The Pros and Cons of Offering All Bills Paid with Apartments

Posted on Sep 21 2015 - 9:07pm by Lance Edwards
Lance Edwards. President, First Cornerstone Group, LLC.

Lance Edwards, President, First Cornerstone Group, LLC.

BY LANCE EDWARDS— An “all bills paid” property means that there is one bill for the entire property and you are paying the electric bill instead of the tenants. As a result, you charge more for rent. You will discover that many properties, especially Class C, will be “all bills paid” properties. You need to weigh the pros and cons of offering all bills paid with your properties.

Typically, you will be faced with deciding whether it is beneficial to switch from all bills paid to individual meters for each unit. Most people are not looking at going from individual meters to all bills paid.

All bills paid properties are usually easier to rent because the potential tenant does not have to come up with a credit check and it is more convenient to have the electric bill included in the rent. The tenants are writing one check to you instead of two separate checks. Another advantage is that if you had a tenant not paying on time, you could have the electricity shut off.

You could convert an all bills paid property to individual meters but it is capital intensive. The tenant will have to get his account set up with the utility company.

The argument against all bills paid properties is that utility prices have been going up and if something is “free” to a tenant, they will not be very judicial with the use of their utilities. The disadvantage is that you can lose money based on usage. You could overcome this by adding a clause to your tenant’s contract that says if the utility bill exceeds a certain amount that you reserve the right to bill back the tenant.

An option would be to leave it as a single meter for the property and put a monitor on the individual units to measure the usage. You can outsource that to a company who will monitor the usage every month.

There is a service that you can pay with a capital cost of $500 per unit. They will put in a measuring device to determine how much electricity is used. For a small fee, the company will measure the usage remotely and bill it back for the electricity used. This is much more cost-effective than putting in electrical boxes for each unit. The cost for actually converting a single unit is more than $500 because you are putting in a new meter box.

If you do offer the all bill paid to your tenants, ultimately, you are still responsible for the electric bill. You are the electricity “provider” so if you are flexible with that, you can charge more rent for the convenience of that service. All bills paid properties have their advantages and disadvantages and it is important to weigh all of your options when considering making a switch.