Heating fuel costs in Alaska

[Manuel E Urrego]

Greenhorn here, and I am still trying to decide on whether to stay in the local Fairbanks/North Pole Market or broaden to OOS markets in warmer climates. The real sticking point that I cannot factor is how half the rentals on the market have heat included in the rent. So 95% of these homes will use heating fuel with forced hot air or a hot water base board with a boiler. How do you account for the eb and flow of fuel prices when figuring long term cash flow. If over the span of a few months fuel prices increase and this tenet in the building is trying to make it a tropical 80 degrees in their unit, you are going to use much more fuel that month at a higher cost that eats you cash flow. How do people account for this when analyzing properties in these regions when half the competition includes heat with the rent price. I know I must be missing something simple. Please educate me!

[Allen S.]

@Manuel E Urrego It’s just another line item for you to plan for.   It shouldn’t be too difficult to estimate what your yearly energy expenses will be on a given property.  Likewise with planning for 17% vacancy in Fairbanks... make your estimates match actual data and then next year you won’t be wondering why your “investment” isn’t making you any money.  I also recommend you get out of the monthly cash flow mindset and look at your investments based on their annual performance...