Should you or shouldn’t you? As a real estate investor, should you pay for the utilities or let the tenants be responsible? Paying for utilities can be an attractive way to appeal to a wider pool of potential renters, giving you the opportunity to choose the cream of the crop, so to speak.

 

You don’t even havepaying a tenants utilities to pay for all the utilities, maybe just take care of the water bill. What are some of the considerations when deciding whether or not to pay for some or all of a tenant’s utility bills?

Before buying any rental unit, you can obtain a usage history from the local utilities. This will tell you how much the electricity, gas and water has been used over time. If you’re paying the utilities, you can adjust the monthly rent to cover those additional charges. But there may be some drawbacks.

If your tenants know they don’t have to pay the gas bill do you think they’ll always keep the thermostat at 68 degrees all throughout winter? Probably not. And in the summer time will they respect the amount of electricity used when powering the central air conditioning unit? Again, not likely. If they don’t have to pay the bill they’re more likely to pay no attention to their usage levels. The less they care about utility bills the less in your pocket each month.

And with utility bills comes the bills each month. You pay the mortgage, the property taxes and insurance along with maintenance requirements but if you pay the utilities you’ll also pay separate bills for water, gas and electricity. Oh, and don’t forget about waste collection. If you own multiple properties you can see how the monthly bills add up. So much to the point you can no longer handle the paperwork and hire a property manager who will be more than happy to take care of the bills for you. For a fee of course.

If other rental properties in the area have an “all bills paid” sign out front then you may have to follow suit. Otherwise, think twice before such a prospect. It might be much more work than it’s worth.