Utilities
I am considering purchasing a duplex that does not have seperate utilities. Is it possible to charge the tenants the utilities (other than raising rent of course) so I am not stuck with a huge bill? This duplex has air conditioning and I invision the tenants running the air all day with windows open or something similar. 
Is it fair to charge on a percentage basis based on sq. foot or number of rooms or number of persons? Thanks for your feedback.
If you can't seperate out the utilities, I wouldn't buy it. The tenants may not intentionally be wastefull, but without that monthly utility bill as a strong incentive, they will inevitably use way more than they would otherwise. The people who I have known that had buildings without seperate utilities have lost money or broken even at best. I would definately seperate the utilities if you chose to purchase the building.
The duplex that I own has partially seperate utilities. I pay the water and sewer ($30-50 a month), the tenants pay all others. There is only one heating system with 2 different hot water loops (allows each to control temp in their apartment). The deal is that the heat bill is split 50% to each unit. Until I can replace the heating system, this is the best I can do.
I wouldn't get a property without seperate meters if you are planning on landlording. I have a feeling your tenants would complain every month. "I was gone 2 weeks", "They have 2 kids I have none" etc. etc. etc.
I might consider if you are buying way under market and plan to sell fast to get the equity, but not to hold.
If you will have enough positive cash flow that you don't mind some variation in your monthly bills, it's not so bad. I have a 4 plex without seperate utilities, and my final decision was to include all off them in the rental rate. I figured out how much I thought all of them would be per month, on average, added in some padding for wasters, added that to what I felt was fair price for the unit, and that was that. Gas bills are way high in the winter, but way low in the summer, etc. Just be sure your rent will cover the expensive winter months or be prepared to fork over the dough until the warm season when expenses drop again. Z
Zach,
That was my idea. I would put the house on budget for gas/elect. and then pad a little for extras. Could I put something in the lease that states the utility charge may be increased/decreased due to usage being low or high? I would have a set rent amount and then the additional utility amount, if they abuse the utilities then that amount increases. Any thoughts?
I didn't get specific about the utility allowance because I didn't want to ever hear any bickering by one tenant that another watches more tv, cooks on the gas stove more, likes the heat 15 degrees warmer, takes longer showers.. You get the idea. I simply stated the rent amount, and wrote "gas, water, and electricity" in the spaces provided for things included in the rent. Actually, I think the tenants like it this way because it simplifies their lives a bit. Some have even commented that they like the arrangement. My bills do go up and down a little, especially the gas bill in the winter, but luckily cash flow is positive even with $400. gas bills in Feb. My property manager pays the bills, so I don't even see them until I get my statement. I think I am fortunate to have good tenants who mind their own business and don't worry about how the neighbor has a boy/girlfriend over all of the time or even the fact that one unit might have one renter while another has 3. You could make adjustments for these situations, and maybe I would have too, but it just never became necessary. I don't like the idea of changing the rent to accomodate differences in the monthly bills, I think it just makes things complicated. I knew someone who divided up the bills every month according to the number of residents in each unit, and the knocked on their doors, gave them a paper with that months charges, and returned again a few days later to collect. Worked for her, but I sure wouldn't want to do it. The bottom line is that you can do it any way you feel comfortable with. For me, that was keeping it as simple as I could so I could concentrate on other things. It's probably not the most efficient system because I am sure the gas bill would at least be lower if everyone paid their own, but the peace of mind I get knowing I don't have to go tracking down tenants to collect or alter the rent amount more than makes up for the inefficiencies as far as I'm concerned. This is all just my opinion, and I know some landlords like to deal with thier tenants on a regular basis, but I'm not one of them. Consider all of your options and be sure you will be satisfied with the results of the method you choose. I telephoned the utility companies before I bought the place to see it the units could be replumbed, wired and piped individually, but it would have been almost impossible and certainly not possible from a monetary standpoint. Nope it was the only way I could do it, and it worked, but I would still prefer seperate utilities any day if I had the choice. So, yes, it can be done, just be careful that cover your expenses. Hope this helps, and remember, it's only one opinion. Zach
One of my properties has a common water supply to all four units. The lease terms require that the bill be split evenly amoung the tenants. Once there was a problem since one person was using most of the water but that got straightened out (they paid more for that period).
