Dividing Utilities when Converting Basement to Rental - Bray Electrical Services | Atlanta's Trusted Electricians

There are many things to consider prior to converting your basement to a rental unit. One of the first things is whether or not you can handle being a landlord. It is not always an easy road to travel.

The extra income may be nice. However, the tenants may not respect your property. Furthermore, you are responsible for maintaining the property. Finally, collecting payment and handling disputes can take time and energy. It can be an excellent financial opportunity. It can also be a nightmare.

One thing to decide before converting your basement into a rental is how you are going to handle utilities. It may seem like you could just wrap the utilities into an increased rental price, but you may attract tenants who abuse that privilege. You may also dissuade renters with high rental rates.

Here is a list of six common utilities and how they may be divided when you are renting out your basement.

6 Ways to Divide Utilities in Your Basement Rental

  1. Electricity

There are multiple ways to provide electricity to tenants. The first is by charging a flat fee to tenants that is included in the rent regardless of use. This is a simple method that must be included in the rental contract.

Another way to charge for electricity in a fairer manner is to charge by people using electricity on the meter. If the main house has 2 resident owners, and the basement rental has 2 tenants, the electricity bill may be split equally on presumed equal usage.

Lastly, you can have a submeter installed and make the tenant solely responsible for their own bill. This requires approval from the electric company, and it can cost a significant amount of money. However, this reduces the ability for the tenant to ramp up your electric bill.

It is likely less expensive to charge a flat, reasonable rate and install efficient lighting, heating, and appliances to ensure the actual bill does not exceed the flat rate.

  1. Water/Sewer

Water and sewer can also be submetered and is typically charged on a flat rate basis. However, anything above a certain amount of usage may be charged based on consumption.

Typically, basement apartments are not very large, and they don’t have much private access to the yard where excess water could be used.

In so many cases, water and sewer is much simpler to include in rent. It saves the trouble of submetering, and there is very little risk.

  1. Internet:

You can provide internet access to tenants, and it may be a great attraction. However, it is likely more trouble than it’s worth.

First of all, the more people using the internet, the slower it will be. Secondly, it may be against the contract that you signed with your internet service provider. Third, it may result in privacy issues. Lastly, you may be liable for illegal activity conducted over the internet.

More importantly, it can just be a pain to offer shared internet. If a tenant forgets the Wi-Fi password, or the internet isn’t working, guess who they are going to call. Of course, this is dependent on whether you pay for a separate service or not.

Ultimately, whether to include internet in your unit depends on whether or not you need it to get the apartment rented.

  1. Gas

Again, submeters are available for gas, and it is often very easy to separate the bills based on usage. As with all utility companies, you’ll have to check with them.

The easier option may be charging based on occupancy. Especially when the heat is gas, it may be fairest to charge based on the percentage of occupancy.

  1. Garbage

You may just want to call to get an extra garbage can, or you can share yours. However, tenants have the capability of overfilling and adding extra fees to pick-up services.

If you don’t want to deal with it, have the tenant set up their own service, but that opens yourself to issues such as whether or not they remove the garbage can from the street on pickup day, etc.

  1. Cable

You aren’t supposed to share cable services with a tenant, but if you are cutting corners, you may be able to just get an extra box for the tenant. This is not advised and could get you into some trouble. They really should get their own cable television.

The last thing to mention is that renting out your basement as an apartment is not always a legal option. It must be recognized as a separate, legal residence, and you have to change your homeowner’s insurance. There are many unexpected expenses involved in converting part of your home into a rental, and it can be expensive if you do it the right way. Consider all of your expenses before you rent out your basement, and do it the right way. It will pay off if you do it for a long enough time.

Posted On 03 Jan , 2019