Tenant utility respnsibilities in a semi-owner occupied MIL

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Tenant utility respnsibilities in a semi-owner occupied MIL

Joseph Delia
Investor · Kirkland, WA · Member since 2016 · 31 posts · 26 votes

I may be overthinking this, but I thought it best to call on the infinite wisdom of the awesome BP community.

I just purchased an out of state SFH with separate entry MIL basement suite. It's a major city where I do a lot of business so I'm giving serious thought to keeping the MIL suite for myself (avoiding hotel expenses that I otherwise might have to charge to my clients, and making my life easier) and renting out the rest of the home. The home is in a killer school district where new development is not really possible, so there is a ton of demand to buy/rent in this neighborhood. Even better, this particular home has a pleasant 5 min walk to the elementary school. I mention this only to give perspective that I should have no problems renting the rest of the home even though the owner (me) maybe sometimes living in the basement MIL suite.

So here's my predicament.  I don't want to pay any utilities, including cable/internet, even my "ratio". For one, I don't want the hassle of thinking about them (whether by receiving bills at the address in my name, nor having the tenant telling me each month how much I owe them).  For another, my occupancy of the MIL is so unpredictable and sporadic that it is hard to develop any rationale for the portion I should pay even if I wanted to do so (but it would definitely be less than the sq ft proportion).

So, I was thinking of just laying it on the line for prospective tenants, "yes, you will pay all electric/gas/water/cable/trash, and yes that includes for the MIL suite, but I will pay landscaping ($200/mth) and pest control spraying ($30-$50/mth)".

It probably wouldn't deter the discovery of a decent tenant, but I'm fearful I'd be planting the seed for some amount of resentment, whereas if I were to communicate (or treat) the situation differently, maybe I could avoid and have a nice Kumbaya relationship.

Any ideas on how I could best handle this situation?  Any of you dealt with any remotely similar situations?

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  • Penny ClarkPro Member
    Sacramento, CA · Member since 2014 · 513 posts · 319 votes
    10y

    @Joseph Delia,

    First, check your state to make sure what kind of lease or agreement you should use if you are still partially occupying the property as an owner. Check with your accountant as well to see what expenses you can still legally deduct if you are partially occupying the property.  I would also state in the lease that owner will be occupying the basement suite occasionally and without notice so you don't run into a "quiet enjoyment" conflict with your tenants. Tenants like their privacy and you will want to secure a tenant who won't mind you being there and will still pay top dollar for your unit. As far as utilities go, unless both are separately metered, wired, etc. it is difficult to assess a percentage of who pays what and how much. If you go this route, state it in the terms of your lease on which utilities you will pay and what the tenant will pay. 

    Now, you may have a tenant that doesn't mind if you are only there a couple times a year for a limited stay of 1-2 days.  However, if it is more frequent then that (you're there a week at a time 8-10 times a year), it could breed resentment. If this is as hot a property as you say it is, consider averaging cost of utilities for the month, and rolling that into the rent. This would include electric, gas, sewer and garbage only; internet, cable and water (especially if the water is metered and not a flat rate) should be paid for by the tenant. If water is not a separate bill, roll that into the rent cost too)  For accounting, just have utility company automatically take it out of your account.

    We are considering doing something similar because we have one property which has a basement type apartment the adjoining home already occupied by the tenant. It also has a separate entrance but the utilities are run off the same box. 

    I hope this helps!  

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