Include Utilites on a House Hack?

Question

I just got an accepted offer on my first multifamily. It's a 2 unit property (2 bed/1 bath & 1 bed/1 bath). I'm going to be house hacking and the units share meters (electric, water and gas).

Should I include utlitilties or split utilites, say 40/60 (smaller unit pays 40% and I pay 60% in the bigger unit)? I understand that tenants can take advantage of included utilites, so I'll do my home work and establish a cap if that's the route I take.

Average rents for a 1 bed/1 bath in my area is $650-750 per month.

What are you all's thoughts? Has anybody else ran into this? What solutions have you guys come up with?

Taylor Dasch · Answer

I am not sure of the cost, but I would definitely look into getting separate meters, I hate the idea of having to pay the tenants electrical/water, because I know if I wasnt paying for it I would probably not care about the usage at all. I set my house to 77 in the summer time, but if someone else was paying the bill I would keep it about 10 degrees cooler in here lol! Also, look into what other people in your market are doing. Is it standard for the landlord to pay the bills? If so then it wouldnt be worth getting two separate meters since paying the bills is the norm for the area.

Kevin Sobilo · Answer

@Stefan Gray, first off check your state's laws about splitting combined utilities. Some states prohibit charging separately for them.

I think if you call the utility companies they can give you an average monthly bill based on the previous years usage. You can use that to bake the utility cost into the rent.

If you want to factor in for extra usage in some way, perhaps do it based on occupancy. You might say rent is $700 based on 1 person occupancy and $25 for each additional person. So, if a family with 2 adults and a child apply the rent for them would be $750. This would roughly account for the potential difference in utility costs.

If you are looking to separate the utilities, many people install a 2nd electric meter and wire the 2nd unit to that and put the 2nd unit on electric baseboard heat. That would separate most of the utilities at once. If you also installed an electric water heater for their water runs then you would also have them paying to heat their own water.

People often don't install a second water meter. Putting in a new water line is expensive and the water bill is usually a smaller bill compared to the others on average.

Stefan Gray · Answer

Really good to know, I will look into it thank you.

Rick Albert · Answer

For my first house hack, I included utilities but did a cap. Anything past the cap we would split. On my second one where the water is shared, I did a flat water fee with a cap. It all depends on what you are seeing out there in the competition.

Keep in mind if the tenants stop paying rent, you are still on the hook for the utilities.

Ben Rezac · Answer

As everyone is saying, check local laws... but, for my first house hack, I just made it simple... I lived in the small unit, and it was just me. My tenants had the larger unit and there was two of them. They paid 2/3s of the utilities each month.

Don't sweat the small stuff. Just enjoy the excitement of getting the house! Congratulations!!!

Michael Sassone · Answer

I'd look into your local laws as @Kevin Sobilo mentioned and make sure you won't violate anything by doing so. They also sell devices you can install to track consumption/usage of things like water. Maybe have a wifi enabled smart device installed where the main water supply splits to their unit to track their water usage?

I think there is also a wifi enabled device you can install into the breaker box that will track electrical usage as well.

May add a little bit of work each month to keep track but could end up saving your business a ton of $ and will enable you to give fair utility charges.

Just some food for thought.

Tommy Parker · Answer

Outside of checking the local laws as most are saying I would have the tenant pay their share of the utilities each month and I pay my share.

Include Utilites on a House Hack?

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