The Ultimate Guide to Rental Property Utilities

Last Updated: December 2023

Rental Property Utilities

Rental property utilities play an extremely important role in defining the overall cost structure and operational efficiency of an investment property. Whether utilities are included in the rent or billed separately can impact both tenant attraction and retention, as well as a property’s bottom line. Understanding and navigating utility-related matters, is a vitally important aspect of rental property management for any real estate investor or landlord.


10 Common Rental Property Utilities

In the realm of rental properties, utilities represent a significant consideration for both landlords and tenants. These services not only provide necessary comforts and conveniences but also factor into the overall cost of renting. Here’s a list of typical utilities associated with rental properties:

Electricity

Powers lighting, appliances, and other electric devices in the property.

Gas

Often used for heating, cooking, and sometimes for water heaters.

Water

Essential for hygiene, cooking, and sometimes for heating in properties with a boiler.

Trash & Recycling

Collection and disposal of waste and recycling materials.

Internet

Provides connectivity for tenants and is increasingly seen as a basic utility.

Television

Although not as essential as others, it’s sometimes included in rental properties, especially furnished ones.

Sewer

Covers the cost of wastewater removal.

Heating/ Cooling

In some properties, heating and cooling may be a separate utility, especially in regions with extreme climates.

Landscaping

Especially for single family rental properties with yards that require regular upkeep.

Snow Removal

For rental properties in regions with heavy snowfall, these costs can be significant.


Methods to Decide Who Pays for Utilities – Landlord or Tenant

Rental property utilities are usually paid by either the landlord or tenant. Deciding who pays them is a strategic decision that can significantly impact a property’s bottom line and tenant appeal. While it may seem simple to have the tenant pay them all, various factors like local market conditions, property type, and tenant expectations also play a role into the decision. Below are 4 commonly used methods to determine who will pay for utilities:

  • Utilities Included with Rent: This method provides simplicity for tenants, as they pay a flat rental rate without worrying about fluctuating utility costs. This can make your property more appealing to potential tenants, but as a landlord, you take on the risk of increased utility usage.
  • Separate Monthly Utility fee: This involves estimating the monthly cost of utilities and charging tenants a fixed fee. This can make budgeting easier for both parties, but it may require adjustments if utility costs significantly rise or fall.
  • Tenants Responsible for all Utilities: This places the burden of utility costs and conservation directly on the tenants. While this reduces risk for the landlord, it may dissuade potential tenants who prefer an all-inclusive rent or are considering another competing property that does include utilities.
  • Hybrid Model: This is a mix of the methods above. For example, the landlord could include some utilities in the rent, like water and trash collection, while the tenant pays for electricity and gas. This method seems to work the best as it strikes a fair balance between utility responsibilities.

What Utilities Do Landlords and Tenants Usually Pay?

When it comes to managing utilities in rental properties, the responsibility can often be divided between landlords and tenants. The division depends largely on the rental agreement, property type, and local legislation, but generally, certain trends can be observed. The chart below compares common utilities and who usually pays them.

UtilityTypically Paid by LandlordTypically Paid by Tenants
Water & SewageYesNo, but some multifamily properties may bill proportionately
ElectricityNo, except for all utilities included propertiesYes
Natural GasNo, except for all utilities included propertiesYes
Trash & RecyclingYesNo, except for some single family rental properties
LandscapingYesNo, except for some single family rental properties
Internet, Cable, TelcomNo, except for all utilities included propertiesYes

Rental Property Utilities FAQ

What are Rental Property Utilities?

Rental Property Utilities

“Utilities” refer to essential services required for a livable, functional space. They typically include electricity, gas, water, and sewage services, necessary for lighting, heating, cooling, cooking, and sanitation. Additionally, utilities can also encompass services such as trash collection, internet, cable TV, and landline phone services. The responsibility for payment of these utilities is typically stipulated in the rental or lease agreement.


What Does “Utilities Included” Mean?

When a rental property is listed as having “utilities included,” it means that the cost of certain utilities shall be included in the rent. This is common in multifamily properties and essentially means that the landlord assumes responsibility for paying the utility bills directly, rather than the tenant. The specific utilities covered in this arrangement, such as electricity, water, heating, or internet, should be clearly outlined in the lease agreement. For tenants, this can simplify budgeting as they have one less variable cost to consider, while for landlords, it can be an attractive feature to attract and retain potential renters.


What is the Average Price for Utilities?

Average utility prices can vary based on many different factors such as property size, age, and occupants. According to Move.org, the list below is a compilation of the average monthly utility cost for American residents as of 2021:

Electricity: $117.46
Natural gas: $61.69
Water: $45.44
Sewer: $66.20
Trash: $25–$100
Internet: $59.99
Phone: $114
Streaming services: $48.25 

US total: $538.03–$613.03

Source: https://www.move.org/utility-bills-101/


What is RUBS (Ratio Utility Billing System)?

The Ratio Utility Billing System (RUBS) is a method commonly used by landlords and property managers to allocate utility costs among tenants. In multi-family properties or apartment complexes, it can be challenging to determine individual utility usage. RUBS addresses this by apportioning costs based on factors such as unit size, number of occupants, or a combination of these. This method is beneficial in properties without individual utility metering. However, landlords need to comply with local regulations and be transparent with tenants about this billing method to avoid potential disputes.

Commercial Property Utilities?

Commercial real estate utilities encompass a broad range of services that are critical for maintaining the operational efficiency and comfort of commercial spaces. Unlike residential properties, commercial utilities can be more complex and potentially include services like waste disposal, security systems, and specialty services related to the business type. The allocation of these utility costs can be a crucial part of lease negotiations, often depending on the type of commercial lease in place, such as net leases or gross leases. Furthermore, energy-efficiency measures and green certifications can significantly impact utility costs and appeal to environmentally conscious tenants.

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