Triplex Without Seperate Utilities

[Aaron Corleone]

Hello everyone!

Just found this website and look forward to being a part of this community. I'm newer to this so I have a lot to learn!

I just bought a triplex. The only issue with it is it doesn't yet have separate utility meters for the three units. I can't afford to do this as of now but would like to get renters in there in the mean time. What would be the best way to handle this? I don't want to just pay for the utilities as that gives no incentive for the tenants to be responsible with their use. But I also can't figure out a way to split them up fairly among the three units since we won't know how much each tenant/unit is using. I'm just envisioning fights breaking out in the foyer of the triplex! Me getting calls every month saying they aren't the ones driving up the bills!

Has anyone come up with a good way to handle this?

[Matthew Paul]

Rent to the Amish , they dont use electricity . Seriously , you can go to the electric company and get historical usage for the year . Now since you are paying for the electric , I am going to be cool and comfortable , even on the hottest days , and toasty warm in the winter . Long hot showers are very nice .

Find a way to split the utilities , the cost savings to you will pay off rather quickly .

Now would be the time if it is empty you will disrupt no one . if you wait you will have to work around tenants or wait for 3 vacancys at the same time .

[Bill S.]

Couple of ways. Split by square footage. Each unit has the same foot print. They get 1/3 the bill each. The other way is by number of occupants. The way I do it is, I pay the bill myself and bill the tenants separate from rent based on square footage. I haven't had any complaints yet. Probably will one day. I'll cross that bridge when I do. I the mean time I have saved lost of money by recovering the cost of utilities.

[Jerry W.]

Welcome to BP @Aaron Corleone . Get those metered separately as soon as possible. I am working on putting a new heater in an apartment that does not have separate meters. The electric bills have been huge, come to find out the tenant in the largest apartment was afraid of her gas heater, it seemed too hot, so she bought 5 large electric blower/heaters. Absolutely great tenant otherwise. So I am putting in a small forced air furnace I bought from a guy that had been used to heat his basement separately. It probably cost me an extra $100 to $150 per month in electric bills. I don't think it would have happened if she had to pay the electric herself.

[Bill S.]

@Jerry W. wouldn't take long at that rate to have the whole building rewired on individual meters. Have you gotten bids to individually meter? Sometimes with multiple units it is significantly cheaper to do a few of them (perhaps the ones with attic access). The key is finding a knowledgeable and capable electrician.

[Nate Saum]

Thanks for the post Aaron. I just bought a triplex with seperate utilities except water. I will be seperately metering them asap. Hopefully a few more experienced investors will weigh in. Good luck.

Nate

[Jerry W.]

Hey @Bill S. , that apartment building is about 80 years old or more. Once I pull in a licensed electrician I suspect they will require a lot to be done. It is an ungrounded system. I have switched the electric stoves over to gas so I can split the 240 wires into two 120 lines. Back when that was built you used electricity for your lights. I suspect I am looking at 8 to 12K to do it right. The rainy day account is fairly low as I put a new roof on one house and a pipe cap cost me 8K in plumbing bills to tear out a line it was stuck in.

I should at least get estimates though, good idea.

[Sam Leon]

does OP mean electric or water?

probably require some reconnaissance to make sure the usages are not all "tangled" up before you try to separately meter them.

I know of someone who had a 4plex and over the years previous owners have fixed problems without considering what should go where as long as it's on one bill. So you might find unit 3's water heater actually feeding hot water to the sink of unit 4 because it's on the same wall, or two of the receptacles from unit 1 was split off a junction box in the attic to feed unit 2 etc etc etc...

Also you might have common usages that was not an issue when it's just one bill. For example two hose bibs outside in the common area and if unit 1's tenant used it to wash cars who pays now? If the building has a common area that has a shared washer & dryer, or irrigation pumps, sprinkler water, swimming pool filter pumps etc...do you create a 4th water meter and a 4th electric meter to track those and divide them up?

[Kelli Bristol]

They make small sub-meters that you can utilize to charge the tenants separately for their electrical usage. Doing the calculations if you live in an area with tiered electrical charges is the hardest part but you should be able to come up with a spreadsheet to do the trick. I just did a quick search and found one on ebay entitled "Multifamily Multitennant Housing Electric Sub Meter". I'm sure a little time on google will turn up some additional options. Just be sure to build the electrical billing procedure into the lease.

