So, I picked up a new place at Tuesday's tax sale. I tried posting some pictures to my album, but was running into technical difficulties, so, y'know...

It's two structures. The main structure was built in 1945, and started off as a 630-sf 1/1 duplex. The second structure is off the alley, and was built in 1945, and started off life as a 900-sf 3/1 single-story garage apartment. The parking bay has since been converted into a fourth bedroom. I'm thinking it would convert into a smaller 1/1 duplex as well-- throw in a wall, plumb in a kitchen and a bathroom, add two more exterior doors, make a parking pad, and so on. There's nothing in the zoning that would say no.

I'm going to have to rewire both structures, and replumb both structures no matter what.

The street duplex was originally separately metered. The previous owner had knocked out part of the living room and kitchen walls to turn it into a 2/2. So I'd have to put that stuff back into place, but it will be easy.

I haven't spotted a meter for the ADU yet, but there's still the fourth side of the building I need to look at.

I need to look into the water meter to see if it's metered for one, two, or three ways.

I normally cater to people who are one economic step above the sort of people who would be likely to pick up a 1/1 duplex, either the street duplex or the alley duplex. This is my experiment both with my first multi, and a possible step down from my usual tenant pool.

My question to the forum would be--- would my tenants be more likely to be successful if I carry electric and water? In theory, I'd get a greater discount by carrying four units' worth of electricity and water on a single bill, because you don't have all the fees and surcharges x 4 going on. And in theory, they'd be more successful on a tight budget, if I mentally roll in $40 for water, rather than letting them each tote a $80 water bill for garbage/water/sewer. Electric, I'm less clear about.

But at the same time, you have a greater risk of excessive use, since it's not on their dime.

Do you make it clear that if you're charging $x/month, that $y is the utility allowance, and $z is the rent? Or do you just call it a single bill and raise the rent if they're excessive with their usage?

Or do you just make it not-my-problem, and let them carry their own utilities in the same way you would with a sfh, because it's not a big deal to separately meter everything since I'm re-doing major systems anyways?

when redoing, separate out.... especially electric and gas (if that's how you heat). I owned many old buildings where utilities weren't separated. They were great cash cows but the oil and gas bills drove me bonkers.

Sounds very straightforward, and an invisible screening tool as well. :)

Think about this:

If they decide to play the moratorium game and not pay rent, would you be glad, at that point, that the meters were separated and you were not paying there utilities as well as not getting rent.

Also if that were to become the case, when they get the utilities cut off then you can evict for uninhabitable reasons.

If they do not have to pay the actual utilities company themselves and get a look at the bill then they will not care how much they use, as Robert in Ontario always reminds us.

Don't you attract a totally different tenant if you include utilities?

If these were short term rentals then I understand keeping the utilities in your name and rolling them up in the rent with a cap. But if they are annual rentals I wouldn't include the utilities. If they can't get their own utilities in their own name, that tells you a lot about the tenant.

plenty is right about the rental amount being too high. I used to rent for $500 plus $100 utility contribution. Then, I got lookers because $600 was too much.

Your new acquisition sounds like a boarding house. As such, I would rent by the week( at a higher rate) if I were to include all utilities. Also, if all utilities included is the plan, be sure to operate in such a manner to fall under hotel laws.

If you do decide to rent them with all utilities included, I suggest that you go all electric & during your renovations, you set things up so the utilities can easy be changed to separate meters.

Have all utilities separated out. You attract tenants with the lower rent. Most tenants, especially lower rent tenants, can't seem to balance out the costs of utilities included but that makes the rent is higher. They will go for the lower rent, not even taking into consideration the cost of utilities.

Also, I've had the occasional low rent tenant who can pinch the bejeebers out of a budget and they can get their utilities low, so they like to pay less rent and to be in charge of what they use.

$4628, Tarheel.

I had been thinking about rooming-housing it, Sisco, because the parking ordinances are more generous that way (1 parking space for each 2 sleeping rooms, vs 1.5 parking spaces per unit). And the income would be greater, in theory, presuming everyone got along and I was able to keep full.

