As a landlord, you have the choice of paying, or not paying your tenant’s utility bills. But, what is the better option?
Benefit of paying for your tenant’s utility bills
You can advertise a higher rent rate if you pay for your tenant’s utility bills. This rent pricing strategy is suitable for short-lets with high tenant turnover, such as Airbnb and executive rentals. Most short-let tenants will not apply for properties that require them to open new utility accounts.
Rent inclusive of bills is also suitable for properties that are let to multiple unrelated tenants. Financial conflict among your tenants is also limited if you take responsibility for paying their bills.
Benefit of not paying your tenant’s utility bills
Rent prices are often marketed at a lower rate if bills are excluded. However, lower rental prices can attract more prospective tenants. And, with more tenancy demand, your rent price can increase.
You also bare less property management duties and ‘headaches’ if your tenants are accountable for paying their own utility bills.
But, which option is better?
Over the years, the rent prices for my investment properties have included and excluded utility bills. From experience, it’s better to exclude utility bills when letting long-term rental properties.
Many tenants completely disregard their water, gas and electricity usage if they are not responsible for paying their own bills. Lights are on longer than necessary. Hot showers last longer. Gas radiators are on 24 hours, all throughout winter; the same applies to air conditioning. Higher usage means higher bills.
Admittedly, this was my behaviour when I was once a tenant. And, through karma, my electricity and gas bills have always doubled whenever I pay the utility bills on behalf of my tenants.
And, with excessive usage, utility appliances are more likely to break. As the landlord, you pay for the replacement or repair costs.
So, do you pay your tenant’s utility bills?
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