Rental Property Investor · Golden, CO · Member since 2017 · 27 posts · 11 votes
I have a single family rental property in the Denver area that appears to have been used as a multifamily at some point in its life. There is an addition behind the garage that is currently used as a master bedroom, but has its own entrance in the back of the house, a bathroom, kitchenette area, and mudroom that has space for a washer and dryer. It's essentially a studio apartment that has a door connecting it to the main house.
For the last 3 years, I have been renting the house to students, generally 4 at a time, and it works great for roommates, but my current tenants are leaving in May, and I have been debating converting that addition to its own unit. I am trying to determine what I need to do to make it work. My biggest questions are how to divide up the utilities and mail since there is only one meter, and it's all one address. I have always been warned away from including the utilities in the rent, but I am not sure they can really be split up between units.
Have any of you done this? What sort of challenges did you face?
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y
@Kellie Alkayam my solution is to pro-rate the utilities by the square footage of the space utilized exclusively. Ie large master bedroom space pays more. The other and easier way is to make each tenant pay 1/4 of the bill. I have some of my units on levelized billing with Xcel and then just add amount to rent. If utilities go up then tenants pay more. Not too bad.
Investor · Jonesboro, AR · Member since 2017 · 136 posts · 79 votes
9y
First check zoning. In my area you can't get a second meter without a second address. You can't get second address without going thru city planning. Only other option is to split the utilities as mentioned earlier.
Rental Property Investor · Golden, CO · Member since 2017 · 27 posts · 11 votes
9y
That's kinda what I was thinking, @Bill S.. If I can't break up the utilities, I'd just pro-rate it and bill them each month.
That's a good point, @Lindel Turner. I tried to read a zoning map and it looks like it's zoned R2, but it is really difficult to tell. I will check with the city. Thanks!
Nothing great to add to what others have already said about how to split the utilities. I'd opt for @Bill S. 's idea to pro-rate by square-footage.
I was also going to add that you might consider Airbnb for that studio. Unlike Denver, Wheat Ridge doesn't have a law against short-term renting non-owner-occupied homes. I don't know where this place is located in Wheat Ridge, but you might be able to get a better return operating that unit as a short-term rental. (Especially if it's in the southeastern part of the city where you could advertise as being near Sloan's Lake and the Highlands there in Denver.) The returns can be more, but so is the work, so it's a matter of your goals and time commitments.
Either way, if the numbers work better making it its own unit, then go for it. Good luck!
Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
9y
Hi Kellie, if the property is zoned R-2 then you can have the home reclassified as a duplex through the city and then you can get separate utilities and the resale value could be increased. There are definitely some advantages as having it reclassified. I have not gone through the process but I am sure the zoning department can help you through that.
Rental Property Investor · Golden, CO · Member since 2017 · 27 posts · 11 votes
9y
@James Carlson, I had actually considered AirBNBing the back bedroom, but I was unsure of the laws. Thanks for mentioning that! I need to research what I could list it for to determine whether or not it would be worth it. I suppose I could always try it for a period of time and switch it to longer term rental if it doesn't work out. If I did short term, though, I wouldn't need to worry about dividing up the mail. It is very close to the Highlands and not too far from Sloan's, so that could be a great option.
Thanks @Kevin Grinstead. I think this is something worth exploring. Even if I don't end up going through with it right away, it will be good to know in case I decide to do it down the line.