the cost across all tenants. This is how it is structured in the lease.
- Investor 路 Provo, UT 路 Member since 2016 路 759 posts 路 626 votes3y
Quote from @Hendra Wijaya:
Quote from @Logan M.:
It depends on the configuration of utilities.
I would never ever make any specific person pay utilities as a rule.
It is going to be property by property.
Now with that said in the Mobile Home Park Space and any multifamily space in general utilities are one of the greatest areas of increasing profitability.
Yeah, especially when there are times where each unit's utilities come up to $100+ per units, that's $1,200 per unit. That's costly.Exactly, you run into similar issues with HOA costs.
- New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Quote from @Rachel H.:
@Hendra Wijaya Some properties the landlord pays utilities. In these types of cases, it's more of a matter of sub-metering the units which requires logistics.
Usually, these are older types of properties in my experience.
For the most part, tenants tend to pay for their own utilities for most properties that I see.
Hope that helps!
In all of my multi-family/apartments that I live in, I have never had the experience of water and sewage bills being paid for by the landlord. So this was a new concept to me.
Thanks again
- New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Quote from @Brittany Perkins:
Hello!
Typically, gas and electric are placed into the tenants names to pay directly. However, water and sewer often stay in the homeowner鈥檚 name. To compensate for this, you can charge the tenant a standard fee monthly (or charge back the actual rate- depending on what the lease states).
Please also note that this also depends on if you are working with section 8 tenants or not, in which case you would comply with that is depicted in the HAP.
Yes, I believe the latter (charging back the actual rate) is better as it would be fairer to the tenants. The amount of water usage differ from household to household so it wouldn't make sense to charge a standard fee. I guess I just need to learn as I go.I appreciate your input!
- New to Real Estate 路 Omaha, NE 路 Member since 2023 路 36 posts 路 5 votes3y
I would and do have my tenants pay the utilities it is the primary way they are accountable for usage.
- New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Quote from @Rachel K Reiman:
I would and do have my tenants pay the utilities it is the primary way they are accountable for usage.
Yes, I totally agree with this! If we pay for their bills, they will not care how much water and electricity they use.
- Real Estate Broker 路 Cody, WY 路 Member since 2010 路 28k+ posts 路 41k+ votes3y
As the Landlord, you decide. The Tenant typically pays the utilities and that's the recommended way to go about it.
If you have a property with shared meters and the Tenants can't set up their own accounts, then you would do something different.
Here's my basic utility splitting guide:
HOW TO SHARE UTILITIES 101
You have a property with two or more units and the utility meters are shared. There are a few options.
1. Pay to separately meter the utility. This can be very expensive and is usually the worst choice to make because you can't justify the cost.
2. Charge the tenants a higher rent rate and include utilities with their rent. This is the simplest method, but it also means your tenants are more likely to abuse the utilities by leaving windows open with the heat or A/C running, leaving lights on, ignoring the toilet that constantly flushes on its own, etc.
3. Pay the bill yourself, then reimburse yourself by charging the tenants based on a formula. This takes a little more work, but it's the most fair and reduces the likelihood of tenants that squander utilities.
If you choose #2 or #3, there are considerations:
Start with an average. Use varies throughout the year. Heating costs go up in winter, as does electric due to the reduced natural light and people being indoors more. Electric can also spike in the summer with A/C. Contact the utility provider and get an historical average based on the last year of use. It won't be 100% accurate, but it will be close enough. I recommend you do this each year to adjust for utility increases and other variables. If your average heating bill is $150, you may not collect enough in the winter months when the bill reaches $225 but you'll collect extra in the summer when it drops to $65. If you base your tenant charges on the historical average, you should come very close to collecting the entire amount over a one-year period.
Charge a higher rate. If the water bill is $100 a month, increase the price by 20% (or whatever you decide is fair) to compensate you for the time required to split and bill and to cover additional use when tenants squander the utility. If the bill is $100 a month split between four units, increase it to $120 and charge each tenant $30.
How to calculate charges. Don't make it harder than it has to be. If you have four 2bed/1bath units with the same appliances, split it four ways and call it a day. You can make minor adjustments based on the type of appliances (dishwasher, clothes washer and dryer, air conditioning, etc.) and the size of the rental. If Apartment A is a 2bed/1bath with washer/dryer and Apartment B is a 1bed/1bath with no washer/dryer, Apartment A should pay a higher rate. Another option is to split the cost based on the number of occupants in each unit but this also means you'll need to adjust the charges as tenants move in/out, so it requires more work and I wouldn't recommend it. I recommend a simple spreadsheet to check your math and it will make it simple to adjust each year.
