Most people prefer secure, foreseeable monthly costs; this is both true for landlords and tenants. However, is it worth the landlord’s frustration to cover the price of each tenant’s utility bill? Moreover, just like in every real estate management choice, there are advantages and disadvantages. Below are the things you must consider for rental units that include utility costs in the rent.
The Buffet Approach
When individuals do not need to contribute to the costs, they take much more than they usually should. We, as humans, are very greedy. It holds true for all-you-can-eat buffets, all-you-can-drink alcohol offers on cruise ships, as well as utility bills when they are included in the lease. When there is no consequence for using more than they should, individuals will continue to do this without any regard for the other party. This can leave the landlord in a precarious spot when the utility bills come around.
If Utility Bills Increase, Margins Will Fall
Furthermore, as soon as electricity or gas prices start to increase, so will the overall utility bill. This means that the landlord will have to eat the cost until lease renewal time, which can be a while away.
Landlords Can Bill a Lot More
Let us discuss why it would be advantageous to include all utilities for tenants. Many potential tenants are afraid of the idea of having multiple separate bills to handle, such as electricity, internet, water, etc. Many of them are willing to pay little a bit more for one predictable bill each month. The landlord will have the ability to charge much more for the same unit when all utilities are included. Additionally, in some cases, the landlord can institute a ceiling or trigger mark on the overall utility bills that should not be exceeded; if they are, the tenant would need to pay the difference.
The landlord decides whether or not to include utility bills in the rent. This decision might depend on the market in the nearby area. As a landlord, you can possibly earn more and attract more potential tenants to fill your vacant units by offering rent that includes utilities. On the flip side, it will add more issues to your residential property management duties.