Owner paid utilities (rent all inclusive) - Raising rents after we purchase to cover utilities - Should we steer clear or is there opportunity???

[Robin Secord]

Hi BP Community!

In looking at several multifamily properties, I am seeing some that don't have separate meters & the units are rent inclusive.  The problem though, is that the current "all inclusive" rents being paid are no greater than units where the tennant pays the utilities separately.  Not exactly sure how the current owner is making the property cash flow this way, maybe that is why they are selling...

Has anyone ever ran into this situation?  Should we steer clear of properties that are "all inclusive" or do you see potential here too?

Anyone have experience with picking up an "all inclusive" property & then raising rents to align it more with the market? 

Any thoughts are greatly appreciated.  Thank you!

[Peter MacKercher]

It's all about the numbers, so if you don't think they can cash flow with their rents and you don't see a way to push rents, then they're bad deal. In my market 4-family properties are almost exclusively owner-paid, but they still make money. If you have the option of tenant-paid utility properties for the same rents then go after those.