Splitting heat costs in a duplex

[Daniel Buck]

Hi All,

I'm closing on my first property at the end of the month (a duplex) and was looking for some input on utility costs and how to approach this situation. Let me start by giving some background.

The house has a monitor heating system (not very common, even where I am in NH) with a kerosene fuel source. Each unit has one "monitor". In the first floor unit, it is in the basement (which is very open to the main floor, presumably designed this way intentionally for the heat to rise; in the second floor unit it is in the kitchen. It also has radiant electric heat (in the floors/ceilings, no baseboards or other visible sources). In addition to both of these, the house has a wood-burning stove in the basement (part of the first floor unit) which is meant for heating purposes. 

I would be using the wood stove and just ignoring the rest, except that I will be living in the second floor unit for the time being, and I'm fairly certain I don't want my tenants to be allowed to use the wood stove. The kerosene heat may become costly. I honestly don't know how often the tank will need to be filled as I don't really know anyone else who has it to ask - and I can't find any good info online. But it's not a split system, so the cost for that would fall solely on me. The radiant electric heat, from what I've been told and researched, could actually be fairly efficient, especially because the house is well insulated with newer windows. 

My question is should I lower the rent slightly and only allow electric heat usage (which is separate for each unit, so tenant pays), or keep the rent a little bit higher and include heating (with the monitor system) in the rent. 

Thanks for any advice!

Dan

[Logan Boesch]

Hey Dan,

I own an 11 unit in Minnesota that has shared heating like the building you talk about. This winter was really hard on us because we saw some of the highest heating costs we've seen at the place with the extreme cold we had. When my property manager was in one of the units for a maintenance call in January the tenant had his heat set to 76 and a window cracked in his bedroom to sleep. That being said, whenever you are able to have the tenants be aware of the cost (ex. Billing them for it or putting the utilities in their name when possible) it eliminates these issues and makes your cash flow much more predictable. We've decided to go ahead and put electric baseboard heating in the units going forward since the tenants pay electricity and will see a substantial increase to the NOI of the property.

Logan