Figuring Out the Numbers - Utility Bills

[Coty C.]

I have a few questions about estimating numbers for investment properties and how other people determine their numbers. Right now, I am looking specifically at Utility Bills and how they are determined and allocated.

1. How are you determining the cost of the utility bills for your rentals? I am aware that you can call each utility company and ask for the previous bill amounts to get a good estimate for what yours will be. I am also aware that you can ask the property owner for the records to see the amount. How do you determine the price if you are just doing a quick assessment of the property? How do you find the price if you don’t know the price for that area?

2. Do you include the utilities in to the rent price? If this is the case, then the tenant would pay a flat rate and I feel wouldn’t care if they go over. Or do you stack it on top of the rent each month? This would allow you to have a lower advertised rent and incentive the tenant to reduce the use of utilities to lower their rent. I have also heard that you should not include utilities at all because the tenants should have the utilities in their names, so you are not on the hook if they decide not to pay it. How does this method work for multi-family rentals?

3. What constitutes a utility bill and who pays which bill? A few utilities are confusing me on this front, Trash & Internet specifically. Trash is a fixed rate bill, so I am assuming that is wrapped into rent. The internet will be a fixed rate bill, so I would again assume to wrap that into the rent. However, if they want a faster speed they would need t pay the difference. What are some other unknown or unique utilities besides the normal water/sewer, heating, & electric?

4. What are your thoughts on utility sub-metering? Do you find tenants respond better to only paying what they used instead of a formula of bill/Sq ft*unit Sq ft=price? I am still new to the idea of sub-metering so any additional information or pitfalls on this topic would be greatly appreciated.

I appreciate all the guidance and help you guys offer.

- Coty