Need Creative Solutions for Billing Expenses to Renter

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Topic Author
StillLearning1977
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Need Creative Solutions for Billing Expenses to Renter

Post by StillLearning1977 » Wed Aug 14, 2019 2:05 pm

In a related post I explained a forthcoming house purchase with a large back house I plan to rent (about 33% of all dwelling square footage). Since it's on the same property (and one address) there's only one meter, one bill for city services, etc.

Accordingly, my renter can't set-up own electric, gas, water, etc.

My thought was just have an "all-in" price on rent that covers all expenses. Of course, the problem with this solution is renter could crank AC to 63 degrees when it's 100 degrees in August, i.e., quasi-moral hazard dilemma.

Any out of the box ideas? I could say renter pays 33% of bills, but then renter might not trust that I'm not cranking AC and using renter to subsidize that.

psteinx
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by psteinx » Wed Aug 14, 2019 2:32 pm

1) The most straightforward approach is to see if the electric company (and other utilities) can install separate meters. Yes, there'd likely be an upfront cost, but you'd likely recoup this relatively quickly vs. the complexity and problems of other approaches.

2) One problem with a "utilities included" approach is that prospective tenants might not really appreciate the value (and the cost to you) of this approach, and you might not be able to charge enough extra rent to offset this, even IF the tenant didn't overuse electricity.

3) In this day and age, not only would you have to be worried about electricity, but a whole host of other appliances and such, and, at the outer edge, stuff like bitcoin mining.

4) You COULD try to include lease language along the lines of "tenant agrees to use no more electricity than is proportionate/normal for this size dwelling, for typical residential uses". You might even try to put min/max thermostat settings in the lease. But enforcing this could be difficult, and it might feel a bit big-brother-ish to prospective tenants.

5) It's possible that the utility wouldn't even let you do the single meter approach, or have other guidelines/requirements in this situation. Contact the relevant utilities and ask about rules and options...

Silk McCue
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by Silk McCue » Wed Aug 14, 2019 3:52 pm

If renting is a long term plan then I would sub-meter the utilities. Upfront cost but fewer back end issues.

Someone will always wonder if they are being overcharged or under compensated. That's not good for anyone.

Cheers

DVMResident
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by DVMResident » Wed Aug 14, 2019 4:03 pm

On one property with 1 meter, split utilities 50/50 right in the lease and adjusted rents based on the historical running averages: e.g. the larger unit was slightly above market and the smaller slightly below. We explained the rents were adjusted, there was a moral hazard of bundling the utilities, and I as the landlord was not going to get between the tenants and a $50 bill-"be adults, don't screw each other, etc."

mervinj7
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by mervinj7 » Wed Aug 14, 2019 4:10 pm

For our rental property, we have separate gas and electric meter for the unit. We kept the water unit as joint. Water is included in the rent and rest are not. You should get a quote to see how much a sub-meter or second meter would cost to install. Then decide on how to proceed.

Topic Author
StillLearning1977
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by StillLearning1977 » Wed Aug 14, 2019 4:26 pm

Thank you so much!

All great comments. Gas (at least now) isn't very expensive, so I'm probably ok eating that cost now.

As for the electric, I agree it's definitely worth asking the utility the cost to sub-meter that dwelling.

Thanks all.

megabad
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by megabad » Wed Aug 14, 2019 4:40 pm

StillLearning1977 wrote:
Wed Aug 14, 2019 4:26 pm
As for the electric, I agree it's definitely worth asking the utility the cost to sub-meter that dwelling.
I am definitely on board with your thinking here to get the utility company to meter if the utilities are a big number. In fact, if the utility won't do it because it is one address, I would consider getting the properties replotted with separate addresses to then allow separate billing. This would fix the mail situation too if that bothers you.
Last edited by megabad on Wed Aug 14, 2019 4:55 pm, edited 1 time in total.

HomeStretch
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by HomeStretch » Wed Aug 14, 2019 4:40 pm

Can’t hurt to find out the cost of separately metering gas and electricity if you are going to be in the landlord business.

