Should I separate the utilities in my triplex.

Question

Stephen Joyner · Answer

Do you know if the units have there own breakers? Or are there multiple units on a breaker? Such as all the lights in the units are tied to one breaker. Or common walls share the same cicuits? As a electrician I would say on a service stand point it is better if each unit has there own breaker. For the ease of trouble shooting issues and for saftey reason it is better to separate them. If they have separate meters if something should cause a breaker to trip you will only be dealing with one tenant. For billing it will save you some headaches unless you pay the whole bill yourself. Then it won't matter if the are metered by one meter. But it still should be important the each unit has it own breakers and the each unit dose not share circuits.

Stephen Joyner · Answer

This is a money vs time issue when sub metering you need to be read the meter a day or  two before or after your meter is read to get the most accurate readings. So remember not to be a vacation during this time or have someone you can trust to read for you.  There are still some issues to think about when sub metering.

1) you still need to get the tenants to pay a bill that they will always say they did not use that much.

2) you have to read the meters every month.

3) if someone chooses not to pay you do not have the right to shut their power off. ( this one may be different by location.)

4) in this property two of the units share circuits so you can not get an accurate measurement of power consumption.

5) to sub meter you will have the same or close to the same cost as seprate metering will cost because you will need to have a panel for each unit and a product called emon demon which can cost more then a residential meter panel and if you sub meter with a meter panel you might as well just allow the power company supply the tenants with meters. Because you have gone separated them to the own meter panels.

As for cost I know in California where I'm at this will cost between 3500-6000 to install the meters panels. Then there would be cost to separate the units. Also you will run in to the fact you may have to bring some things up to code. Dry wall repair permits and/or inspection fees.

No mater how you look at this it is going to cost money. You need to decide if it going to work for your needs.

Pat L. · Answer

We always separate the utilities, BUT we carefully assess the cost of doing so before we buy the multi. In fact we often find multi's without separate utilities selling at a discount for that reason.

Separate utilities will definitely inflate your future re-sale value. Furthermore, the majority of tenants here get Govt. assistance for their utilities so the impact is not always as significant. But it will be for your NOI.

Jeremy Pace · Answer

@Clarence Smith

Having the electric separately metered will be quite an undertaking for you.  It will not be an inexpensive thing to do, and will require careful consideration and planning.

But you have to look out to the long term.  You'll have a much more predictable cash-flow from each unit, which adds value to the property, which makes it 1) more attractive to potential buyers, but also 2) more valuable as leverage.  More predictable cash-flow is a big step forward for bank financing.

Joe Trometer · Answer

Hey Clarence,

Congrats on your triplex.

There's a lot of good answers and options here!

I separated the gas & electric for each of my 5 units, then installed sub-meters for the water after the main water meter.

Gas and electric are in the names of the tenants and I add their water usage each month to their rent statement.

I did this over time... I wasn't sure how long I was going to keep this property.

Once I decided to keep the property, I updated one unit at a time on a budget.

What happened was, the renters who had their utilities included, didn't like having to put utilities in their name, and moved.

The new renters rented the unit knowing utilities would be in their name with no objections.

The monthly rent stayed the same with small increases over time and not paying the utilities increased the bottom line.

Kelly N. · Answer

Hi Clarence,

We currently have a triplex with common utilities and separating them out is in the future plans for us.

We will leave the water as is- most if not all triplexes and quads in our area do not have separately metered water, I am guessing for two reasons- the cost to separate them and the minimum bimonthly charge would often exceed that apartment's portion of a shared water bill anyhow.

We will separate the electric, adding electric heating and cooling to the upstairs units and electric water heaters as well.  Our utility company doesn't charge (!) for added electric meters so the main cost aside from appliances is the rewiring that will be necessary. These units currently have gas stoves which are old, we will replace with electric.  We will leave the gas furnace and hot water heater for the first floor unit and they will be responsible for those bills.  This is a big project with a large expense, but should improve our bottom line and also the resale value of the house, so we are looking to complete this in 2-3 years.  We will have to plan carefully since the scope of work pretty much calls for all 3 units being empty at one time.

In the mean time, we are doing what we can to reduce the bills- mainly adding insulation.  We insulated the attic this year which will help with the heating in the winter and also keep the house cooler this summer- there is currently no AC provided.  We will upgrade the existing fuse box to a breaker box and plan to insulate the walls in a year or two.  We may add the water heaters sooner just to make life a bit more comfortable for the current tenants- so far no complaints about hot water with the 80 gallon tank in place for the 4 adults living there.

I have found that having the utilities included is a selling feature for some tenants- especially those on a budget.  This also means they are less careful about wasting energy since they aren't paying for it.  Another option I have seen implemented at one of the properties we purchased that is metered separately is allowing a certain amount for utilities each month and if the bill for that unit goes over the specified amount they would be charged for the overage.  They had $175 as the amount, which is high compared to the average utilities per unit, but does offer some protection from huge overages.  I have seen a few places that divide the utilities according to square footage or number of occupants for the water, but I would bet this opens the door for neighbors to be complaining about each other and insisting they are using less than their share- I would rather avoid that issue.

Good luck with your decision!

Kelly

Teresa F. · Answer

The answer --  YES, is the same but my viewpoint is different.  To the greatest extent possible you want (Need) to know what your cashflow will be each month.  Having tenants pay their own utilities is critical.  I get copies of the water bills for a couple of properties.  One tenant averages around $40 per month, the other $130 per month.   I shutter to think what that $130 would be if the tenant weren't responsible for paying.

Let me be more clear, billing tenants for their share of utilities may also end up in needless heartache.  You'll get the "that couldn't be correct, I wasn't home . . . "  In the event of an eviction you may have to face a "I paid my rent, I just didn't pay the crazy utility bill the landlord came up with . . . ."   Let the tenant fight with the utility company, not you.

Just deal with the pain now and do what you must for each unit to have separate utilities.

By the way, congrats on your triplex purchase!

Teresa

Christopher B. · Answer

I 2nd sub-metering, the initial cost should be reasonable and the meter reading costs around $6/month which is passed on to the tenant in their bills, and the company also bills the tenants for you. At least that's how my local company does it. I've got a triplex I'm about to sub-meter the water on.

Christopher Telles · Answer

A less expensive alternative, I think, might be to consider submetering the electric for the units off of the main power panel. The interior electrical work should/would be nil, and the cost of submetering won't require the installation of two new power panels, assuming you currently only have one. idk maybe @Stephen Joyner can chime in and provide some electrician professional insight on this option.

Now the on the billing side of things, you would still be responsible for providing electrical service to the units as the main electric company account holder, but you would be able to bill each unit for their own proportionate share of the electric bill. This obviously may allow you to reduce expenses since the tenants would then be responsible for operating and paying for the use of any electric devises and or AC/HVAC/Heat units running.

Ellis San Jose · Answer

Clarence,

This is essentially a math problem.

What is the cost of conversion?

What is the current expense of paying the utilities?

The next step is to calculate the rate of return on the investment or capital expenditure in this case.

Should I separate the utilities in my triplex.

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