Is tenant paid heat a liability?

I am considering buying a 4-plex where the tenants pay heat through their electric bills (electric baseboard). How much more difficult is it to attract tenants if they know they will be paying for thier own heat? A majority of the apartments in the area include heat in the rent.
The property is in the upper midwest and the winters are cold.
The units themselves are updated nicely with ceiling fans, new appliances, ceramic tile, are large and come with a single stall garage. It is one of the nicer 4-plexes I have seen around. The listing agent claims the units are always rented and I have requested to see the rental history for the last couple years.

i think having tenants pay utilities is a liability in as much as they have to pay them. but i mean if you charge them and include utilities in the rent then you know it will be paid.

I would always prefer to have the tenants pay their own heat. As a landlord why would you want your tenants control your cashflow. With heating costs escalating you put yourself at a huge risk when tenants have the ability to control their thermostat. They essentially have a switch that they can drain your wallet with. Many systems that owners pay heat dont allow a temperature change, but your gas bill will still rise with sinking temperatures.

I cant speak for all states but in my market the only utility that if left unpaid could affect my home is water, they allow water companies to put a lien on your home. Gas and electric if unpaid and in a tenants name only affect the tenants credit.

You will get slightly less for rent than the other homes in the area if you dont include utilities, but at least your cashflows arent controlled by the gas company.

Eric Medemar

Tenants should ALWAYS pay their own utilies, no matter what!
The only bill I pay is the water bill and that is only for more than 1 unit.

In my single family homes I pay NO UTILITIES at all, tenant pays water.
If you have a multiunit property then spend the cash to have individual
heating systems, water tanks, and electrical boxes installed. In the long
run it will save you big $$$$ and make it more attractive to the next investor
who may want to purchase from you.

You might think about having the water bill sent to you and then charging the tenant, this avoids a tenant falling way behind on their water bill. If a tenant gets $400 behind and moves and wont pay the city can put a lien on your property. I just started doing this after a couple of experiences

Eric Medemar.

Ok, I have never had that happen but it is still a possiblity that even though the bills come to you how can you
make sure that the tenant pays it? Obviously it would give you the heads up but no way to really guarantee
their payment. You’re right though at least you won’t be surprised.

By the way have you ever you had experience in wage garnishments for problem tenants who refuse to
move or pay or move without paying what they owe??

I understand the benefit of tenants paying paying their own heat but that is kind of the exception in this part of the country (ND-MN), not the norm. Heat paid is somewhat of an expected thing when renting an apartment here and most buildings are set up with only one main gas meter for the whole building. Just wondering if anybody else lives in an area with a similar situation and if tenant paid heat creates longer vacancies.

Tenants should always pay heat. Heat is probably one of the biggest things that will eat your bottom line right up fast. I know of a landlord that paid for heat because of the way the apartment was set up they didnt have separate heat. The tenant kept turning up the heat so the bills were high. He put a lockbox on the thermostat so the tenant would take a small bag of ice and sitit on top of the thermo locck box to cool the thermo down so the heat would turn back on.

Of course it wouldnt guarantee a payment but it would guarantee that you would know what was going on. You could actually start the eviction process if they werent paying their bill. They would pay you and you would pay the bill. In theory a tenant could live in one of your homes for 2 years and run up huge water bills and leave you to paythem or get a lien on your house. It may not be happening now, but in landlording I have found that if it is at all possible to happen it probably will.

I keep waiting for someone to start a trade program where I can trade in tenant excuses for dollar bills. That is the day that I will finally be able to retire.

I havent pursued any garnishments, I could, but I just would rather worry about other ways to make money. If I miss a chance at selling a home or finding a great flip or wholesale while im out trying to squeeze blood out of a turnip, I think I would be pretty upset.

If my hourly wages ever get to the point where I could afford to chase losers around, I definately will.

I dont have many problem tenants anymore, if their even 3 days late, letter go out, then 10 days later I go file, 4 days later im usually in court, and 10 more days later my guys move the sturff to the curb.

Eric Medemar

In Chicago landlording can be a real headache most of the time. But as far as the eviction process
goes I do believe that rent has to be more than 5 days late before you can give notice to cure deliquency.
Many of my rentals are in Chicago so you get all types of excuses when they go to the judge and usually
they are granted extra time, sometimes up to 30 days. We also have to pay the County Sheriff to forcibly
evict the losers which may take an additional 30 days.