Should You Pay for Utilities or Have Your Tenants Pay?

When renting out a property, one important decision landlords face is whether to cover the utilities or pass the responsibility on to tenants. Both options have pros and cons, and the right choice depends on your specific situation. Let’s dive into the key factors that can help you make the best decision for your rental property.

Option 1: Tenants Pay Utilities

Pros:

• Cost Control: When tenants are responsible for paying utilities, they tend to be more conscious of their energy and water use. This can help keep utility consumption in check.

• Stable Income: With tenants covering the utilities, you don't have to worry about fluctuating bills cutting into your rental income. Your monthly rent payments will stay consistent.

• Less Administrative Work: You avoid the hassle of dealing with multiple utility bills and ensuring payments are made on time.

Cons:

• Budget Management for Tenants: Some tenants may prefer an all-inclusive rental payment, and unexpected high utility costs could lead to financial strain for them.

• Set-Up Hassle: Tenants may find setting up utility accounts in their name a bit of a headache, especially if they're unfamiliar with the process.

Option 2: Landlord Pays Utilities

Pros:

• More Attractive to Tenants: Covering utilities can make your property more appealing, especially to tenants who prefer simplicity and don’t want to worry about extra bills.

• Higher Rent Potential: You can charge higher rent to offset utility costs, and if your tenants are conservative with their usage, this can increase your overall profits.

Cons:

• Unpredictable Costs: You could end up with high utility bills, especially if tenants aren't mindful of their energy and water usage.

• High Rent Might Deter Tenants: If your rent is significantly higher due to bundled utilities, it could push away budget-conscious tenants.

What Do Most Landlords Do?

For single-family homes, it's common for tenants to be responsible for paying their own utilities. This gives them control over their usage and ensures you don’t face any unexpected expenses. For multifamily units (like apartments or duplexes), landlords often include utilities such as water or garbage in the rent, but may leave other utilities (like electricity or gas) for the tenant to pay.

Our Recommendation: Tenants Pay for Single-Family Homes

For single-family homes, having tenants pay their utilities is usually the best option. It gives tenants responsibility over their usage, helping them stay conscious of their consumption, and it ensures your rental income remains predictable. However, if you think including utilities would make your property more attractive to potential tenants and you can adjust rent accordingly, that’s another option worth considering.

Making decisions about utilities? Need help managing your rental property? Calmora Property Management is here to help! Contact us today to discuss your options.