Transferring water and sewage to tenants?

Question

Looking to purchase my first multi family, was wondering what is the best way to transfer or other ways to make tenants pay for water and sewage?

Nathan Gesner · Answer

You can include it in the rent. Determine an average, divide that by the number of units, increase the rent to match.

Average utility for past year is $100 and you have four units. Increase rent $25 each and include that utility in the rent.

I recommend bumping it 10% per unit to cover fluctuations. I also recommend putting a cap on it. In other words, include utilities up to $30 per unit but if the water bill shoots up then charge the excess to the tenants. This helps prevent waste.

Nathan Gesner · Answer

@Gerardo Ali you can't change the terms of an existing lease without permission from all parties. In other words, you would wait until the current lease expires. I recommend giving them notice 30 days in advance, in writing.

Gerardo Ali · Answer

@Nathan G. Wow these are all Great advice! I love learning ways that others have utilized and became successful with... and now I shall pass on this knowledge. Truly Appreciated Everyone’s input.

Nancy DeSocio · Answer

There are probably several schools of thought on this, but I'm in favor of Nathan's approach.  We live in a culture of convenience (and laziness)....tenants don't want to pay more bills (as much as you don't).  This might also be location specific.  In my area, nearly all rents include sewer and water, so being the landlord that charges an extra fee for those items will turn off prospective applicants to the property.  Check out apartment listings in your area and see how other owner's handle this in your market.

Good luck on your journey!

Allyssa McCleery · Answer

@Nathan G. Great advice on putting a cap on it. I don't know why I never thought of that! I currently use a service that measures each tenants usage and sends them the bill but as the landlord I am still responsible for paying the water bill as a whole. I have played around with what I want to do but it seems like increasing the rent is the best way to go.

Nathan Gesner · Answer

Absolutely. Always put everything in writing.

Gerardo Ali · Answer

@Nathan G. Thanks Nathan, that makes sense, they only have a few more months so I’ll send the 60 day notice soon. Appreciate it

Gerardo Ali · Answer

@Nathan G. Could I add water and sewage bill back to a leased tenant? Or do I have to wait when the lease expires to add this bill back?

Andrew McKinnon · Answer

@Nathan G. I imagine this term is included in a lease agreement?

Thomas S. · Answer

I would recommend Nathans approach. Make sure you add a descent amount of buffer and take into consideration the number of persons in each unit. Having tenants on M2M leases allowes you to adjust quickly when costs change.

Transferring water and sewage to tenants?

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