QUOTE (Ian @ Jul 28 2008, 06:14 PM) Hello all:
I am looking at buying a house and renting both floors. I am aware that some investors charge a higher rent but pay the utilities and some charge slightly lower rent and have the tenants pay the utilities. Any advice as to which one to choose?
Thanks.
Ian Dunsmuir
Hi Ian,
If you`re considering paying the utilities, you may want to consider:
For the heating bill:
* How well insulated is the house? Depending on the age of the house, your heating bill may be quite significant, because you may not have attic insulation, the windows may be old, and the walls may have the old wood shavings for insulation. Since you`re paying for the heat, then your tenant doesn`t have an incentive to be watchful of the bill.
* How efficient is the furnace? The older the furnace, the more gas it will use for heat.
* Does it have a programmable thermostat?
* If one furnace for the entire house, how cold does it get for the basement suite? Will you have to provide an extra electric heater for the basement? That would result in extra costs for electricity.
* If the basement gets really cold, and the main floor tenant (who normally has control of the thermostat) has to crank up the heat to satisfy the basement tenant, you will find that the main floor person then leaves the windows open because it`s then too hot for them. Vicious cycle..the furnace never switches off. If the furnace is really noisy, that would bother the basement tenant constantly. Do you then provide sound insulation for the furnace room?
* If your water tank is older, you get a sediment buildup inside, and it takes more gas consumption to heat the water.
* Do you provide a heated garage for the tenants?
* Does the house have a gas bbq outlet?
* Does the house offer a gas fireplace?
For the electric bill:
* Will your tenants be plugging in their cars for the winter?
* Do they have lots of electronic equipment that remain plugged in?
* Does your property have older fridges which use up a lot of electricity?
* Do the tenants have aquariums which have electric pumps?
* Electric heaters? Security lights?
* In the summer, will the tenants leave on the furnace fan for air circulation?
* Do they operate machinery for hobbies, or workshop?
* Do your tenants close off the lights at night, or leave them on 24/7?
* Do you have the energy saver light bulbs, or the hungry ones?
For the water bill:
* Do you have older toilet tanks which use 13 liters per flush?
* Do your toilets have very slow leaks which your tenants never tell you about?
* Do any of the tenants wash their cars at the home?
* Do any of your tenants do any gardening?
* Do your faucets leak?
* Do any of your tenants take very long showers? (affects gas and water bill), or lots of soaker tub baths?
* Do your tenants do major loads of laundry? grease stained work clothes etc?
* Do your tenants fill up an outdoor summer pool for their kids?
The prognosis for future utility bills is that they will continue to escalate significantly. How do you plan to factor this in for future rent increases? And if you pay the utility bills, and you see a whopper of a bill in any given month, how do you approach this with your tenant? Which one of them will you talk to? Will this be a hassle? If you wished to get the best utility rates, you would normally have to sign up for a long term contract. Should you sell the home before the contract is up, the utility companies will probably insist on a termination fee, or have you transfer it to another property.
You can guess which way I personally lean regarding who pays for the utilities.
Sam
