Tenant vs. Owner-Paid Utilities

[Derek Luttrell]

Hey Everyone, 

I have pre-approval letters on a duplex and a triplex, and on the triplex, the owner pays all the utilities. The triplex is listed for $95,000 and brings in $2500/,month in rent, while the duplex is listed at $89,000 and brings in $1300/month in rent. The triplex has separate electric meters. The current owner of the triplex says that insurance, property taxes and utilities come out to $600/month.

Do investors look for one over the other (tenant-paid vs owner-paid), or if a property is owner-paid, do they tend to fluff up the rents and advertise the units as "utilities included," which in my experience simplifies things for renters and makes them feel like they're getting a deal? Is there anything to be concerned about when it comes to owner-paid properties? Is it common for tenants to take advantage of this and crank their a/c all day/leave lights on/etc? 

Thank you, 

- Derek 

[Everett Fujii]

@Derek Luttrell

There's two main factors that go into whether something is all bills paid or not.

The first, and primary, is the area.  Do the surrounding complexes primarily provide all bills paid?  If so, then you are stuck providing that.  You can certainly charge less rent and require people to pay utilities, but then you have to play the game of how much less to charge and still get people to rent from you.  

The second is whether or not the complex has individual meters for electricity, gas, and water.  Although, even if it doesn't you can still bill back a percentage.  I don't know if this applies in Illinois, but in Texas you can only bill back a certain percent.  This is to cover things like watering the lawn, exterior house lights, and lighting/heating of common areas (i.e. hallway).  If a complex is not individually metered then it is impossible for tenants to get utilities turned on in their name.  Well, not impossible, but there's no way anyone would/could/should get utilities turned on in their name and be responsible for someone else's utility usage. 

One of the tenant based reasons for all bills paid has to do with credit history (or lack thereof) and even legal status.  Some places provide all bills paid with the understanding their tenants are unable to get utilities turned on in their name, for whatever reason.