Increase rent or transfer water and sewer - which would you do?

[Arthur McCormack]

I'm 1.5 years into my first rental and the tenants leases will be renewing 4 and 5 months respectively (it's a duplex). I made some dumb mistakes when I first started (didn't go on BP and learn first), so based on what a friend was doing in CA (my property is in IN) I told tenants they pay for gas and electric but water and sewer was covered by me (water is separately metered for each unit). Looking to the renewals coming up I am contemplating offering the tenant the option to not have a rent increase and instead take over the water/sewer bill in the new lease, should they decide to renew. The way I plan on presenting this is that it would a) spare them from having an actual rent increase and b) give them the ability to control the cost as they can control their water usage (in case they have been more wasteful than they could be). This would, of course, reduce my expenses with the property and net me a cashflow increase, and keep me from kicking myself every month I pay the bill for not having done it correctly from the get-go.

What are your thoughts? Do you foresee problems/issues/legal ra

[Nathan Gesner]

Originally posted by @Arthur McCormack:

I'm 1.5 years into my first rental and the tenants leases will be renewing 4 and 5 months respectively (it's a duplex). I made some dumb mistakes when I first started (didn't go on BP and learn first), so based on what a friend was doing in CA (my property is in IN) I told tenants they pay for gas and electric but water and sewer was covered by me (water is separately metered for each unit). Looking to the renewals coming up I am contemplating offering the tenant the option to not have a rent increase and instead take over the water/sewer bill in the new lease, should they decide to renew. The way I plan on presenting this is that it would a) spare them from having an actual rent increase and b) give them the ability to control the cost as they can control their water usage (in case they have been more wasteful than they could be). This would, of course, reduce my expenses with the property and net me a cashflow increase, and keep me from kicking myself every month I pay the bill for not having done it correctly from the get-go.

What are your thoughts? Do you foresee problems/issues/legal ra

Arthur, I get the feeling you have a twinge of guilt and hesitation around any increase. You've got to get over that. Do the dairy farmers and grocery stores cut deals every time the price of milk increases? No, they just increase the price and you pay it. Same with gas, property taxes, utilities, hamburger, and Netflix.

Your taxes are going up. Cost of materials for repairs has increased. Insurance went up. Heck, social security is increasing benefits 5.9% and that's still not keeping up with inflation! It's normal for the cost of goods to increase and most people understand this. If you're apologetic, it implies you've done something wrong and can trigger your tenants to feel cheated. Just treat your tenants honestly and fairly.

Dear Tenants, your lease is due to expire in 60 days. I am offering you a one-year renewal with the following conditions:

• Rent will increase 3%. New rent rate will be $975.00 per month;
• You will take responsibility for water. Average cost is $55 per month.

If you wish to renew, initial acceptance below and return to me. I will create a new lease and send to you for signature during your final 30 days of the current lease.

          I wish to renew under the terms indicated above. INITIAL: ________

If you wish to terminate, confirm your move-out date and return this to me no later than 30 days prior to termination.

          MOVE OUT DATE: _______________         INITIALS: ____________

If I do not receive a response at all, we will expect you to vacate no later than midnight on your currently scheduled termination date of [DATE].

Your Landlord