Every rental property is different, and so is every rental property owner. This means that what works for one landlord might not work for you. That’s okay. The path to a successful real estate investment requires you to try different things in different ways, and then settle on the system that makes the most sense (and the most money) for you.
Today, we’re talking specifically about utilities.
Utilities are services that a home needs in order to be functional and habitable. They include electricity, gas, water, and sewerage services. These are often public services that are provided by an organization and require an account set-up and the monthly or quarterly payment of account bills.
Every home needs to have water, electricity, trash collection, gas, and sewer services.
The way utilities are generally handled with rental properties depends on the type of home we’re talking about and whether the owner wants to maintain control over the billing and payments of those utilities.
In most cases, it’s perfectly reasonable to expect your tenants to set up their own utility accounts and pay their own bills. However, there are several good reasons to pay for them yourself and simply include the cost in your rental amount.
Let’s dive into what we mean by that.
Utilities in Single-Family Homes vs. Multi-family Homes
Tenants are generally responsible for establishing their own utility accounts and paying the bills for electricity, gas, trash, and water when they rent a single-family home in Portland. This seems easy and intuitive since the tenants are the only people using those utilities. There are no communal spaces and no collective use of water or lights or trash.
With multi-family properties, things are a little different. Portland landlords will often cover the cost of utilities for a building and then either bill back the amount that’s due to each tenant based on usage, or just charge a general and consistent flat fee every month for water, electricity, trash, and sewer costs.
If you want to keep the utility bills in your own name, you’ll have to bill the tenants separately for what they use or roll that amount into the monthly rent.
Including Utilities in Rent: Keeping Up with Payments
One of the best reasons to include your utilities with your rental payments is that you’ll make the bill-pay a lot more efficient. It streamlines what’s owed, and that helps Portland owners and residents. When you can combine the rent with the utility payments together into one monthly bill, you’ll give your residents a budgeting gift because they’ll have a better idea of what they’ll need to pay every month.
It contributes to tenant retention because residents won’t have to worry about costs spiking at one point or another during the year. When you’re able to set a specific amount that’s paid every month to cover the electricity, water, gas, and sewer/trash, tenants will feel more comfortable and it’s likely you’ll have your rent paid on time more frequently because it’s a fixed sum and there are no other housing-related bills for your tenants to juggle.
Including Utilities Makes Your Portland Property More Competitive
Tenants have a lot of choices out there on the rental market, even in the Portland metropolitan area, which doesn’t struggle with high vacancy rates very often. There are plenty of residents looking for new homes who are specifically seeking apartments, condos, or even single-family homes where the utilities are included in the rent. Maybe they don’t want to deal with opening up new accounts with utility companies. Perhaps managing monthly bills takes too much time or they’re just looking for the ease and efficiency of one lump payment.
When you offer a rental home that includes utilities, tenants will be more attracted to the home. They’ll be grateful that they don’t have to deal with new account deposits and confusing processes. It can often reduce your own vacancy rate and get your new residents ready to move in sooner.
Extra Cash Flow with Portland Utilities
Another benefit to including utilities with your rent is that you can potentially earn extra income. Incorporating utility costs into your rent payments means you’ll be collecting larger rent checks every month, which delivers additional and consistent revenue streams right into your own account. If the market allows it, you can even build in a buffer, charging slightly more in rent than you actually pay in utility costs. As long as this keeps your rental amount competitive and within Portland’s rent control criteria, you can perhaps earn extra money each month. As long as you can keep these utility costs under control, this can help you stabilize or increase your income.
Cable, Internet, and Additional Services
Providing basic utilities is one way to keep your payments streamlined and appeal to a resident’s sense of ease, but what about those non-essential utilities like cable and internet?
While a rental property is not habitable without water and electricity, additional services like cable, internet, and smart home technology are optional services that most tenants can decide whether they need or don’t need. Landlords in Portland are under no obligation to provide free cable or internet to their tenants. It’s perfectly reasonable to require your residents to set up their own accounts if they want high-speed Wi-Fi, streaming services through their television, or high-tech smart home functions that include security alarms and video doorbells.
However, many apartment communities and multi-family rental homes will provide basic cable and wireless internet to tenants in the hope that it will make their properties more competitive on the market. While this is not something that’s required, it’s something you might want to consider as a landlord, especially if you want a competitive edge in a crowded market.
Address Utilities in your Portland Lease Agreement
Whether you’re paying for all utilities or none of the utilities, make sure your lease agreement stipulates exactly who is responsible for paying which bills. This will ensure that you and your tenants are on the same page and everyone understands their responsibilities and expectations.
If you’re going to include utilities, make sure your marketing materials reflect that. You want your potential renters to know that you’re approaching the payments in this way, and it will also explain why your rental amount is higher than other similar homes.
When you want to pay the utilities yourself and then bill them back to the tenant depending on usage, you’ll need to be specific about this in the lease agreement as well. Make sure your tenants understand that while you’ll still be sending one complete bill every month that covers rent and utilities, the amount may vary from month to month because they’re paying for what they used, not a flat utility rate. This is an important distinction.
If you’d like to talk through how this might work for you and your rental properties, contact us at PropM, Inc. We’d love to serve as your local Portland property management resource, whether you need help with leasing, management, maintenance, or working utilities into your lease agreement.