I own a duplex where I pay all the utilities for the tenants. Each unit rents for $700, but I added $175 "utility charge" each month making total monthly rent $875. Historically, total utility costs have been right around $300 between the two units, so this utility charge has more than covered any expenses I have incurred. Furthermore, I have a clause in my lease stating if the utility bill is higher than the $175 utility charge they will be responsible for the difference. The main intention behind this clause was to not get stuck with a high water bill because the tenant didn't notify us about a running toilet, for example. This winter, I have seen gas prices double from the previous year and being in the Midwest, it gets cold. As spring is approaching, I am trying to brainstorm better ways to hedge against increasing utility costs for the upcoming winter (fingers crossed prices go down). I have thought about increasing rent entirely, but I fear potential tenants will be scared away by the much higher than market rent price listed because they don't realize what utilities cost. I have considered using a strategy out of the commercial RE playbook and charge utilities based on some form of index, such as the CPI. Another strategy I considered was introducing an escalation clause in my lease. Has anyone dealt with a similar situation and found a method to be more successful than another?
