Include Utilities in Rent or Not? Best tenant payment strategy?

Question

Hey BP Community! I'm excited to announce that I am currently under contract for my first home (house hack) at 20 years old! I am a current college student at the University of Utah and plan to do single room rentals while I take up one room. A couple questions regarding the landlord side,

1) From your guys' experience, have you found including the utilities in the rent for a flat rate was worth the time it would save calculating utilities for each person? (Divide total cost of utilities amongst every tenant in home).
2) Also, what is your guys' favorite way for collecting rent efficiently? I've heard Rentler is popular but, just wanted the opinions from people with more experience than me!

3) For doing room rentals, do you guys advise picking a specific "niche" of tenants? For example, only college students... (Without breaking tenant discrimination laws)

Thanks so much for any responses! If you are in the Salt Lake Valley, I would love to chat real estate!

Andy Okamoto · Answer

@Chris Winslow Thanks so much! I can definitely feel a little bit of my nerves coming in and thinking a lot about the "what ifs". But, as long as I keep the rooms occupied with quality tenants, I will be about break even when I'm living there and cash flowing when I move out (in a great area in Utah!).

I'm definitely going to check out those apps. I'm a software guy so I was considering making my own app haha! (Probably not worth it since reinventing the wheel is not too useful).I agree with you on that. For me getting students would be most ideal but, unfortunately its about a 25 minute drive to campus which isn't very appealing to students. But, young and single people who are responsible will work for me! My biggest obstacle is to just keep the rooms occupied with quality tenants (who come in all shapes and sizes)!

Thanks so much for your input Chris, I'd love to connect so I sent a friend request!

Eric Newcomer · Answer

Hey Andy! I'm house hacking in the SLC area. You probably won't have separate meters, so I'd recommend not charging extra for utilities if possible. You can do a rough calculation of how much utilities will cost per tenant/roommate, and then you can bake that into the rental price you set. There's an argument to doing it either way (charging a separate cost or not), but the one flat rental rate has worked well for me.

For discrimination laws, you shouldn't have to worry much about that. Since this is your first rental and you'll be living there as an owner-occupant, you qualify for an exemption under FHA anti-discrimination laws. You should still screen potential tenants in an ethical and unbiased manner, but the exemption means you're allowed to choose your roommates based on who you would get along with or other things like that.

For payments, I use Rentler and have had a great experience so far. Reach out anytime if you have questions!

Jasmine Delves · Answer

There are lots of great property management software options out there that have rent collection features built into them. I'd recommend this over cash apps like Zelle and Venmo as you can block partial payments. Linking your bank feeds through a PM app will also allow you to streamline your income and expense tracking and accounting.

Chris Winslow · Answer

Wow congrats on the success so far, 20 with a house hack is amazing!

1) I have small multifamily properties so my experience and strategy is a bit different but if I were in this situation and living in the house, once the bills come out I would divide them evenly and charge everyone that amount vs charging a utility fee but would consider a utility fee in the future once I had a solid average of expenses. With my properties that have separate units, if they are separately metered then the tenant sets them up and pays for them, if the buildings are not separately meteredthen I absorb the cost but may factor that into the base rent by slightly increasing.

2) Great question here, I am still working through the best one for me to use, I use apartments.com but it takes about a week for payments to come through so it's a bit laggy (for example: tenant pays on the 5th, you get the payment in on the 12th but the payment fails, now you are behind). That being said it's free and I feel it's fine to start here first for free. Some people use Zelle which is nice because it's free and quick but isn't really ideal for rent collection. I've also heard of people using Avail and Innago which are designed for rent collection but I have not had experience using them yet but they'd be worth checking out.

3) For this question I think since you'd be living there, try to screen for people you could see getting along with and living alongside first and foremost. After that, I do think that's a good idea to niche down and get a similar group of people to live together that may have some commonalities. So from that side, it's good but you'll have to make sure that there are enough of that niche of people in the area to make sure you aren't limiting your market too much. Tenant screening is a funnel and you want to make sure you are giving yourself enough good options for the future. And definitely do be mindful of the discrimination laws.