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Real Estate Rent and Utilities cost?

Discussion in 'Real Estate Investing' started by JamesDean, Feb 29, 2008.

  1. JamesDean
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    JamesDean New Contributor

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    I was wondering when you rent out a SFH is the Utilities included in the Rent Cost or does the tenant pay that after they pay rent. Because if the Mortgage was in my name. then wouldnt the utilities be also Meaning that if they do not pay the utility costs i could get the losing end. How do most of you deal with this is there a contract that the tenant signs in the lease stating they are in charge of the utilities and such?
     
  2. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Where are you located?
    I know back in my country it is like that, utility companies do not allow the service being provided in the renter's name, only in the house owner's (if the bills are not paid they can sue you and get your house).
    Here in the US renters get the utilities in their names. The property owner only open accounts in his/her name when the property is empty and the utilities need to be working.
     
  3. JesseO
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    Generally when renting a house, the renter pays for everything. I believe there is a term called a triple-net lease that encompasses all costs.
     
  4. Yankees338
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    Yankees338 Bronze Contributor

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    Correct me if I'm wrong, but isn't that usually used for HUGE commercial properties, where a big department store or a Bed, Bath, & Beyond type store would be located?
     
  5. Runum
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    Runum Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass Summit Attendee

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    I have several SFH. The majority of the tenants pay their own utilities(uts) and the uts are in their name. If they don't pay the bills the uts get turned off. I do have a couple of good tenants that I pay their uts and they reimburse me. I wouldn't do it for just anyone though.

    I am thinking about adding a clause in my leases though about they must keep their uts paid and on. I don't want them living their without water and heat.
     
  6. bflbob
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    bflbob Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    I just ran into this recently with my "Tenants From Hell".

    They were supposed to turn the utilities on in their name, and didn't.

    I asked the utility company what I should do in the future.

    They said, "Tell them the utilities are being shut off on Tuesday, and they need to get their own account set up."

    Of course, my tenant said, "That's OK. I can live in the dark."

    Unfortunately, I have heat shared between all apartments.

    They might not like living without heat as much as light.
     
  7. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    In our area - the utility companies stick it to the landlord. The utilities go into the tenants name, but if they don't pay - we are responsible. Atleast - we can't get it turned back on again when they move out if the bill is not current.

    Because we are in a cold climate, we have to worry about frozen pipes, etc. so it doesn't work to let them live in the cold.
     
  8. bflbob
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    bflbob Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Hey! It was minus 8 here last night.

    I assume it is a Montana State Law that allows the utility company to do that.

    Do they do the same with a property when you sell it?

    In NY, we have a landlord agreement in place.
    When a renter loses power (by choice or otherwise) it switches the account to me.
    But not the old balance.
     
  9. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    where we lived in pa the water and sewage is provided by the landlords.

    its is this way due to the water company having the power to lein the property if the utilities are unpaid.

    the electric and everything else is usually paid by the tennant. You can get places where heat ad hot water are included in the rent too.
     
  10. phlgirl
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    phlgirl Bronze Contributor Read Millionaire Fastlane

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    Yep, it definitely varies by state and by utility. As Carrie mentioned, the property we own in PHL requires that the water/sewer be the responsibility of the property owner. You can assign responsibility to the tenant but if they choose not to pay, it creates a lien on the property and would prevent a sale, if unpaid. With electric service, this is not the case - the person requesting service is responsible and the debt is not transferable to home owner.

    In FL, the responsibility lies with the party who has requested the service, for all utilities. If the tenant does not pay, they risk shut off and it has no impact on property owner.

    Probably best to call each of your providers to make sure you understand the rules up front.
     
  11. JesseO
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    Correction :p

    " A lease in which the lessee pays rent to the lessor, as well as all taxes, insurance, and maintenance expenses that arise from the use of the property."

    Definition of triple net lease.
     
  12. MrPink
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    My concern is not only with frozen pipes, but the risk of mold if the home is not heated.

    On a related note, are people including any type of yard service to their tenants or just making them responsible? My worry is that if the tenants are responsible they won't water the grass.

    Mr. Pink
     
  13. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    typically if its a sfh the tennants do the upkeep. cutting the grass, removing the snow/ice ect. yes you ultimatley as the homeowner are responsible if they dont do it but its usually in the lease that the renters do it.

    in an apt its usually handled by the owner/landlord.

    we just moved into a duplex. in the lease it says we have to keep all utilities on and have to keep the heat at a min of 65. they take care of the yard work but we have to keep the porch and walkways clear of our stuff.

    if we dont we are in violation of the lease. if something were to happen due to our negligence we would be responsible for the damages that occur. if it exceeds the security deposit then they can take us to court for the rest of the money.

    I dont think without paying the water bill you can make the tennants water the grass. Ive never been in a property that needed the grass watered.(rented or owned) isnt that what rains for lol?
     
  14. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    just to add. mostly residential properties dont have triple net leases. usually they just have a regular lease. where maintenence and taxes and insurance on the property is paid by the owner not the renter. unless they have additional renters insurance. if they dont own the property they cant have homeowners insurance on it.

    a triple net lease is typically used for large commercial properties(thats not saying it cant be used in other instances) like where walmart comes in and does a 99 yr lease on a property and then they pay for the maintence and upkeep and repairs as well as taxes and insurances. I believe most triple net leases are for a minimum of 30 yrs.
     
  15. PEERless
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    Hypothetical Situation: I have a condo for rent in Idaho. Tenants are on their own for power, phone, cable, etc. Water is free here. Sewer and trash are paid by the HOA. So...

    If my tenant skips the power bill, freezes a pipe, and floods another unit; does the HOA come after me or go for him?
     
  16. CarrieW
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    CarrieW Gold Contributor Read Millionaire Fastlane Speedway Pass

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    I would assume the hoa would go after you(as the owner and ultimate one responsible to them) and you would in turn sue the tennants.

    unless there was some way to have them join the association as well and sign paperwork to the effect that they are responsible as long as they dwell there.
     
  17. biophase
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    biophase Legendary Contributor I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Contact the power company and see if they have some sort of landlord electrical account. Usually, if they know your property is a rental you can have the power automatically switch back into your name once the tenants cancel. Maybe you can have it set up so the power company will contact you before they are about to shut off power.

    Problem is that if the tenant doesnt pay, its in your best interest to keep power on so you'll have to keep paying. You probably need to make lack of paying for power grounds of breaking the lease.
     
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  18. PEERless
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    PEERless Bronze Contributor

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    Very insightful! Especially the idea for a lease addendum! Rep+ and thanks!
     
  19. Qjet50
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    Have a SFH in a dry area. Lease required the tenant to do all grounds maintenance, to include watering the grass as needed. Most tenants would not maintain the grounds even if not doing so was a violation of the lease. Required extra work to regularly monitor the yard to make sure they got the work done. What eventually happened was the grass died and was quickly replaced with a yard full of weeds, which impacted curb appeal. Finally gave up and had a sprinkler system installed (tenant pays water) and retained a yard service. This new setup does not seem to impact “rentability†of the SFH at all, in fact since the changes were made most applicants have indicated that they do not want to do any yardwork. Since the “upgrade†this SFH consistently rents quickly and within the upper range of the comparables in the area. This unit is in a upper-middle class area, so applicants are normally professionals or military officers.
     
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  20. Runum
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    Runum Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass Summit Attendee

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    Good idea Qjet50. +++ speed
     

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