Utilities split

[saskbrian]

I am considering the purchase of a legal 4 plex here in Saskatoon, however it only has 1 gas meter and 1 hydro meter for the 4 suites and the current owner is paying all the bills and her rental agreements with the tenants incude the utilities in the monthly rent. This may work for her but with the new reality as far as purchase prices go it does not work for me. If I could get the utility portion of the equation paid for by the tenants this property would cash flow nicely. (I have considered purchasing it with vacant tenancy but one of the tenants has been there 10 years and wants to stay)
Any suggestions as to how I might do this?
thanks

Saskbrian

 

[invst4profit]

Are you considering installing separate meters or simply splitting the cost equally.
Separate meters would be the way to go in the long run.
Although one tenant may have been there ten years I would not allow that to block your plans. Tenants expect to move at some point and you should not allow this tenants attachment to the property interfere with a good business plan.
Best to start with a clean slate although you could separate meter one unit at a time to spread the cost over a longer period. Not sure construction wise how that would work.

 

[Nir]

Saskbrian, Good posting/topic.

Greg, how important is it to have separate meters in your opinion? Are you not even considering properties without separate meters or at least the option to separate them in the future construction wise?
Or, is it not that critical and if everything else looks great (i.e. 20% annual rent to purchase price ratio!) not having separate meters does not prevent from putting an offer(?)

Thanks,
Neil

 

[invst4profit]

When I was into rentals (I am not anymore) I personally would not even consider a multy that did not have separate metering. I felt there were fewer potential problems like tenants complaining about each others use of heat and hydro and bottom line just fewer issues and paperwork.
I do see that if used in negotiating a reduced sale price it can work to the buyers advantage providing you have accurate numbers on installation costs for separate meters. The upside would have to be a plus in cash flow not just break even rent to reduced purchase price to bother with the extra effort.
My approach as a small investor is to keep it simple. That was a major reason for me to move out of the residential home rental market.

 

[Nir]

Thank You Greg for the clarification.

As usual, you raised some great points. I`m currently considering a multi-plex with only one electrical service. But...great rent to price ratio! therefore, as you suggest I will try to estimate the cost of separating meters in the future in order to make a final decision regarding this purchase. Depending on the result I might purchase it as it is - hope it`s not a big mistake.

Cheers,
Neil

 

[saskbrian]

Thankyou for your responses. I have decieded to walk away from this 4-plex because at the end of the day I still have no control over two of the biggest expenses, the natural gas and the electricity, water, sewer bills ( approx $1040 per month). I did get a hold of both my plumber and electrician and to split all the utilities out to separate systems on separate meters was in my opinion just too costly (15 - 20K ) and would require opening up walls etc and who knows what other problems I might have encountered. So its on to the next one.
Cheers
Saskbrian