But I didn't think the layout would be conducive to maximizing the space efficiently for a rooming house. Since one of the bathrooms is a private bath off one bedroom, and the walls it borders are the exterior, the back side of the kitchen counters and another sleeping room-- although perhaps, since I need to tear it all out anyways, I might be able to turn it into a hall bath off the kitchen, by turning the kitchen workspace 90*... that would give me a 4/1, which would be stressful on the plumbing. A 4/2 would be preferable.

Turning it into a 1/1 duplex, I'm sacrificing one bedroom for the living room, and another bedroom for the bathroom.

Ah. But it will probably take $30-$40k to fix it up, depending on how many redundant systems I have to come up with. (4 hot water heaters, 4 heating/cooling systems, 4 stoves, 4 fridges, 4 breaker boxes, 4 kitchens, 4 baths, plus total replumb and total rewire, paint and flooring, light fixtures, etc, etc, etc.)

6x6, I think I'm going to go over with a measuring tape tomorrow and see what I have for a floorplan. And in the meantime, I'll get some progress made on the demolition and tear-out and get my canvas blank. That will give me an idea about how to put stuff back together again.

I've heard from several tenants that they prefer all electric. Guess they equate one less bill to pay with saving money. In the case of not paying taxes/fees which for gas is about $25-30/mo, they'd be right. Also it's one less thing that could start a fire.

And in the winter, electric heat is more expensive, about the cost of HVAC in hottest of summer, but it's a short period.

Oh, Deanna, how I envy you with this purchase! I read your blog and can’t wait to see pictures and hear how you’ve transformed them.

Two of our last purchases were fixers and I am completely hooked! Now, I can’t seem to drive by an overgrown yard full of trash or dead cars without taking note of the address for further investigation.

We purchased 26 acres with a cute little 3 bed 1 bath farmhouse and spilt it into a duplex with 1 bed and 1 bath each. Although it was a headache to split out the utilities, I am very glad we did as billing the Residents is so much easier.

We removed the propane and went all electric and I am very glad about that too. We have 1 home that still has propane and it keeps slipping our Residents’ mind to check the tank level until one day, no hot water. In our area, the minimum propane refill is 100 gallons and that can be quite a financial shock for our Residents. We are saving to convert that 1 home to all electric.

In our farmhouse remodel, we were able to fit in all the conventional kitchen appliances, albeit apartment sized, including a dishwasher (as I would never, ever, ever rent a home myself without one) and washer and dryer.

I was hesitant to get into the duplex business as we have read so many articles regarding noise disputes between neighbors. We found some products that helped including special sheetrock and caulk of all things. How you position and situate the interior spaces will also help. We were able to replace a window with a door so we have a back and a front unit which allows them so much more privacy than if they were side by side.

We have a 2 bed 2 bath duplex with a bonus office space where water, landscaping, internet and trash is included in the standard rental price. As plenty (MO) shared, it has been tricky to rent as applicants look at the base price which includes all those utilities and think it’s too high for a 2 bed 2 bath. Maybe with the current work/school at home situation, it will be easier to rent.

Were you thinking about targeting Section 8 applicants? If so, does rent need to include utilities?

All the best!

Renne

Yay, Renne! Your setup sounds very exciting! Thank you for the recommendations and experience!

Our town was part of the oil/gas boom back in the day. There were about 300 units' worth of multi-family housing that were built to accommodate the oilfield workers. After oil and gas went bust in the 80's, the City fathers decided to turn all the vacant units of property into government housing. So now we have, like, 300+ units' worth of government housing in a teeny rural town of 3000.

A lot of the people I rent to are people who are trying to get away from government housing. They like the price tag, but they hate the neighbors. :P (They include basic cable and water in the rent; electricity is metered separately, I think.)

I don't try to compete with Housing on price, because I'll never win... I'm that rung on the ladder that's a step up from Housing and the slumlords, and then the next rung above me is home ownership.

What a task you have with all that surplus government housing! Based on your blog, it won’t be long before you have turned that property around!

Be encouraged about young singles. One of our very best Residents is a single young lady and our target Residents are young people who don’t have a rental history. Not trying to paint everyone with a broad brush, but for us they have been wonderful Residents. True, it takes a little bit of helping to educate them, but I’m an educator so it’s very natural for me.

All the best!

Renne

When I buy a duplex now a days I look for three things

1) Location - you can't change where it is at normally.

2) Lay out - if up and down....it has to be dirt cheap as complaints can be expected