Top / Bottom duplex rental agreement suggestions / advice?

[Michael Ernst]

Anyone have any experience with renting out a top/bottom duplex to 2 different tenants?

I'm looking for some help with the following questions to put into an agreement:

How to deal with excess noise from either tenant written into the agreement.

How to deal with heat/gas/electric since they are not separated out. I was thinking of building this into the agreement in a way where I pay for the utilities in return for upping rent to cover it. This way both tenats are worry free about who uses more electric/gas throughout the month.

Heating cooling is central but only controllable in the upstairs appt. I was thinking to use dampeners on all the downstairs vents and leaving electric heaters and an electric AC to use if needed for basement tenants so they have more control over their environment. The boiler and hot water heater room will only be accessible by myself since it has a door sectioning it off. I was going to add into the agreement that I will provide these heating and AC units for the basement tenants but they need to make sure they call the PM for any issues.

Property has a 2 car garage but I don't want to split it between tenants as this could cause tension. There is plenty of on-street parking in this area though so if the agreement says on-street only with no access to the garage for one of the tenants is that ok?

Anything other advice on this type of rental would be greatly appreciated!

Thanks!

[Karissa Sampson]

I have a duplex that has shared water (all other utilities are separated and tenants pay). I determined a flat rate to add to the rent each month based on last year's use/cost taking 12 months of bills, divided for a monthly average, rounded up to nearest whole number, and divided by number of people in the entire duplex. That gives you a per-person amount. You could do it per unit based on sqft or # of bedrooms too if you don't know how many people to plan for in the unit when advertising. This is for water though-sqft doesn't really affect it. For electric/gas, you'll need to factor sqft into the equation. Put in a clause about what happens if there is excessive use. Specify what is excessive use (X more than $dollar amount per month, or more than x gallons/month, or unreported maintenance) Unreported maintenance meaning that the tenant had water leaking and causing damage under the kitchen sink and they knew something was up but failed to report it and now you owe a ton of money for water bill (and repair damages). Spell out things like no window AC units, no plug in heaters, no swimming pools, no filling of RV tanks with water, no electric or gas use for business or commercial purposes (lest they setup their business in your garage and use your "free" electricity and gas to fund their business), etc. and put them in the lease. Make a good lease that spells things out in detail. Most people arent going to pay close attention to those details but they will mean a world of difference to you. In the event you have an issue, pull out the lease and "make the lease the bad guy" as Brandon Turner (I believe, maybe David Greene..) once said. 

Example (my own): Tenant's daughter left a garden hose running for a weekend. I received a water bill for $250 more than usual. I notified the tenant of the unusual high cost and that I was going to the property for an inspection to assess for leaks/causes. After finding no leaks, I noticed the garden was soggy and everywhere else was dry. I inquired and found out that the daughter had left the hose on. I brought out the lease and referenced the clause about this situation in it. I worked it out with the tenant to pay the excess $250 bill in smaller increments over the next 6 months. I had reserves to cover the cost and I like this long term tenant. I could have asked for the $250 upfront but knew that she would be more likely to pay it without argument or legal action if I spread it out over time. I am also lucky that she's a great tenant. A lesser tenant may tell you to fck off and refuse to pay, in which case you will need to keep security deposit, take them to court, or just eat the cost yourself.

Really advertise UTILITIES INCLUDED in everything you advertise. Tenants, in my experience, don't recognize the value of included utilities as much as we think or would like them to. They mostly focus on the per month rent cost. And if its higher (because of included utilities) than other local properties, they may pass on your property. They often see a cost of "$1800/month" (no util.included) vs. "$2,000/month" (util. included) at face value only and dont factor in that the $1800 is really $1800+cost of utilities. Stress to them also that having utilities included means that they don't have to deal with managing those additional bills each month/less stress. 

Curious-is this a legal duplex? The big thing for me was the lack of separate HVAC systems with shared ductwork. Ducts allow for fire to travel between units and usually a legal duplex is required to have separate systems. With electric heaters in the downstairs, consider the fire hazard risk if an absent minded tenant leaves it on unattended and something touches it and catches fire which introduces lots of potential problems. Does your downstairs have appropriate egress windows if its a basement? Can your tenants escape a fire? Is there fire blocking for the upstairs so the fire doesn't rapidly spread to their unit and they have time to escape a fire? Big picture- If its not a legal duplex and/or if your insurance is not for a duplex, then you may be at a huge loss and perhaps no coverage in the event a fire damages or destroys the property. If city finds out, they can shut it down and make you operate it as its actual use (ie: single family), may have fines too. Denver has been a hot market and people have been advertising properties as multifamily which are NOT legally multifamily (ie: SFR, SFR w/ legal ADU, SFR w/ illegal ADU, etc.)

If its is illegal and you plan to rent it anyways, make sure its safe for the tenants and you've thought about the risks. Also, be careful in talking to the city to find out if it is a legal duplex because you could bring attention to yourself if youre just going to rent it anyways.

If its legal-sweet, congrats on a legal duplex in Denver and I hope you get the utilities figured out.

Anyways-long winded answer. Hope it helps.