[Nate Saum]

Sam,

During the walk thru of the property the seller told me apartment C pays the electric for the Hot water heater that supplies all three units. The hot water heater is actually in apartment B. Tenant in C does not know they are paying for all 3 units. I'm not really sure how to address this when i take over the property due to electric being seperately metered.

Nate

[Sam Leon]

Originally posted by Nate Saum:
Sam,

During the walk thru of the property the seller told me apartment C pays the electric for the Hot water heater that supplies all three units. The hot water heater is actually in apartment B. Tenant in C does not know they are paying for all 3 units. I'm not really sure how to address this when i take over the property due to electric being seperately metered.

Nate

This is a tough one. So you know the electric while being separately metered but there are some "shared" electric (and water).

Does the property have other shared electric fixtures? For example a walkway light at the entrance gate, or an irrigation pump for the outside common areas, or a shared washer/dryer? If so you can split the WH off from the wiring of apartment C and run some new 220-240V wiring from the "common" meter so their respective usages are properly accounted for, but you will be paying to heat their water.

Or you just pay the electric yourself and either increase their rent as a fixed amount, or bill them additionally based on some square footage or per head prorating as some suggested here.

Lastly depending on the sizes and occupants of each unit, you may have a plumber look at using on demand WH units one for each apartment and see if it's feasible to do. I bet this would be a costly one because it will involve both electrical and plumbing changes, you have to locate a manifold with both hot and cold supplies in each unit where it's accessible and convenient as well as bring dedicated electrical from each apartment to those locations. Nahhh too much hassle.

[Bill S.]

Remove outside hose bibs in common areas. This is a recipe for a large water bill. Sometimes people come by and leave them on for spite.

@Jerry W. I have found that on old apartment buildings doing the upgrade in stages to be most cost effective. The first step is the separate meters. In older buildings this can be fairly easy since there were much fewer circuits in those days. I have a SxS duplex I split and as well as a four plex. On the duplex, there were 4 circuits total, 2 per unit (one for light and one for outlets). It wasn't too expensive to split. The costly part will be when I bring the units up to code by adding the needed circuits. The important thing is to find an electrician to do this. On the four plex some electricians thought I had to update the whole building which would have been 10s of thousands of dollars. I just did the meters for lots less. It was inspected and signed off by one of the most difficult and challenging Cities in the area.
Since you are in a more remote area, you may have to provide some "guidance" so the electricians don't see dollar signs.

[Steve Babiak]

Since you are in PA, you may want to read this and disregard some of these other ideas:

http://www.biggerpockets.com/forums/52/topics/72185-water-sewer-bill---what-to-do-with-it?page=1#p412876

[David Krulac]

What @Steve Babiak said.

In some PA. municipalities water, sewer & trash are billed through the government and are lienable. Some areas won't put sewer and trash in the tenants name under no circumstances.

Electric is usually the easiest to separate with separate meters. Heat from gas and oil are usually more difficult and expensive to separate, but we done those also.

But even in the areas where water is supplied from a private co. and not lienable, the cost of separation is sometimes high. At one place they required that the lines be separated at the main in the street, which required tearing up the street, requiring a state permit. When all said and done the cost of individual water was going to be $1,000 per unit. I passed on that one.

[George Paiva]

Originally posted by Aaron Corleone:

What would be the best way to handle this? I don't want to just pay for the utilities as that gives no incentive for the tenants to be responsible with their use. But I also can't figure out a way to split them up fairly among the three units since we won't know how much each tenant/unit is using.

You may want to look at the legality of this, is this a legal 3 family? Here in CT, you can't have shared electric utilities like this in a multi-family, especially on common areas. I would suggest what others voiced. Get the property properly metered out. Save your self a lot of aggrevation.

Also some mentioned here about water. In CT the water stays with the owner. You can have the water submetered if you want to maintain a log of usage but you can't act like a utility. I have seen some properties water submetered where the units are separated like condos but not apartment buildings with multiple units under one roof.

[George Paiva]

Originally posted by Nate Saum:
Sam,

During the walk thru of the property the seller told me apartment C pays the electric for the Hot water heater that supplies all three units. The hot water heater is actually in apartment B. Tenant in C does not know they are paying for all 3 units. I'm not really sure how to address this when i take over the property due to electric being seperately metered.