With the gas/electricity billed directly to the tenant, it’s less money you have at risk of non-collection from a bad tenant. Also, it allows the rental price for the unit to be lower in the listings which might work in your favor.

123
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by 123 » Wed Aug 14, 2019 4:50 pm

There may be state or local regulations about how "shared" utilities are allocated/paid in rental situations.
The closest helping hand is at the end of your own arm.

megabad
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by megabad » Wed Aug 14, 2019 4:54 pm

123 wrote:
Wed Aug 14, 2019 4:50 pm
There may be state or local regulations about how "shared" utilities are allocated/paid in rental situations.
+1 all the more reason to have the utility deal with it by having them meter it directly.

Ping Pong
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by Ping Pong » Wed Aug 14, 2019 5:01 pm

If your main concern is air conditioning, you could install a hotel thermostat that lets you set minimum and maximum temperatures.

Ping Pong
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by Ping Pong » Wed Aug 14, 2019 5:03 pm

I once had a tenant who was on his own electric meter. He turned the air conditioner off during the day, so there was tons of humidity in the unit. I’m sure mold grew a lot faster. The other side of moral hazard.

boomer_techie
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by boomer_techie » Thu Aug 15, 2019 12:46 am

psteinx wrote:
Wed Aug 14, 2019 2:32 pm
1) The most straightforward approach is to see if the electric company (and other utilities) can install separate meters.
There's no reason to involve the utility. It is possible to buy one's own private meter. Then all that's (officially) needed is a building permit and a licensed electrician.

Note: There could be local laws around how a sub-meter is billed to a tenant.

Topic Author
StillLearning1977
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by StillLearning1977 » Thu Aug 15, 2019 6:28 am

This is brilliant. Looks like just costs about $75 to put one in. How do I install so the meter is only capturing the electricity being used at this part of the dwelling as opposed to the whole property?

megabad
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by megabad » Thu Aug 15, 2019 6:40 am

boomer_techie wrote:
Thu Aug 15, 2019 12:46 am
psteinx wrote:
Wed Aug 14, 2019 2:32 pm
1) The most straightforward approach is to see if the electric company (and other utilities) can install separate meters.
There's no reason to involve the utility. It is possible to buy one's own private meter. Then all that's (officially) needed is a building permit and a licensed electrician.

Note: There could be local laws around how a sub-meter is billed to a tenant.
That is a big “note”. In my area this would be the least straightforward approach. I don’t think it was even allowed at all where I last lived (billing as a 3rd party for electricity). If the utility can do it, that is almost universally the simplest approach as mentioned above. OP, I would check your local rules for this carefully if you are self performing. Even in CA where the rules are pretty clearly laid out, the rules are numerous.

wilshuer
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by wilshuer » Thu Aug 15, 2019 7:32 am

Not sure of their accuracy or practicality, but there are various smart energy monitors which could be installed to monitor usage. A quick search is one called Sense - https://sense.com/

I would imagine there is a single line running over to the guest house, and a subpanel there. If that's the case, perhaps something like this could be installed and you could monitor what usage is specific for the renter. Work out their proportion from the total bill, charge accordingly. You could do this all in the spirit of openness too and allow the renter to see the full bill, their portion, etc.

Could get into some issues regarding legality of them refusing to pay, etc - work terms into contract.

WhyNotUs
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by WhyNotUs » Thu Aug 15, 2019 10:24 am

Whether you have a subpanel or not, something like this provides credible results.

https://www.powermeterstore.com/P10691/ ... wer-meters
I own the next hot stock- VTSAX

flarf
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by flarf » Thu Aug 15, 2019 10:30 am

StillLearning1977 wrote:
Thu Aug 15, 2019 6:28 am
This is brilliant. Looks like just costs about $75 to put one in. How do I install so the meter is only capturing the electricity being used at this part of the dwelling as opposed to the whole property?
You're going to need to call an electrician. Where the power enters your property and where it branches off to the outbuilding will determine the complexity of installing a second meter. In most locales your electrician will prep everything and then the electric utility will come out and install the second meter.

aristotelian
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by aristotelian » Thu Aug 15, 2019 10:46 am

If you want to get real creative, install a Nest thermostat that is linked to their phone but you get to monitor the temperature and usage? Then you could do utilities included and know that they aren't being wasteful.

