How do you charge back utilities on small multi’s

Question

Hi All- I've been researching the forums and google a lot to get perspective on this, but still struggling. When you have a small multi property that has all utilities- gas, water, sewer, trash-combined (paid by owner), what do you charge back (if any) to the tenants?

some people just increase rents, although I think that makes the units less competitive. I've got a duplex that has $600 a month in utilities, with gas, water and sewer being the large chunck. Should I just add $100-200 "utility charge" to tenants rent? Investing in submetering doesn't seem to have a good ROI either.

just curious what the experiences people on this forum have done to manage through this. Rents are below market, fyi.

James Jones · Answer

This is a very common issue on small multis, especially older duplexes where everything is master-metered.

In practice, I see three approaches that actually work, and one that usually causes friction.

1. Flat monthly utility reimbursement (most common)

This is what you’re already thinking about and it’s usually the cleanest solution.

• Calculate a 12-month average of total utilities

• Divide by unit count (or bedroom count if uneven)

• Charge a flat monthly utility reimbursement as a separate line item

Example:

$600 total utilities ÷ 2 units = $300 per unit

You might charge $150–$200 per unit and absorb the rest.

Pros:

• Predictable for tenants

• Easy to explain

• No submeter install cost

• Works well when rents are below market

Cons:

• Owner still carries some usage risk

This is very common and generally accepted by tenants if disclosed clearly.

2. RUBS (Ratio Utility Billing System)

If allowed in your jurisdiction, this can work well.

Utilities are split by:

• Unit count

• Bedroom count

• Square footage

Pros:

• More “fair” than flat fees

• No capital expense like submeters

Cons:

• Slightly more admin work

• Tenants sometimes push back if they don’t understand it

This is usually better once you’re above a duplex, but still viable.

3. Build utilities into rent (simple but less transparent)

This works best when:

• Rents are already below market

• You plan to raise rents anyway

Instead of calling it utilities, you move rents closer to market and keep utilities owner-paid.

Pros:

• Zero tenant confusion

• Simplest administratively

Cons:

• Usage abuse risk

• Harder to adjust later

What I’d avoid

Adding a vague “utility charge” without explaining how it’s calculated. That’s where disputes come from.

Submetering

You’re right to be skeptical. On small properties, ROI is usually poor unless:

• You’re doing a major renovation anyway

• Local utility incentives exist

Bottom line

For a duplex with $600/month utilities and below-market rents, I’d either:

• Add a flat $150–$200/month utility reimbursement per unit, or

• Raise rents toward market and keep utilities included

Both are very normal approaches. The key is clear disclosure and consistency.

Tim W. · Answer

@James Jones super helpful. Really appreciate the time you took explaining this our. Thank you!