Underwriting Utilities for Rent by the Bedroom

[Jabbar Adesada]

Hello everyone? I am trying to figure out a good way to account for utilities in my SFH rent by the bedroom house hack. I know other house hackers, student rentals, and transient room landlords deal with this? What is a good way to deal with utilities? Should I the landlord pay for it and charge a premium in the rents? Should utilities be split amongst residents? Does rent plus a utility fee work better? It's going to be 5 other residents in this SFH 3 with their own private bathroom + me. I will be gone for a lot of the year on various exercises and possibly deployments so the main usage will be on them. What ideas do you guys have or have used that work well?

[Ryan Swan]

@Jabbar Adesada there's no perfect solution to the problem. You can err on the side of keeping the tenants happier, or on the side of minimizing your expenses. Some of the fixed utility costs (eg internet) can be easier such as: $89.99 per month divided by house occupants (say 4, including landlord) = $22.50/month for internet. If one tenant moves out, then the landlord should eat that share of the internet cost while keeping it fixed for the 2 current tenants. 

Electricity is probably the most difficult because it can swing wildly from December (lowest) to July/August (peak) bills. At my own house we are on the plan where the full year is averaged to make consistent monthly payments - so we pay $275/month regardless of the time of year. I would then do the same thing and divide the monthly average by the number of occupants. Here you could make small adjustments +/- depending on the size of the tenant rooms (larger master suite may pay slightly more than a small single bedroom). I would have each tenant sign a lease addendum that spells out exactly how the utilities are split up so there is no confusion or ambiguity down the line. 

The EASIEST solution is to just make a per room rental rate that is all inclusive (internet, electricity, water, gas, trash, pool, landscaping, whatever). So your 1-bed (no bath) rents for $625/month. Your master suite rents for $725, and so on. You calculate your average monthly utility overhead and then price the rooms accordingly.