Paying all bills for a sfm????

Question

Hello ive been racking my brain try to think about pro's and con's on this issue. I'm going to soon have a renatl property and i was wondering would it be a good idea to pay for all of the untilities on a SFH? Would it make it more appealing to renters? Has anybody done this? Any help would be greatly appreciated.

Bernie Avila · Answer

Well thanks for the heads up guys. love this site.  I'm not putting any utilites under my name.

Steve Babiak · Answer

The only two good situations to not have tenants putting bills in tenant's name are for any bill where you as the landlord get stuck having to pay any unpaid amounts (usually lienable utilities), and for any bill that is a flat rate that is fixed for the year so that you can divide by 12 and push up your monthly rent by that amount.

Anything else is a case where you will probably be subsidizing tenant wastefulness.

George P. · Answer

terrible idea.

Fred T. · Answer

@Mason H. I don't usually do 1st, last, security deposits (not to say that's right, just not something I do) and the reality is if a couple hundred dollars is going to break the bank, then prob. not a tenant I would want anyway.

When you go to put utilities in your name, certain areas require a security deposit based on your credit report and prior utility payment history anyway...so either give that security to the utility company to turn on the utilities or give it to me if I'm controlling the utility.

Same same./

Colleen F. · Answer

Unless you are doing like a short term vacation rental you don't usually include utilities. They use more they pay more.  I know some people have tenants pay into a utility account to pay the utilities for them but that is more for particular kinds of student rentals.  Besides the tenants don't really notice what is included except when they first sign the lease, after that it is right out of their mind.

Mason Hickman · Answer

I agree with everybody else. DON'T DO IT!! With no skin in the game, you never know what you are going to get hit with for utility bills. The name of the game is predictability. The more predictable your cash-flows, the better off you'll be. Therefore, utilities are the tenants responsibility.

@Fred T.  I agree that you want to protect any of the utilities that can result in a lien on the property. In your experience, have these extra deposits resulted in a lower number of applications? Personally, after first, last, security my last rental move in bill was about $6,000. To tack on an additional $X for utilities may deter some folks. Your insight is helpful.

Robert R. · Answer

By the way. This same tenant caused an unnecessary Air Conditioner repair 2 summers ago as well. She put the AC on at 60 degrees. It froze the system. The AC repairman told her to keep it off for an hour to defrost it and not to run the AC below 68 or it will happen again.

Jesse T. · Answer

In general I think it is not a good idea as others have posted.  Another disadvantage is it will appeal to applicants with poor credit and who owe money on utilities.

The only exception I can think of is if you have a property in a very desirable location that would support a high premium(30 to 50% depending on how short) for short-term leases it might be worth the risk.  It would make it a lot more convenient vs. setting up utilities for 3 to 4 months.

I would not cover 100% of all utilities, I would cover up to a reasonable amount and want a separate deposit for overages.  I also would partially refund if they went below a certain amount.  For example if utilities were generally 350 I would charge 425 and cover everything up to 400 and refund under 275.

Robert R. · Answer

I would advise against it. We owned a Condo in Chicago. The gas was paid for by the HOA. It was a central unit for the 64 unit building. My tenant actually called me in the middle of February last year to complain about the heat. When the HOA handyman showed up it was 5 degrees outside. She answered the door in a pair of shorts and a tank top. He checked and she had the heat on at 78 degrees. I guess she thought the place was supposed to be a Sauna.

Imagine if it were individual gas bills and it was on me.

Fred T. · Answer

As a safety net for you, I would control any utility that can place a Lien against the property if unpaid.

Along with this, you want to make sure that you collect a separate Utility Security Deposit of 1mths Average Cost for the utilities you are controlling (in addition to the standard Lease Deposit) and have in the lease terms that the Tenant will pay the full amount due of xxx Utility at the same time as their rent payment.

Each month, you will then want to make sure that you send a certified mail copy (or actual and keep a copy of the mail receipt and bill for your records) of the Utility Bill to the Tenant upon receipt by you to give them time to plan as needed.

If your county or municipality can't lien the property for say the Water Bill, then no worries and the tenant can put all in their name.

As far as "appeal to renters", if this is a SFR then most expectations are they will pay the utilities themselves in their name. Instead of raising the rent to cover utilities, they would much rather be able to control their own utility expenses and as such prefer them to not be included.

If this is a Multi-Family property, where there is common area electric or single metered utilities for more than one unit, then of course the utilities would be expected to be included in the base rent instead of splitting a utility bill each month.

Remember, this is a Business...so what do your numbers say?

Are you willing to try to estimate Utility Costs for the coming year with all the uncertainty in the World today to derive a Base Rent Rate to charge?

Is that part of your Risk Assessment?

Cover the Asset is the main answer here :)

Happy Landlording!

Paying all bills for a sfm????

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