The bottom line on including rent with utilities If they are searching for homes based on price, they may even filter homes above a certain rent. In highly price-sensitive markets, prospective tenants may see only the price tag, not consider the fact that it includes rent, and rule out a house where utilities are included. (This can help avoid the disadvantage of tenants having little incentive to conserve.) The rent may appear higher to prospective renters If the cost to the owner exceeds that amount, the resident can be required to make up the difference. To get around this problem, the owner can set a dollar cap on how much can be covered as part of the rent. If an owner accounts for a $100 electric bill as part of the rent, but the cost to the landlord rises to $150 in a given month, that impacts rental returns. Utility companies can change their rates without notice. Residents may not be inspired to save energy if they feel they are not paying for it, and might be less conscientious about, say, leaving lights on all night or maintaining tropical levels of warmth in the dead of winter. Tenants may have no incentive to conserve But if the owner’s name is on the account, and the tenant fails to pay, the owner is responsible all the same.Īnd the law frowns on so-called “self-help evictions,” in which an owner tries to compel a resident to leave without bringing the law into it. If a resident is responsible for the electricity and doesn’t pay the bill, the utility provider will compel the tenant to pay, and may even cut off service. The cons of including utilities in rent The owner takes on the liability for paying the bill If the utility company allows customers to pay their bills with a credit card with no fee, the owner can earn benefits on their preferred credit card, such as airway miles, with money that’s actually being spent by the resident. Utilities are one of the costs of running an investment property, so they are tax deductible. This may be attractive to clients who want to minimize administrative hassles as well as those who find it difficult to budget for multiple expenses each month. Once the process is set up, the tenant has just one bill to pay each month. The pros of including utilities in monthly rent The owner can charge a premiumįor taking on the responsibility of paying the bill, the landlord can charge a premium. Other common utilities are internet, cable, and telephone, but those are almost always the resident’s responsibility.Īny lease agreement should lay out clearly what utilities are included in the rent, if any, as well as any local requirements as to what provider must be used for any particular utility. The most common utilities under consideration are water and sewer, electricity, gas, and trash and recycling. It’s also important to know that including utilities in rent for rent-controlled housing is illegal. So it’s very important to determine what utilities cost before assuming responsibility for them. They calculate an average monthly cost for utilities and bundle that cost into the rent. Typically, property owners are not charitably paying expenses themselves. While it may simplify matters in some ways for the investor to take on the responsibility of the gas and electric bills, and some landlords say it attracts better tenants to do so, there are real risks to handling these expenses in this way. Property owners have the opportunity, in most cities, to decide whether they want to include utilities in their tenants’ rent. What are the pros and cons of including utilities with rent? | Mynd Management Skip to main content
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