Rental Property Analysis

[Noah Barba]

Hey BiggerPockets friends,

I'm looking at a triplex and am trying to estimate my monthly carrying costs for the property. I know my taxes, insurance, mgt payment, and other items like maintenance, cap x and vacancy. However, I have a question about utilities.

I understand the basics of figuring out your utilities estimates (simply calling the provider and asking), however a realization popped into my mind and my question is this: if I'm having my tenants pay ALL utilities, do I need to factor utility expenses into my monthly costs? BiggerPockets has always taught me (podcasts, webinars, etc) that I need to bake these into the cake, but if I'm not the one paying them, why would I factor them into my analysis? Am I right in my thinking? A clarification would be very helpful in me finally finding my carrying costs for ANY property. Thanks so much BiggerPockets community!

[Kenneth Garrett]

@Noah Barba

If my tenants are paying utilities I do not include it in my numbers.  In the event a vacancy occurs, the utility cost is very small and I let the cash flow handle the small number.  There is nothing wrong with adding a number say $10 a month I just think it’s insignificant.  In my case, I don’t live off of the cashflow it goes towards paying down the principle or buying another unit.  Still a W-2 earner and self manage my 20 units.