I have one duplex that has seperate everything and I just carry the service contracts and the furnaces and waterheaters, etcand I have a fourplex that i pay the hear and W/S. It is OK in the summer, but I just got a 850.00 heating bill and last months the bill was 700+. The owner lived in the complex the previous year and the heat H/W was only 3000.00 for the year--he controlled the heat and kept it low--2 tennant even had kero heaters in their appts. Nightmare!!!! Well the lady who controls the heat knows her rent is going up because of it-she if always cold and ups the heat other tennants complain too hot. other than that she is good and watches everything and cleans up ETC>>>> I was thinlkng about putting and aux heater in her appt and relocating thethemostat and putting it on a timer. I have 2 duplex props, that are not sep heat and water but they are not too bad, but there is a big jump from summer to winter and the local gas company does not do bugets for ''commercal property"".
If I had a choice or could do it inexpensively I would swich them all over to sep untilities.
In a perfect world........sep untilites.
[ Edited by jenkie01 on Date 03/06/2004 ]
I thought about moving the thermostats also. I was going to use those computerized devices that change the temp automatically in the evening and morning, etc. I was going to put them in the basement with a big, steel box around them and a lock. Because it never became the issue I expected it to become, I never did it. It's definately an option if the situation turns into a headache. Z
Some good info on this post. However it got me thinking - since I do run across properties with common meters that would make great investments..Has anyone split the water or gas meter? and if so how much did it cost?
With older homes, especially those that have been converted to something with more units than originally designed for, splitting utilities could cost a fortune. My fourplex was converted from a duplex during a housing shotage in WW2. The wires were run whitchever way was most convenient, along with the gas pipes and water lines. It all works, and it's all safe, but untangleing everything and running it all new would be a real nightmare. It might be more practical in some other buildings depending. I've seen some that would be pretty easy because the splits to each unit were already right at the meters instead of some from the kitchen, some from the bath, etc. That goes for water, elec., and gas. You'd really have to take it on a case by case basis. It could cost from $0 to infinity depending on the layout and number of units. Z
Quote:I thought about moving the thermostats also. I was going to use those computerized devices that change the temp automatically in the evening and morning, etc. I was going to put them in the basement with a big, steel box around them and a lock.Zach,
Don't those programmable thermostats measure the ambient air temperature, then adjust accordingly? If so, then putting the thermostats in the basement would have the thermostats' function set by the basement ambient air temperature. Surely the basement is a lot cooler than the rest of the units which will keep the heat on all the time because the hot air will never get to the basement to tell the thermostats to shut off.
Hoober,
There was a discussion at one time on this website about the costs of seperating utilities but it may have been within the context of another topic. It seems like most people paid something reasonable like $200/utility/unit. As far as I remember, everyone who seperated their utilities said that they paid for the cost of the work in a short time. I didn't pay a lot of attention though because I have found that I personally much prefer SFR. Also, I was familiar with people who had bad experiences with buildings that had combined utilities so I always skipped over those properties and went on to others.
DaveT -
You're right, and I'm pretty sure all thermostats work that way. I did think about that, but never worked out the bugs. At first I figured that the the temp in the basement would increase along with the rest of th house, but only at a different rate and only to a relatively lower temperature. It also occurred to me that lag times between the two spaces might cause the heat to go on and off at inapproprate moments, for example, the heat might go on while the upstairs is still warm because the basement cooled more quickly, etc. I can see it creating an uncomfortable environment in the living spaces. Another thought was to just lock up the thermostat right there in the living room, although I'm sure it wouldn't be long before it was jimmied it open by the tenants to do with it as they wished. Any ideas??? Z[ Edited by Zach on Date 03/07/2004 ]
Thanks davmille for the info. I'll be getting in touch with the local utilities this week to get some quotes. If it is that cheap..then I'm off to the races to get a few more properties. I'll let the folks know here what I found out.