The Pros and Cons of Charging Tenants for Utilities
There has been a lot of debate recently over the advantages and disadvantages of charging tenants for utilities. Many feel that renters have come to expect utilities (especially water, sewage, and trash) to be covered with rent. When choosing whether or not to include utilities in your rental price, it is important to consider the individual needs of your renters, your property, and yourself. Before deciding whether or not to include utilities in the rent, consider the pros and cons of charging tenants for utilities.
Pros for Charging Tenants for Utilities
Easy to Manage
Simply put, managing utilities is a hassle. Whether you are setting up service, reporting problems, or disputing billing errors, your job is complicated when you provide utilities. When you require the tenant to make these arrangements, you save yourself the hassle.
More Reliable Tenants
When you require tenants to register for utilities in their own name, they need to be on good terms with their utility provider. Less responsible tenants may have unpaid utility debts, which will discourage them from applying for rentals that don’t include utilities. This can be another way to screen out undesirable tenants.
Conservation
When someone else is paying the bill, it is easy to overindulge. If water and sewage are included in the rent, you may get stuck paying for your tenants to fill-up an above ground pool in the summer or wash their cars on the weekend. Placing the bill on the tenant will usually encourage them to find ways to conserve energy and water as much as possible.
Cons for Charging Tenants for Utilities
Retrofitting
If your building has only a single-meter for multiple apartments, you have a pretty good incentive to provide utilities. Retrofitting your apartments for individual metering can be very expensive, particularly if you have a lot of them. Individual metering may be cost prohibitive at this stage, so get estimates from your service provider before committing to this plan.
Lower Rent
Naturally, if you are providing a service for free, you can set your rental price a bit higher. If you take the time to accurately estimate the energy usage for each apartment, you may be able to set a price that will result in a profit for you by the end of the year. Proper planning makes all the difference.
Cosmetic
If your investment property has a significant investment in landscaping, you may consider including sewage and water in the rent. A renter on a strict budget may cut expenses by not watering your lawn in the summer. This will be a major regret should you lose all of your beautiful green grass.
