Raise Rents OR Split Utilities?

[Zach Schwarzmiller]

Greetings,

I owner occupy a Tri-Plex in Snohomish County near Seattle, Washington and have been there for 60 days now. I've had enough time to get to know the tenants - previously poorly managed by Century 21 and all tenants were very thankful for a new landlord so I do have positive rapport with the tenants - and analyze the buildings true financials.

The tenants are currently paying below market rent by about $300-400; they have been there a long time and I don't need or want to bump it by that much but if I could get them both up $250 and $150 it would put my "rent" where I want it to be and be competitive with the market.

I am not sure the tenants can handle a rent bump of $250; I was wondering if I sit down and explain this all and give them the option to instead of raising rent leave it as is but split utilities with me (which are currently all paid by myself) if it would seem I am being more fair and having them be part of the decision. Bottom line is I pay way to much and they are way under market, something needs to change. If they decide to split utilities, it's actually a win-win; they can reduce their consumption and save money and it's a greater net savings of $250/$150 a month for me. The units are not currently individually metered but I am looking into this. I have worked with clients on implementing RUBS programs on larger buildings but I don't think that would work well with this building, i'd rather just fairly split it. I could collect rent on the 1st and then have them pay utilities on the 15th or so to help their financial situation - perhaps this is a bad idea. Has anyone ever gone this route a fair 1/3 split of the bi-monthly utility bill? I'd probably require $200 month 1, then the balance month 2 for the remaining utility bill but as I mentioned could be paid on the 15th so they can collect another pay check.

Any advise/experience/anything appreciated !