New to Real Estate · Cleveland, OH · Member since 2020 · 27 posts · 17 votes
Hey everyone!
I am in the early stages of real estate and am currently trying to learn how to analyze deals. Right now I am trying to figure out exactly where all of the expenses come from.
When I watch videos on analyzing deals, most people do not account for utility payments as they will make the tenant pay. However, I am curious how much this will jack up the prices in total for the tenants and if the property owner pays any of the prices like water, sewage, garbage etc.
And if it is best to have the tenant pay for these expenses how do you go about charging them? Do investors typically charge a roundabout cost and put that into the rent (and if so, how can I formulate that roundabout cost for each unit). I know that there are sub-meters that can be installed into the multifamily home but a lot of places aren't built to support them.
Los Angeles · Member since 2018 · 464 posts · 471 votes
5y
I am
curious how much this will jack up the prices in total for the tenants
Find out from the previous owners or from the neighbors. The amount may surprise you, so it's best to find out in advance. You'll want at least a ball-park estimate should a prospective tenant ask you.
and if the property owner pays any of the prices like water, sewage,
garbage etc.
Find out what is commonplace in your market. For example, some areas it is common to include a refrigerator. In other markets, the tenant provides their own. Follow the norm for the area.
And
if it is best to have the tenant pay for these expenses how do you go
about charging them?
If you have separate meters, you don't. They go to the utility companies themselves and get the service activated in their own name. They will receive the bills and pay them.
If the whole property is on a single meter, you pretty much have to pay it yourself and consider that as a cost of business, but again find out what's normal for your market. Apartments in Florida may divide the total electric bill by the number of units and charge that to each unit. This is because electric bills aren't very high, and you pretty much need to run the AC 24/7 to prevent mold. You want to discourage people from trying to "sweat it out" to save a little money, so this way they aren't saving much, might as well just run the AC 24/7.
Do investors typically charge a roundabout cost and
put that into the rent (and if so, how can I formulate that roundabout
cost for each unit). I know that there are sub-meters that can be
installed into the multifamily home but a lot of places aren't built to
support them.
Again, check what is commonplace in your market. You may actually need to pick up the phone and call people and ask. And if the place can not support individual meters, then in that case, you're just stuck. Stay flexible.