Who bears the cost of utilities in your rental properties? If you’re a real estate investor who owns multiple properties, chances are you have very limited time to deal with an individual unit. This, however, doesn’t free you from the critical task of day-to-day property management that involves answering tenant’s calls for service requests and dealing with vendors. Well, the answer depends on the type of utility.
This guide will help you understand who pays for utilities: landlord or tenant.
Who is Responsible for Paying for Utilities?
Simply put, the tenancy agreement clearly specifies which utilities will be paid for by whom. While tenants are expected to pay for common utilities such as electricity, gas, etc., you should still specify this in the tenancy agreement. If you don’t add a related clause in the agreement and the tenant doesn’t pay for the utilities, you’ll automatically become liable to pay for those unpaid bills. Here are some of the utilities that you need to consider when formulating the tenancy agreement:
- Water and Sewer
- Natural Gas
- Internet, Telephone, Cable
- Trash Collection
- Security System
As per the common practice, you should require your tenants to pay for electricity, internet/cable, and gas. As a landlord, you should cover the costs of water, garbage, and sewage, incorporating these into the monthly rent you charge them.
Having said that, if you have separate utility meters for your rental units, you have the flexibility to either let your tenants take care of the electricity bills or include utilities in the rent. Keep in mind that the more utilities you incorporate into the rent, the higher will the rent be. So, be sure to take into account the price sensitivity and competitiveness of your local rental market. By not including utilities, you should be able to market your units at a lower rent and thus draw more interest. Remember, most renters will look at rent first and other details later.
Besides, make sure to conduct in-depth research of your local rental market to determine the average utility expenses for properties. Not only will this help you better predict the necessary expenses for utilities but also help adjust the rent price to accommodate for costs you want to include. You may even realize that it’s not feasible to include utilities in rent at all.
On top of that, if you do decide to include important utilities such as electricity and gas in your rent, be sure to examine the structure of your residential units and the appliances used in them. This is because these can have a massive impact on electricity and gas bills.
To sum it up, there’s no set law regarding who pays for utilities. It entirely depends on the landlord’s preferences based on their financial goals and local market conditions as well as negotiation with potential tenants. Whatever you decide must be clearly illustrated in the tenancy agreement. If you’re looking for credible property managers in South King and Pierce County in Washington state, get in touch with Sensible Home Management today by calling (253) 236-0337 and let them handle the rest!