Splitting utilities in a duplex

[Jacob Yates]

Hi everyone I am looking at making an offer on my first deal. I would like to have each tenant pay for their own utilities. I know some laws may require that certain things be set in place to have tenants pay for their own utilities. Outside of the law what are the necessities to have tenants in a duplex pay their own utilities. Such as water, trash, and electricity? I know the electricity needs to be multimetered, but does multimetering the house also cover the water usage for each individual unit? 

Also if I have each unit individually metered can I then have the utility companies charge the renters directly for the utilities? if I can do such a thing I will be including this in the lease.

[Nathan Gesner]

The best solution is for each unit to be metered individually and then require tenants to set up their own utility accounts. However, it's not cheap to spit the utilities so this may not be the best choice financially.

Another option is to do what @Jonathan Towell recommends. Contact the utility companies and get an average for the past year. If an average for the past year was $200 and you have two units, that would be $100 to each tenant. So you increase the rent by that amount and then advertise that the rent price is $XXX.XX with utilities included.

Two recommendations:

1. If average use is $100 per unit, consider bumping it 10% to cover overages, increases in utility rates, etc.

2. Add a clause in the lease that says something like "Rent includes the following utilities: electric, water, sewer, trash, and natural gas. The included utilities are based on historical averages of $100.00 per month. If your actual use exceeds the historical average, you shall be charged for the difference."

The second clause is important because tenants often abuse utilities when they are included in the rent. I have an 8-plex where electricity is included in the rent. All the tenants spend around $60 - $65 a month in actual use which is within the range I budgeted for. However, one tenant is using $145 a month so I have to charge him for the extra use.