Topic Author
StillLearning1977
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by StillLearning1977 » Thu Aug 15, 2019 1:15 pm

I like this idea. Contract says $350 flat rate for all bills cable, internet, electric, gas, water, trash and lawn maintenance. And temperature year round must stay between 70-74 degrees. Also disclose house has a Nest which I can monitor temperature settings.

This is by far the easiest, and dovetails with most important renting any property - - vetting of tenants.

j0nnyg1984
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by j0nnyg1984 » Thu Aug 15, 2019 3:38 pm

Surely something like this exists on a larger scale?

http://www.p3international.com/products/p4400.html

wilshuer
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by wilshuer » Thu Aug 15, 2019 3:57 pm

StillLearning1977 wrote:
Thu Aug 15, 2019 1:15 pm
I like this idea. Contract says $350 flat rate for all bills cable, internet, electric, gas, water, trash and lawn maintenance. And temperature year round must stay between 70-74 degrees. Also disclose house has a Nest which I can monitor temperature settings.

This is by far the easiest, and dovetails with most important renting any property - - vetting of tenants.
Maybe it's just me, but if I was looking to rent a place and the contract stipulated the temperature range - and narrow at that - I would probably run. Would make me wonder what else I would be surprised with.

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Wiggums
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by Wiggums » Thu Aug 15, 2019 4:07 pm

Separate utilities is the best solution if not cost prohibitive.

If you are unable to do that, I’d split the Utility bills 50/50 in the contact. You can always charge them less. I don’t know if I would feel comfortable charging a fixed amount for utilities unless you had a few years of historical data.

Just a thought.

illumination
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by illumination » Thu Aug 15, 2019 9:03 pm

I will say on two different former rental properties, there were arguments about the tenant's utility bill. The first time, I had a short term rental where I kept the bill in my name, and the tenant was convinced we were lying about the actual bill. Turn out they just liked it ice cold. The 2nd one demanded we get a more modern AC unit because he thought his bill was too high. :D

If people think they aren't responsible for the bill, they will crank the AC super cold and/or the heat super hot anytime they get the slightest bit uncomfortable.

So anyway you can make that as cut and dry as possible and put it all on them, I would do it. Especially if this is going to be a long term proposition where you plan to rent this over several years. You can also write it off as a legitimate expense towards the rental income.

SandysDad
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by SandysDad » Thu Aug 15, 2019 9:36 pm

Just put in the lease a % of electric bill, and have them pay that. I did that for 19 years with a rental. Worst thing ever to happen was a tenant asked for a copy of the bill occasionally.

I do the same for water as in cities, water and sewer prices are going thru the roof.

mchampse
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by mchampse » Fri Aug 16, 2019 1:21 am

We’ve been sharing the cost of certain utilities (water, garbage, internet) with renters for years without issue. Gas and electric are separately metered. I think you are overthinking it.

tesuzuki2002
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by tesuzuki2002 » Fri Aug 16, 2019 1:31 am

Month 2 month all inclusive. Let tenant know if utilities are extreme you will have to raise the base rent. If it’s way higher then you thing it should be. Send notice that the following months rent is going up to xxx.xx amount.

After a time or 2 of a just met a they might conserve or move it.

boomer_techie
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Re: Need Creative Solutions for Billing Expenses to Renter

Post by boomer_techie » Sat Aug 17, 2019 6:34 am

flarf wrote:
Thu Aug 15, 2019 10:30 am
You're going to need to call an electrician. Where the power enters your property and where it branches off to the outbuilding will determine the complexity of installing a second meter. In most locales your electrician will prep everything and then the electric utility will come out and install the second meter.
In some/many places, local laws may prohibit the power company from having a second meter/account on one parcel. But nothing will prohibit having your own meter measuring usage in your guest house, garage, pool house, water well pump, teenager's room, and so on.

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