Real Estate Agent · Portsmouth, VA · Member since 2016 · 13 posts · 1 vote
Hey BP Studs and Studettes. I'm pulling the trigger to submeter water and sanitation at an apartment. It is a 6 units, with 3 of the leases up in the next 30days. I have a 4th renter that is very behind in rent, and so I may ask them to agree to pay their own water or just proceed to eviction. 2 questions.
1. How can I get the last 2 tenants to sign off on paying utilities mid-lease? Or can I do that at all?
2. What is some good "language" to put in the new leases to account for paying their own water and trash??
This is exactly what we do. Unfortunately some landlords don’t consult with us first before putting leases in place in setting up a long range Energy Managent plan in coordination with the leases they sign.
There is most certainly a methodical and intelligent way of installing sub-meters and ensuring an additional profit. This increases the value of any property as well as making it easier to refinance or leverage to buy additional properties. Lenders and property owners/managers love these additional income streams. With continual increases in Utility costs it’s an area that is many times ignored until an issue arises or a big bill arrives.
It’s not as simple as people believe since Utility bills are complicated by nature. Every Utiilty is also different so you have to know that market, what’s available and how to put into effect a concise plan with guarnranteed supply rates in the case of Electric and Natural gas.
Way too much to go over on a forum so if you want help feel free to PM me and I’ll see what can be done. It also must be coordinated with your Real Estate attorney since we leases are involved.
@Jonathan Beasley, you can ASK them to sign a new lease requiring them to pay their own utilities, but they don't have to if it's not to their advantage. You will have to pay the utilities until their lease is over. You might want to say I'm extending a new lease for one year with no increase in rent, but you have to start paying your own utilities. That might work.
@Jonathan Beasley you can’t change the lease mid-term without the tenant agreeing and signing. They really have no incentive to agree to it, since it’s basically an increased monthly payment for them.
I think you’ll be stuck covering the costs until lease end, unless you can work out some kind of deal. ($50 off rent, but you pay water usage that has averaged $40 the past 6 months). But still, they rented the house with the understanding that those utilities were included.
@Mike McCarthy
Right on. I figured as much. Unfortunately I made the mistake of signing these new leases before I had finished figuring out that it was going to be financially smart to sub-meter, and the market will
Support it.
I’m looking to refinance. I’m guessing the lender will only take into account the decreased expense of the 4 units? Not all 6??
@Sam Carroll
Starting point is to call the local / municipal utility office. In my case, they will install the meters for a fee, and I pay a plumber to connect.
From there, you need to have a good and trustworthy plumber look at how it’s run and discuss the cost and logistics of separating it.
In my case, it is still fairly expensive (gonna be about 2k a unit once all said and done) BUT will save me 500-600 bucks a month, and will add 80-90k in value that I will capture when I refi.
Hope that helps!
You also might want to verify with the municipality that if the tenant doesn't pay the water bill, a lien isn't put on your property. If this is the case, you might want to collect additional deposits and/or modify lease language to mitigate your risk and aggravation.
@Wesley W. Yeah man!! Just instructed my assistant to do that today. We’ll create laungauge in the lease that if we have to pay it, we can collect It from the tenant as rent etc.
This is exactly what we do. Unfortunately some landlords don’t consult with us first before putting leases in place in setting up a long range Energy Managent plan in coordination with the leases they sign.
There is most certainly a methodical and intelligent way of installing sub-meters and ensuring an additional profit. This increases the value of any property as well as making it easier to refinance or leverage to buy additional properties. Lenders and property owners/managers love these additional income streams. With continual increases in Utility costs it’s an area that is many times ignored until an issue arises or a big bill arrives.
It’s not as simple as people believe since Utility bills are complicated by nature. Every Utiilty is also different so you have to know that market, what’s available and how to put into effect a concise plan with guarnranteed supply rates in the case of Electric and Natural gas.
Way too much to go over on a forum so if you want help feel free to PM me and I’ll see what can be done. It also must be coordinated with your Real Estate attorney since we leases are involved.
We do Electric and Natural has audits constantly. Many mistakes are found and refunded all the tone from the Utility as well as alternative third part suppliers
Water is far worse. If you’ve never had a Water audit done especially in a place like Arizona it’s a necessary fact of life if you’re going to own property.
Depending on the situation it can all be done on contingency basis. Be careful though not all auditors are created equal like anything else.