Switching utility bills to tenant upon new purchase.

[Tosin Oluwatoye]

I am currently considering a 10 unit (5 duplexes) purchase where the current landlord is responsible for all utility bills and does not have a cap on usage written into any of the leases.  Fortunately all 10 units have month to month leases and the deal will most likely close going into the winter months ( I am assuming this is an advantage) 

In my Analysis, I have found that If I reduce rent to the same amount across all units & transfer the gas&electric utilities to the tenants while landlord is still responsible for water & sewer ( win-win), I can increase the CoC ROI by 11%. To get to the details, annually, I will lose about $5,760 on the top line but save $14k+ on expenses and increase cash flow by $7.8k+.

I would prefer to implement this on day 1 though I understand such changes could be a tricky dance with tenants who have gotten used to status quo. 

I am wondering if anyone in the BP community has had a similar situation and has a few helpful nuggets to share.

Thanks 

[John LaBanca]

I haven't had this experience, but instead of telling them that they need to pay for gas & electric, you could increase rent by the equivalent amount (or ease them into it over 2 years).  Making them responsible for something that the landlord used to pay will feel like you're taking away a benefit, whereas charging more for rent is typical and reflects increasing costs over time. As tenants move out, you can charge the new tenants for gas & electric.