How Utilities Affect a Duplex Investment

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If you’re familiar with duplexes, then you’re probably aware of the utilities dilemma. Unlike single-family homes where everything is pretty straightforward, duplexes can present some unique challenges by way of utilities.

And here’s the scary part:

Those challenges really can affect your investment – especially if you’re carefully considering your numbers before making a purchase.

The ‘Dream’ Scenario: Fully Split Utilities

When looking at duplexes, the best thing possible thing that you can find are newer, fully functioning utilities that are split – with essentially two of everything.

Having split utilities allows you the opportunity to charge your tenant for exactly the amount of heat, water, and electricity that they’re using in their own unit. Whether it seems like it or not, this can help to avoid a massive headache down the road – especially if you end up with a tenant that drives utility bills way up.

When observing utilities, it’s fairly easy to determine whether or not most items are split. By heading into the basement, you should be able to find two water heaters, two electric panels, and two of pretty much everything else.

However, it’s not always so easy. In some cases, utilities are located in strange places that aren’t quite as easy to find.

During your check, make sure that you also take the time to determine how old/new the furnaces, water heaters, and other major components are. Most people don’t want to buy a property only to have thousands more to invest just months after the initial purchase.

Keep in mind that most properties with utilities were built as ‘true’ duplexes – they probably weren’t converted from originally being a single-family home.

The ‘Classic’ Scenario: Semi-Split Utilities

While many duplexes offer fully split utilities, many more offer a partial split. In cases like these, you’ll find something like one water heater and two electric panels or one furnace and two water heaters.

Whatever the case may be, partially split utilities are a decent option for prospective duplex owners because some of the risk of a utility hoarding tenant is eliminated. In cases like these, you could consider charging a tenant for exactly what they use if you know the amount plus a flat rate or a percentage of the other utilities that you share.

The ‘Nightmare’ Scenario: One Set of Utilities

When it comes to utilities, the worst case scenario for duplex owners (even though it’s definitely workable) is having just one set of utilities.

In cases like these, it can be tricky to determine just how much your tenant’s utility bill would be if you could measure the amounts that they use. To combat this, many duplex owners have each tenant pay a percentage of the bill, a flat rate, or the like.

There’s no need to fear – you can still have a cash flowing duplex that has just one set of utilities. You’ll just need to be prepared for the possibility that a little bit of money for utilities could end up coming out of your pocket if you’re not careful.

Still, there is a small advantage to having only one set of utilities – you only have to worry about repairing or replacing this one set instead of two.

Conclusion

No matter what kind of situation you’re anticipating when it comes to utilities, the best thing to do is work with a duplex expert like those that work on our team. We’re familiar with how to deal with these kind of situations, and we’ll help you to prepare for what it all might look like.

To learn more or get started in the buying process, give us a call today!