Rebilling utilities back to tenants

[Kaybreh Mathis]

Hello! My husband and I have 20 units that all had tenants when we purchased them. They are in leases with the previous landlord, but most of them have expired which means in my state that they automatically become month to month. The former owner didn’t increase rents annually and he also paid all utilities, so these are significantly below market value. I would like to start the process for billing utilities back to the tenants, but I have some questions. I will double check with my lawyer, but I believe I just need to give them 30 days notice. Has anyone done this? Do you figure that month’s utilities as the bills come in, and tack that amount on to the following month’s rent bill? Do you distribute evenly by the number of units or per adult? Is there an app or software to streamline this? I know this is an easy way for us to instantly start making back $3k a month but am a little unsure on how to go about it. Thanks in advance for any advice!

[Joe Splitrock]

@Kaybreh Mathis billing back utilities is no different than giving tenants a rent increase. In the end, it is total expense for the tenant to live in your property as compared to the competition. It is harder for the landlord and tenant when you are billing separate variable expenses. 

As far as splitting expenses, people use a formula that includes either number of occupants or square feet of the property. 

My advice is do a market comparison and see what competitors charge for comparable units, with and without utilities included. If your competition is charging $1000 dollars with utilities, you are going to be more expensive if you charge $1000 without utilities. Consider the whole cost to live there. Also look at what is customary in the area. If all your competition includes certain utilities in rent, it is going to be weird if you don't.