Utilities: Under my name or PM while vacant?

Question

Hi BP family,

I just acquired my first rental property and the utilities need to be under my name or the PM company. However, the PM company charges at 10% markup fee while paying these utilities during vacancy. I will have this switched when the property becomes occupied.

Question:

Do I take the small 10% hit considering the bills will be very little considering the property is vacant or just put it under my name?

Any advice is welcome!

Thank You

Arturo Matamoros · Answer

@Jason Martinez this is my first post to BP so I hope it goes over well and provides insight on your situation :)

I’m a property manager in Orlando, FL and although my company doesn’t charge ancillary fees, I can understand why other PMs might mark up these types of services. As another member said, it’s a “convenience fee”. As much as I dislike that term, the reason it’s used is for the convenience to the client/customer resulting in the work/risk for the PM.

What many people don’t take into consideration is that it takes time (and sometimes a lot of patience) to get on a call with the utility company and go through the process of setting up the account. It’s even worse when there’s an issue such as a meter/address discrepancy, unpaid balance, lien, etc.

Ultimately, it comes down to your “pain tolerance” for time equity loss. Is “saving” $10-$20 (for a $100-$200 utility bill) worth the time consuming phone call, or could you invest that time into higher dollar productive activities that generate more than $10-$20 (analyzing deals, networking, negotiating, mailers, etc.)?

James Wise · Answer

2nd this. There would be no reason a property management company would want to take on that additional level of risk for the owner. Now there is no reason the PM can't as a service offer to pay the owner utility account for the owner. If the PM company offered that service logic would dictate that they would charge for said service.

Anna Sagatelova · Answer

This might be area-specific, but in Cleveland, I don't know of any PMs who put the utility accounts in their names. All utilities in a vacant unit would be on in the owner's name, however this does not prevent the PM from obtaining the account numbers and making the payments on the owner's behalf through the trust account funds. How this service factors into the PM's price structure will vary; some do not charge for this service.

Adam Kelly · Answer

Congrats on the deal! I'd rather have them under my name for control.  I can't stand overpaying for things.  But it may not be worth your time to manage...up to you I think.

PS - what area is your property in?

Ric Ernst · Answer

@Jason Martinez I've never even considered that a PM might offer to handle utilities when a property is vacant. Once you have accounts set up with IPL (Indianapolis Power & Lights) and Citizen's Energy Group (water and gas) it's pretty easy to have service switched on and to stop service so your tenants can take over. I think one of them might ask you for a security deposit when you first open an account but they'll refund it back pretty quickly when you turn the service off and won't ask for it again when / if you buy more properties. You'll probably get a 3rd utility bill from the Ben Davis Conservancy which is for the sewer system. This will come automatically as they open an account for you when they get a notice from the county recorder (or maybe the tax assessor). Take a good look at that bill and make sure they are only charging you for the time that you have owned your property and not before. You will need to contact them and ask that they bill your tenant (not your PM) once you rent your place out and you will need to give them a copy of your lease to prove to them that you have a tenant in the house that is responsible for the bill.

Ric Ernst · Answer

@Jason Martinez one more thing that you might run into....if your property has been vacant for an extended period, IPL will require you to have a licensed electrician tag the meter head to certify that it is safe to turn the electricity on. You should have someone at the property (your  contractor ideally) when they turn the water and gas on in case there is a leak.

Caleb Heimsoth · Answer

@Jason Martinez you’re going to find out real quickly as a long distance owner you don’t want to be paying that 10 percent markup.

My utilities when I owned long distance stuff would be. ~ 120 a month during vacancy

Joseph Firmin · Answer

In GA/SC, I've seen PM's take this on and they don't charge a %, but a flat fee to transfer service when a tenant moves in. A tenant can do this on their own, so I don't have them do it, but if they did have it in their name, I wouldn't have to worry about it. I guess it goes back to how much you want to be involved...

Jeff Kao · Answer

@Jason Martinez

Congratulations on your first rental property! It sounds like you would be paying the markup fees now as a convenience fee so you won't have to worry about changing the name to the PM company when the property is occupied.

Jason Martinez · Answer

@Arturo Matamoros

Sounds like a great example of opportunity cost. Thank you for your expertise from being a PM yourself. Thank you!

@Ric Ernst

I didn't even know the exact company to contact regarding utilities. This is my first property and I am learning a ton. Thank you very much for your help. Next time around I will just deal directly with them. As mentioned by @Caleb Heimsoth those markup costs will get to me...

Utilities: Under my name or PM while vacant?

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