Who & How Are Utilities Paid?

[Aaron Krawitz]

Good morning!

I'm new to REI and spending most of my free time reading and digesting information (currently reading @Brandon Turner's Real Estate Investment book).

I built a spreadsheet that lets me calculate cash on cash ROI so I can test sample homes to understand the impact of certain expenses, but one expense I'm struggling to understand are utilities. I have a few questions that I'm hoping the folks on BP can answer!

1. Does the landlord or tenant traditionally pay utilities? 
2. If the tenant pays utilities, is that amount rolled up into the rent or paid separately?
3. When listing a rental property on any MLS website, would the $$$/month include the utilities?
4. If this is a contract-by-contract basis, what method do you use to manage utilities?
5. Is there a good way to estimate total utility costs? (Electric, gas, water, sewage, etc)

If it helps, I'm located out of Houston Texas. Thanks!

[Christopher Phillips]

@Aaron Krawitz

It depends on if there are separate meters on the property.

If you can get separate meters for gas, water, and electric, then the tenant can put the accounts in their names and pay the bills directly each month.

On the listing, you just say "utilities not included."

of course, to have separate heat, you need to have a boiler for each apartment. If you don't, then usually it will be heat include (prorated somehow), with electric and water in the tenant's name.

It all comes down to how the meters and mechanicals are setup.

Utilities are cheap. It's nothing to get crazy about. Just toss in some basic numbers based on your own primary residence (assuming you're local) and then ask the owners for a list of monthly expenses during tours. After seeing 2 or 3 places, you get the gist of expenses.