The question of whether or not to include utilities in the rental price has been one that has landlords and property management companies going back and forth on for years.
The trend seems to shift depending on what the rental market is doing at the time. In the 1990’s, with higher rental vacancy, the trend was to include utilities as a way of attracting new tenants, or at least it started out that way. Eventually, it became standard and it ceased to be an incentive and became something tenants expected. Some of the large apartment companies were even including free parking in the rental price to attract tenants.
As we moved into the 2000’s and rental vacancy across the lower mainland made it’s way down, landlords no longer felt the need to include quite as many perks to attract and retain tenants. Free parking, with the exception of single family homes, is almost unheard of these days.
And, while some landlords do still include utilities with rent and its price, it has become much less prevalent today to the point of being almost a rarity.
However, if you find yourself wondering whether to include utilities with rent or not to include, we’ve assembled a list to help you work it.
One meter, many units. If you’ve purchased a rental property and it has been divided from a single family home into multiple apartments there is a good chance that each of these units is not separately metered. This, of course, means that there is no way to know how much each apartment is using in a given month and completely impossible for more than one of them to set up an account with BC Hydro. Of course, you could go through having the metering for each apartment separated, but get ready to incur a hefty bill. In this case, you are almost forced to set your rental prices with the utilities included.
Earning a Utilities Service fee.
If you are quite positive in your abilities to estimate the hydroelectric, water, and sewage expenses for your property, you could make a small profit on the including them in the rental price. By knowing how much you need to charge, you could then attach an additional administration fee. As you are including the utilities, this small additional charge likely won’t scare off any potential tenants. Of course, this opportunity comes with a pretty serious caution. First, you have to be fairly confident that you have a good handle on what the utility costs are likely to be and be prepared to set the rental price to account for fluctuations. The other caution is that rental increases are fixed year over year and the utility costs could potentially spike higher than what you are able to increase the rent to compensate.
Lawn and Garden.
The other rationale for including utilities is purely cosmetic. If you have had extensive landscaping done to the property you wouldn’t want the lawns and gardens to be neglected by a tenant looking to save dollars on their monthly expenses. However, one solution to this is to opt to pay the water and sewage fees, while having the tenant set up their own account with BC Hydro.
Not to Include:
The fact is, not being responsible for the utilities makes your life as a landlord a little easier. You don’t have to set up another account, you don’t have to pay additional bills, and you don’t have to worry that you are going to be stuck with a massive surge one month due to a heatwave or a cold snap. And, it’s one less problem for you to deal with if something goes out. If you maintain control of the account and there is a power or water issue, the tenant is going to be calling you up for a resolution. If the tenant has a direct relationship with the utility companies, it’s up to them to work through and resolve any issues related to Hydro, water, or sewage. You are already the first point of contact for any problems that come up, this removes just a few of the potential hassles from your plate.
If you pay the utilities there is no direct correlation for the tenant between their usage and the cost. Which usually means they are going to use more, and you are going to pay more. If they are directly responsible for paying for how much they use every month, there is a real incentive for them to reduce their use. Even if they choose not to conserve, you aren’t going to get the bill.
Another tenant quality tool.
Of course, you are taking all the steps required to make sure any new tenants are well screened before they sign the lease. However, making the tenants set up their own utilities can serve as one extra screening layer for getting the best tenants possible. Paying utilities requires that the tenant must set up an account in their name and has to know that they will be able to do this before they take possession of the property. If someone has unpaid utility bills from previous rentals, they are quite likely to self-select out of applying. Which means one less fruitless credit check for you.
Of course, it’s up to you to do a thorough scan of the rental market when you’re purchasing an investment property and know what sorts of things are going to provide you with an advantage in the market you’re in. If your’s is the only property not including utilities in the rental price in a given area, you may find you are at a serious disadvantage. You always want to consider what you are giving up in exchange for what you are getting and that the deal is fair to both the tenant and yourself.
In the current rental market in Vancouver, the wisdom suggests not including the utilities in the rental price, but as mentioned in the example above, with a single meter for several units, your situation may dictate that you have to.
Bolld Real Estate Management Property Management Vancouver 2017