In a previous commentary, we mentioned that the tenants should be responsible for their own utilities. There are some important points to follow up on this important topic.
1) If you are purchasing a property which is empty on your possession date, ensure that the heating/cooling utilities, water and electricity will all commence at that time. All too often, investors have their attention on many other details including dealing with realtors and lawyers that they forget about this important step. As soon as a tenant moves in, stop paying for the utilities.
2) If a tenant moves out, arrange for the utilities to immediately revert back to your name for as long as the property is empty. This can be easily setup with a simple phone call to each utility provider. It can be a valuable time saver and potentially ensure you do not have burst pipes in the middle of winter! In the event a property manager is overseeing your property, have them pay all the bills while it is vacant and you can then reimburse them upon successful placement of a tenant.
3) Utilities providers sometimes entice customers into signing longer term contracts using the sales pitch “saving you money”. There are no hard and fast rules in this area because every contract is different and situation unique. However, you must recall that before they ever approach you, they have done very extensive due diligence as to what is in their best financial interests and not necessarily yours. The rates they offer for utilities are designed to maximize their profits.