Utilities
Utilities can be tricky if the tenant doesn’t pay all. Many multi-family properties have shared meters. The dilema for property owners is if you include utilities in the rent tenants tend to abuse them and leave the heater going 24/7 – they aren’t seeing the bills so they don’t know the expense. I am a firm believer in tenants paying their utilities. There are a couple ways of doing this.
1. Prorate the utilities by number of occupants, or by square footage if one unit is very large and the other is small.
2. Owner pays up to a certain limit and anything over that the tenant pays.
3. Add second PGE (Pacific Gas & Electric) meter to other units and bill per the meter. You can do the same thing with water but it is extremely expensive to put in a separate water meter – I have looked into this several times and it doesn’t make financial sense for me but check it out anyway.
4. I pay water for my tenants with their rent on my duplex but if the bill gets higher than normal I send a copy of the bill to the tenants showing them the increase along with a letter asking for conservation or I will start charging and then they are good about it and the following bill is usually lower or back to the normal usage.
5. Some cities put all utilities on one bill including garbage. However, I have found that garbage, water and gas/electric are usually separately line itemed on the bill. If you want to include the water or gas/electric you can still charge for garbage service and this is usually easy to see and calculate. In my business we have many multi-family where tenant pays gas/electric and owner pays water – can’t separate bill out by tenant, but we do charge for the garbage.
If you are going to include utilities with the rent make the rent high enough to cover the bill. This method works best for small studios or cottages – it doesn’t work well for units of different sizes or duplexes.
When looking for investment properties to buy ask if the utilities are separately metered. Call the utility company to find out average bill for the year for the property and then you can add this to the entire aspect of facts as to if you should buy the property or not.
Please check out my website at www.PortolaRentals.com if you are interested in properties in Santa Cruz or have rentals in Santa Cruz, CA.
Kathleen Richards
