I rent monthly and have a guest (furnished finder) who’s been in since mid October and has asked to extend another five months. She’s on a month to month lease which either of us can terminate. I’m happy with this tenant, except that her electric bills are crazy high - electric for this apartment has averaged $40 (summer) to $90 (winter) monthly for the past few years, but her bills are about $100 over that. (Monthly rate is $2800 all inclusive). I reached out to her about it - not accusing, just asking if she could be more conscious of her use or if she thought there was an issue somewhere - and she says she has no idea what’s causing it. My husband thinks we should eat the cost but that adds up with her prolonging her stay. I’m debating asking her to sign an addendum that she’ll cover the higher than average cost or to vacate. I have no probably finding guests. What do you all think?
People who have never been homeowners, just renters, whose utiliities have always been included in the rent, can often be totally clueless about how much their electricity consumption costs.
Things which suck a lot of electricity are small appliances which heat up quite hot quickly. Hair dryers, irons, toaster ovens and toasters, electric kettles, that sort of thing. If she has to iron work clothes or uses a hair dryer daily, those things could be the culprit.
You say you are otherwise pleased with her as a tenant, so maybe consider that an extra $500 for the five months she’ll be paying you $14,000 for, may not be worth hassling over or taking a chance on a new renter who may not be as hassle-free as she has been.
Or you could explain that the rent you charge is based on what you’ve found to be the average cost of utilities and ask her if she would be willling to cover the extra that she is consuming.
I think that at 2800, everything inclusive, that overuse of electricity should be included. Unless you wrote it down at the lease agreement time about bills being higher, I would shut up and enjoy having a responsible long termer.
When she extends her stay, for the new lease, you have 3 options:
Show her the power consumption/bills before her stay & during her stay. Explain the current rent is based on a $40(?) monthly electric bill. Options are:
Increase rent $100 or
For Electric bills over $40(?) she pays the difference
A hassle free tenant is priceless. I have long term rentals as well as my STR and I have kept rents way under market for easy tenants keeping them for 13 and 17 years respectively. It has been well worth not screening and dealing with new tenants. Have your actual rates gone up? My local electric company has a fuel adjustment charge and it has certainly bumped up. I’m with your husband.
Call the utility company and ask for them to come out and read the meter. It happebed to us once, the person that came out to read the meter input the wrong reading. That might be the case for you as well.
I don’t know your carrying costs for the rental, but the extra consumption could be based on a rate increase. Lots of people, myself included in my small town, are seeing rates almost double.
I’d eat it.
Is it a stand-alone unit or part of a home share?
Also this. I’ve seen rate adjustments as well. We now have those wi-fi readers.
Just say no if the $100 a month is something you do not want to pay, or raise the rent
Bit of a feckin no brainer, just from my perspective I must add.
Let her get on with it and suck up el dinero
With a month-to-month lease, raise the rent, giving advance notice as provided for in your LTR contract, by $50 to reflect increases in energy prices.
See what I did there? You’re not blaming the guest, you’re blaming the vendor. I might even preface it by saying something like. “Hi tenant, regarding the electricity use I brought up previously, it’s not you – it’s the electric company rates. So we do need to increase the monthly rent by $50, effective [date], to partially cover the cost. We wanted to give you plenty of advance notice. Sincerely, Sarach027”
At that overall monthly rate, your tenant is unlikely to walk or even get agitated; it’s only a 1.8% increase.
I think this will be way more effective than jawboning the guest about energy use. I’m imagining drying my hair and thinking, ugh, am I going to be getting another message from the landlord. Giving me multiple opportunities every day to feel guility/irritated/resentful – take your pick based on personality. With a small rent increase, it’s one and done, all businesslike and not a personal comment on your tenant’s profligacy.
I would need to know: is this an all electric apt? Or does the furnace use gas? Sometimes people keep their homes very warm. We don’t and dress appropriately. When I was managing, we had a wifi thermostat which the owner would turn up or down, depending upon the season, while the guests were there!!!
Another time, the elec bill skyrocketed for a two month stay and it turned out that a part was running continuously, rather than stopping and starting. We found this after the shocking bill; sent out an HVAC who diagnosed the problem.
Thanks all. This is a big 2 bedroom apartment in multi-unit complex with loads of amenities and a great location. I charge a higher rate in the summer with monthly rentals ($3200 last summer), so I’ve decided that I’ll respond to her request to extend by letting her know the rent will go up 10% as of May 1 for summer rate and not mention the electric.
Everything is electric; I suspect she’s just leaving the heat on 24/7. Electric rates have not increased but they are tiered, so you pay a higher rate as your usage increases.
I realize 2800 sound like a lot, but we have no cash flow from this property. Comparable units are renting unfurnished with 12 month leases for $2500, plus utilities. The average house price here in Seattle is close to a million. This is our retirement property, our hope is that renting will cover the mortgage and expenses starting this year (year four).
If the furniture & decor are decent, you may not be charging enough if you’re that far below market. Would it be competitive if monthly rent was high enough to cover everything?
Rents have been going up quick but are no where near catching up with housing prices. There are very few short term rentals; last I checked mine is the only whole unit rental in this neighborhood. There are some places that are cheaper and smaller or cruddier in shared houses, and some ADUs by the waterfront that are much more expensive and often vacant. Hotels are around $140-200 a night. My issue is vacancies - I have to rent one month minimum per HOA. In the summer it’s fine because people are mostly looking for a whole calendar month, but the rest of the year it’s pretty easy to end of with gaps of 2 week between guests because of the scheduling issue, which eats up any profits really quick. I’m definitely prioritizing low vacancy vs. higher rates. Having a longer term renter seemed like a good solution, until they had higher than expected costs and wanted to extend five additional months at the non peak rate.
If you have no cash flow or you are losing money then perhaps it is a bad investment and time to sell. You can only get competitive rates regardless of what you paid and regardless of your personal overhead. To me it sounds underpriced, but alternatively you may be stretched too far financially. So your choices are limited. You stay as is and charge the same/ you can increase because it is month to month and tenant can stay or leave. You can sell. You can look for a new tenant at higher rates. You can set a bar that tenant pays anything excess. Neither you nor tenant are bound to the agreement already made… it can be changed if that’s what you want to do. Good luck.
The OP said this is their retirement home. They are renting it out to cover costs until they move there themselves. It isn’t an investment property they bought just for the purpose of renting out short term and making a profit.
Sounds like you are chickening out. 10% increase on $2800 doesn’t even get you to your last year’s rate of $3200, and she might be gone by then anyway.
I vote for @dpfromva 's suggestion - split it with her. Tell her utility costs are at least $100 over typical costs for this time of year, mumble something about “[expletive] runaway inflation” and say “we’ll split the $100 with you to keep this from being too much a burden on you”
It’s her future retirement home.
I can’t speak for anyone else but my financial goals for my future retirement home are different than if it were investment only.
We bought our property as our future retirement home so I made sure we could afford it even if it did not rent out.
But that doesn’t change our financial goal to maximize profit in a professional manner on our retirement home until we decide to move in.
I am responding to what the OP wrote: =. “…we have no cash flow from this property. Comparable units are renting unfurnished with 12 month leases for $2500, plus utilities. The average house price here in Seattle is close to a million. This is our retirement property, our hope is that renting will cover the mortgage and expenses starting this year (year four).” And also: "…the scheduling issue, which eats up any profits really quick.". I feel the OP does have personal concerns about profits…or she would not have posted, retirement home or not.