Basically, I got into trouble, or more like my dad did… meaning well of course. He bought a rental property that was owned by our long time neighbor when she passed away. There are a lot of pluses for us by owning the property. Gives us quite a bit of land (For town anyway) and keeps the property away from a guy on the otherside who would plow it under to build a parking lot. The problem is my dad talked me into going in on it with him, mortgage, deed… and everytime I would ask him about the property he would give me answers that sounded good until i found out he wasnt sure himself. Then he would say “just trust me.”
Anyway, we are losing about $200 on this property. The main problems are these. I was led to believe that the utilities were split for the 2 units. Not true… ( I was pretty mad because when I did the basic math on the property I was led to believe the utilities would be paid by the tenant!) Unfortunately, the heat isnt split, making it illegal in PA to make the tenant pay the heating bill. Also, forcing us to pay for the upstairs’ electricity because their electric fires the ignition source. Not to mention, im sure you all know how irresponsible even the best tenants can be if they arent paying the utilities.
The heat is oil… and im in Central PA. An ez solution I can see at the moment is what if I change the downstairs heat to electric, that would allow me to make both tenants pay for their own heat and electric. I would reduce the rent some to compensate and hope to break even.
How much would the change over cost approx.? and is it even a possible option?
Are there any other ideas? Options? Solutions? Other than sell the property, because as I stated before, this property offers us quite a bit more than just a rental property.
even if you can’t make the tenants pay for the utilities directly, can you set up a “common expense allocation” to the tenants as part of the lease? Where you pay the utilities, and then bill the tenants 50% each (assuming the units are the same size). This is common in the commercial world.
Or you can look into splitting the utilities (two meters).
The units arent the same size, one is a large 2 br, and the other is a rather small 1 br. (The one I would change to electric heat) Im looking for a cheap fix so id rather avoid putting in a new furnace for a small 1br. The electric is metered seperately but i cant make 1 tenant pay for the cost of both tenants use of the ignition source. Thanks for the ideas though.
Whatever the leases says, you are stuck until the leases run out.
I’d split the heat and utilities completely. That will reduce your expenses and substantially increase the value of the property.
If the leases say that tenants pay for eletric, but you are paying because the ignitor is on one tenant’s meter, put in a house meter that runs the ignitor and the outside lights. Then let the tenants pay their own electric, as they agreed to do when they signed their lease.
There are difficulties with oil heat for rentals, so if it were mine, I’d bite the bullet and completely re-do the heat.
Again, if heat is included in the lease, you can not change that until the leases run out. But in the meantime, you can get the systems separated so you are ready.
Maybe it is worth being $200 a month negative for part of a year if having a parking lot next door would reduce the value of your existing property. You have to consider the value of all your holdings and not just each one separately.
But in the meantime, get those utilities separated so you aren’t paying them forever.
I would change over to electric baseboard heat. I changed one of my large 2 bedroom apartments over to electric heat a couple of days ago and the materials were $390. That was for a 250 foot roll of #10 wire, two 5 foot baseboard heaters, thermostats, one 4 foot heater, one 3 foot heater, some pvc conduit, etc. It took me about 5 hours to complete it.
If tenants are paying for their own heat and they have oil heat, they will try to buy the cheapest oil, and gum your system up.
They don’t like to pay the large amount to fill the tank.
They let the tank run dry and then the repairman has to come out and get the system fired up again.
They’ve been known to try to add a few gallons by themselves and spill oil on the ground.
They almost always try to sneak out at the end of their agreement and leave the tank bone dry. A lot of times there isn’t enough left of the deposit to fill the tank up for the next guys. Then if you try to rent it with an empty tank, the cost of rent and deposits plus the cost of filling an oil tank is more than most tenants can afford to move in.
Then , tenants aside, there are environmental isssues which keep getting stricter and stricter.
That sounds like a good idea make both units electrical. Maybe screen tenents better to be sure they can afford the place and utilities. With no heat could freeze the pipes and cause more problems.