Nate

Hope your getting a sweet deal. Seller could be in all sorts of trouble if Tenant C knew this was happening. When you get possession I would get a plumber and electrician together to quickly get another water heater in place. Is there any way to get a concession before close to get the seller to remedy?

[Bill S.]

My experience is if things are this messed up (tenants paying each others utilities without knowing it) you are just scratching the surface. Untold heartache is to come. If they cut corners with visible there is 10 fold hidden that will cost you at every turn. Been there done that. Better get a really good deal. The cost to correct will be large.

[Aaron Corleone]

Thank you everyone for the replies! This really helped me a lot.

Thanks for the heads up @Steve Babiak and @George Paiva I'll look into these issues. Is there a good website you would recommend that will inform me on all laws similar to this? A website that would help me learn tenant/landlord law 101 without all the legalese?

@George Paiva

[George Paiva]

Well its very state specific but you may want to read up on the series of books NOLO puts out. I have their "Every Landlord's Tax Deduction Guide" & "Every Landlord's Legal Guide". There is some good nuggets of info in there.

Also check your state's housing website. For instance in my state of CT we have this resource. http://www.jud.ct.gov/lawlib/law/landlord.htm

Outside of just reading and browsing the web. I would try to befriend a few plumbers, electricians, carpenters... They will make or break your investments if you are looking at depressed fixer properties.

[David Krulac]

@Aaron Corleone

In PA there is a law that tenants can NOT pay for the electric used for common areas or areas outside their apartments. When the power company finds out, and they will find out when a tenant complains about a high bill and they come out and check, they will automatically put the tenant's bill in the owners name.

AND back bill the owner for the back bills that the tenant paid where they were paying for somebody elses electric. There have been cases here where the owner has gotten $10,000+ electric bills. It is not something to be flippant about.

[John Schmiesing]

I am also in PA and support what David Krulac mentioned. I just split the gas and electric in a 2-unit.

When I bought it, there were 2 meters both has and electric. What I came to find out fairly quickly is that the prior tenants (now gone) had in fact complained to the power company and now this burden was on me.

Gas service; there was only one furnace, but 2 HW heaters. So we installed a new furnace to serve unit 1 and modified the ductwork for existing furnace to serve unit 2. We also properly split the gas supply lines.

Electrically we installed an owners meter and wired all common areas to it. Common areas is anything used by both tenants. In this case it is basement lights, front porch, rear floodlight and common vestibule immediately inside front door. I put most of these on motion switches to hopefully reduce electric costs on my owners meter.

All work has been completed and it has been inspected by the utility companies. This was a pricey exercise but is worth it for long term buy/hold, as I am not interested in paying for use of these utilities.

Hope this helps

[Steve Babiak]

My previous link in this thread takes you to some other links that explain the case law in PA for what @David Krulac and @John Schmiesing stated regarding "foreign load" utility billing being the owner's responsibility. Worth a read even if you're not in PA, because that same legal reasoning might be made by a judge near you. And all the "tenant advocate" assistance services are onto this too ...

[John Schmiesing]

@Steve Babiak , thanks for the info. I will be sure to review the link.

I've decided to 'standardize' the multi-families to split both electric and gas. I don't want the bill, the headache, the questions, or the added time involved with trying to parse it out to tenants. I'd rather not see the bills and therefore not have to think about it. It's expensive to set up, but I think worthwhile in the long-run.

This may be interesting for everyone; I had a tenant who stopped paying their gas bills. I called and verified with the utility that their non-payment can't somehow come back to me.

[David Krulac]

@Aaron Corleone

@Aaron Corleone

The PA law is Act 54, here's a summary:

https://www.pplelectric.com/at-your-service/electric-rates-and-rules/remsi/foreign-load.aspx

[Jassem A.]

I have a duplex with one meter. I rent the whole thing to a single extended family for a discount and let them figure out the utilities rather than pay it myself.

[Steve Babiak]

Originally posted by John Schmiesing:
...
This may be interesting for everyone; I had a tenant who stopped paying their gas bills. I called and verified with the utility that their non-payment can't somehow come back to me.

@John Schmiesing - lucky for you that your tenant's non-payment of gas didn't happen in Philadelphia, because gas in Phila is lienable, and landlords have been stuck with tenant bills due to that happening.