One of the things that’s easy to overlook when you’re renting out a home in Tulare is utilities.
Who will pay for them? How will you manage them, especially if you’re renting out a multifamily property with various units at different usage levels?
Maybe you’re assuming your tenants will take care of things like lawn maintenance and water bills. But, does your Tulare tenant have the same expectations?
There are several different ways to structure the utilities and the maintenance responsibilities at your rental home. When it comes to utility management, the smart landlord will focus on maximizing efficiency and minimizing costs.
However you decide to structure your utilities, it’s important to communicate how they work to your tenant. Discuss this before they move in and make sure utility management is in writing in your lease agreement.
Deciding how to handle the property utilities will largely come down to the type of property you’re renting out. We have a few things for you to think about as you’re deciding how to focus on cost-effective utility management and efficiencies.
Rising Utility Costs in Tulare Rental Homes
Of course the cost of utilities has gone up. California, in general, has some of the highest electricity rates in the nation. Anyone can do a little number crunching and see that those increases are even outpacing inflation. In Tulare, the average monthly electric bill for residential customers is around $295, which is 24% higher than the national average. Locally, the cost of utilities has risen not only because of inflation but also because of capital improvements the city is making. These planned improvements have also led to an increase in rates for water and sewer services.
The California Public Utilities Commission (CPUC) is implementing new billing structures to address rising costs, including a new fixed fee for most customers, but we’re not entirely there yet.
Utility Management for Single-Family Homes in Tulare
If your real estate portfolio of rental properties in Tulare is mostly single-family homes, this may be an easy enough question for you to answer. In a single-family home, it’s often easier to have tenants establish their own utility accounts and pay the bills as they arrive. Tenants can set up their own accounts with a copy of the signed lease agreement, identification, and a $5 fee.
We can tell you that there are likely to be the following utilities:
- Electricity
- Natural gas
- Trash collection
- Water and sewer
Most tenants rent a single-family home because they want the space and the privacy that comes with homeownership without the responsibilities of actually owning a home. Your single-family tenants will likely expect to set up their own utilities and pay the monthly bills.
Include this instruction and responsibility in your lease agreement, and reinforce the expectation when you’re showing the property, when you’re collecting the application, and when your tenant has been approved and is preparing to move in.
Managing Multifamily Properties and Utilities
Things get slightly more complicated when we’re talking about multifamily units and apartment buildings. How can you be most efficient and cost-effective when it comes to providing and paying for utilities?
California law requires the installation of sub-metering systems at properties built after January 1, 2018 when landlords are billing residents for individualized utility usage. This is required for water and owners can also include those sub-meters for residential electric usage and gas.
In a building where you’re renting out several units, there will be the personal utility usage of each home and also communal usage. For example, in a 10-unit building, each unit will have its own water bills and electric bills. But, there may be hallway lighting or sprinklers and irrigation outside that serve the entire building. Trash collection in a condo community may include personal bins outside every door or there could be a dumpster that every resident uses to empty trash. Don’t forget the recycling bins and the organic waste, which is required in multifamily buildings.
As a rental property owner, you are not necessarily responsible for paying utilities throughout the building. You’ll need a plan to split those costs among your residents, and there are a few different ways to do that. Separating utilities by usage or by resident will depend on whether you’re dealing with an apartment complex or something smaller, like a duplex. Install sub-meters for each apartment, which will ensure that all your tenants pay for what they use.
It might be more efficient and affordable for owners and their tenants to handle each utility separately. Even in a multifamily property, you can have each tenant set up their own electric, gas, and water/trash accounts. Or, you can have them take care of the electric and gas while you cover the water and sewer bill as well as the waste collection and include an extra fee for that in rent. The best option will depend on your building, your tenants, and the way you want to approach managing utility costs and set-up in your property.
Utilities and Non-Utilities in Tulare Rental Homes
Utilities are water, sewer services, trash collection, and electricity. Gas, if your homes use it.
Cable services and internet services are generally not considered utilities. They are services that most tenants like to have in their homes, but you are not responsible for providing them. Some apartment buildings will include them as a way to incentivize people to live there. You can consider this if you’re having trouble attracting tenants, otherwise leave the option for cable and internet to your tenants. They are not necessities and they do not affect habitability the way water and heat do.
We do know that remote workers are growing in renter populations, and they’re always looking for strong internet. So if you want to provide a wireless internet service and include that cost in your monthly rent, it can be a great way to provide your property with a competitive advantage. It’s also a good way to earn more in rent every month. This is something to consider, but not mandatory.
Include Utility Information in Your Tulare Lease Agreement
Deciding on the most efficient and cost-effective way to provide utility services in your rental properties is up to you. However, it must be communicated to your potential tenants. To keep everyone on the same page (and to keep the lights on), you have to be clear about instructions and expectations in your lease agreement. Having all of this documented in writing before a tenant moves in will prevent any confusion or distrust.
This is critical information that many tenants will consider when they’re choosing where to live, so it should be shared even before your tenant moves in. As you prepare the marketing materials and the listing, advertise whether utilities are included in the rent. If they are, this will be attractive to tenants who may not want to establish their own accounts.
Be specific in your lease. If trash is paid for by the landlord, state that so your tenants know what kind of services and benefits are included in the rental amount.
Every rental property in Tulare is a bit different. If you’re renting out a home in an HOA community or a condo community, there are likely to be separate rules and regulations that govern utilities, especially water and sewer and trash. The water bills may be covered by your HOA fees. Some condo units do not have separate water meters. You’ll need to plan for these unique systems and set-ups in the home you are renting out.
Creating a Customized Utility Management Program
The right way to manage your utilities will depend on your goals as a property owner. Is it to keep costs as low as possible for you and your tenants? Are you concerned with sustainability and providing a greener quality of life for your tenants and your community? Depending on where you want to focus most of your energy and resources, we can help you put together a utility plan that makes sense and meets your needs. Some of the things we might recommend include:
- An Energy Audit. How much water, electricity, and gas are your tenants or your buildings actually using?
- Convergent billing. Is receiving one bill for all utilities better for your tenants than several different bills? Is it better for you?
- Meter maintenance. There are ways you can be sure your meter reads are accurate.
- Ratio Utility Billing Systems. Also known as RUBS, we can talk about the benefits of these programs and how they may reduce your operational costs and protect the environment.
- Upgrades towards efficiency. Is it time for smart thermostats, low-flow plumbing devices, and maybe even solar panels? If not now, would you want to consider these upgrades in the future?
We know there can be some confusion around utilities and how to handle them. And, we’re here to support you as you decide how to structure things for yourself. Whether you’re renting out a two-unit duplex or a 12-unit apartment building, we can help. Contact us at The Equity Group and we’ll show you the most efficient way to manage your utilities.