End the complaints. Tenants may complain about your method of calculating how much each unit pays. They think it's unfair because they only shower once a week but they can hear the upstairs neighbor showering twice a day. You can put an end to this by showing them an actual utility bill. Why? Because a large percentage of the charges are base fees that do not change based on use!
I just looked at a utility bill and it has a total charge of $184.12 but $116.50 is from base fees! If I divide this bill by four units, each tenant would pay $46.03. If they were separately metered, each tenant would pay the $116.50 base fees and their individual use, which would be 3x higher than what they pay when sharing a meter.
There are a lot of options out there, but don't make it more complicated than it needs to be. Tenants actually save money when using a shared meter, so there's plenty of room for error when calculating how to distribute the charges.
The DIY Landlord Book4.7248 Reviews - New to Real Estate 路 Singapore / Los Angeles 路 Member since 2023 路 24 posts 路 9 votes3y
Quote from @Nathan Gesner:
As the Landlord, you decide. The Tenant typically pays the utilities and that's the recommended way to go about it.
If you have a property with shared meters and the Tenants can't set up their own accounts, then you would do something different.
Here's my basic utility splitting guide:
HOW TO SHARE UTILITIES 101
You have a property with two or more units and the utility meters are shared. There are a few options.
1. Pay to separately meter the utility. This can be very expensive and is usually the worst choice to make because you can't justify the cost.
2. Charge the tenants a higher rent rate and include utilities with their rent. This is the simplest method, but it also means your tenants are more likely to abuse the utilities by leaving windows open with the heat or A/C running, leaving lights on, ignoring the toilet that constantly flushes on its own, etc.
3. Pay the bill yourself, then reimburse yourself by charging the tenants based on a formula. This takes a little more work, but it's the most fair and reduces the likelihood of tenants that squander utilities.
If you choose #2 or #3, there are considerations:
Start with an average. Use varies throughout the year. Heating costs go up in winter, as does electric due to the reduced natural light and people being indoors more. Electric can also spike in the summer with A/C. Contact the utility provider and get an historical average based on the last year of use. It won't be 100% accurate, but it will be close enough. I recommend you do this each year to adjust for utility increases and other variables. If your average heating bill is $150, you may not collect enough in the winter months when the bill reaches $225 but you'll collect extra in the summer when it drops to $65. If you base your tenant charges on the historical average, you should come very close to collecting the entire amount over a one-year period.
Charge a higher rate. If the water bill is $100 a month, increase the price by 20% (or whatever you decide is fair) to compensate you for the time required to split and bill and to cover additional use when tenants squander the utility. If the bill is $100 a month split between four units, increase it to $120 and charge each tenant $30.
How to calculate charges. Don't make it harder than it has to be. If you have four 2bed/1bath units with the same appliances, split it four ways and call it a day. You can make minor adjustments based on the type of appliances (dishwasher, clothes washer and dryer, air conditioning, etc.) and the size of the rental. If Apartment A is a 2bed/1bath with washer/dryer and Apartment B is a 1bed/1bath with no washer/dryer, Apartment A should pay a higher rate. Another option is to split the cost based on the number of occupants in each unit but this also means you'll need to adjust the charges as tenants move in/out, so it requires more work and I wouldn't recommend it. I recommend a simple spreadsheet to check your math and it will make it simple to adjust each year.
End the complaints. Tenants may complain about your method of calculating how much each unit pays. They think it's unfair because they only shower once a week but they can hear the upstairs neighbor showering twice a day. You can put an end to this by showing them an actual utility bill. Why? Because a large percentage of the charges are base fees that do not change based on use!
I just looked at a utility bill and it has a total charge of $184.12 but $116.50 is from base fees! If I divide this bill by four units, each tenant would pay $46.03. If they were separately metered, each tenant would pay the $116.50 base fees and their individual use, which would be 3x higher than what they pay when sharing a meter.
There are a lot of options out there, but don't make it more complicated than it needs to be. Tenants actually save money when using a shared meter, so there's plenty of room for error when calculating how to distribute the charges.
This is definitely a solid plan to go about the utility bills if it had to be a shared meter. Thank you, sir!
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