Tenant pays for fuel, how to handle?

Tenant pays for fuel, how to handle?

PostBy: NJJoe On: Tue Jan 15, 2013 10:25 am

Guys,

I am looking at purchasing some rental property. In New England, many of the properties heat with propane and/or oil and this presents a unique challenge to me. I only have experience with properties supplied with natural gas and any tenant would always get the utilities in his name. I would be responsible for utility charges until date the tenant assumed responsibility and it made it very easy to maintain responsibility over costs.

With oil and propane, the fuel is obviously paid for first and stored on site. My father had experience renting out a building with 5 commercial units in it, all heated by an oil boiler in the basement. He would ask the tenants to keep the heat down to a reasonable level during the day and set it lower at night. He told me many times he would have to enter a unit at night for maintenance reasons etc... and find the heat cranked up to 80 when the business was closed. :shock: :mad: The oil tank was filled up multiple times each winter and it drove him crazy.

Eventually he converted the building to natural gas, gave each unit its own boiler and made the tenants responsible for their own utility costs. Dad added a heating addendum to the lease and made acceptance mandatory. The tenants tried to fight back but in the end they could not do anything about it. Now, at night time, the thermostats were set to 60! My dad even told me that the tenant who was the most forgetful about leaving the thermostat cranked way too high was at one time spotted wearing a hat and jacket INDOORS during one bout of really cold weather :D :P Its for this reason that I would like the tenant to be responsible for their own utility, because when they pay for it is when it is used responsibly.

I have identified some issues that I don't know how to solve/handle:

1. When the unit is unoccupied, it still needs to be heated. Meaning I would have to have some fuel in the tank/cylinder. When a new tenant signs a lease, how is that fuel handled? I think the best way is to measure how much is remaining and charge the tenant accordingly. What is the best way to measure oil or propane levels? I visited a friend nearby who burns oil and his tank had a crude meter that just gave measurements in the Full, 3/4, 1/2, 1/4 marks. I'd need something more precise, preferably giving me the gallons remaining. Possible?

2. When a lease ends and tenants vacates the building, how is the remaining fuel (purchased by the tenant) handled? The tenant can't easily take the fuel with them (my girlfriend leased an apartment with a wood stove for heat, when her lease was up she took the cord of wood she had purchased with her) or do oil/propane companies offer a fuel removal service? I would again probably need a way to measure the remaining fuel and compensate the tenant for any left behind.

3. Assuming it were possible to meter the fuel, what price should I charge? Price I paid for it when purchased? Or should I charge the current price of the fuel? Meaning if the price has varied significantly since my purchase price, I may make/lose money. Could I mark it up?

I would love to hear some best practices from you guys please. How have you handled these issues?

Thanks

Joe
NJJoe
 

Re: Tenant pays for fuel, how to handle?

PostBy: Richard S. On: Tue Jan 15, 2013 10:32 am

I'd just fill the tank before they moved in and put it in the rental agreement it comes out of their deposit to refill it after they leave.
Richard S.
 
Stoker Coal Boiler: Van Wert VA1200
Coal Size/Type: Buckwheat/Anthracite

Re: Tenant pays for fuel, how to handle?

PostBy: CoaLen On: Tue Jan 15, 2013 10:48 am

I agree with the Mayor.
You top it off before they move in and they top it off when they move out. Of course you'd have to take it out of their security deposit if they leave you with an empty tank.
My experience here tells me you'd better get agreement with your fuel supplier that they'll come out and top off a tank. My propane guy doesn't want to come to my house unless I'm down to 1/4 tank. In your situation you may need to call him out on a tank that's nearly full already.
CoaLen
 
Hot Air Coal Stoker Furnace: Keystoker Koker
Coal Size/Type: rice


Re: Tenant pays for fuel, how to handle?

PostBy: dcrane On: Tue Jan 15, 2013 11:37 am

easy peasy mac N cheezy...

#1 this is handled with a fuel adjustment clause, they tenant will pay for the fuel remaining in the tank along with their deposit (Oil is easy, read gauge, most tanks are 275 but if you have different its marked on the tank someplace as to the gallon capacity) Example 1/2 tank oil = 137 gallons (round down to account for some sludge and be fair), charge whatever the fair market price is at the time. Propane can be done by making sure you have a gauge on the tank (you should ask your propane company to install one if you dont have one).

#2 The same fuel adjustment clause applies to when the tenants vacates the premises, only difference is you will be paying them for the fuel remaining.

#3 Ive always done "market price" (which is the best price you can obtain locally at any given time), You can however charge based on the "bill paid" if you wish (this means you should save the bills and make sure they are readily available as should the tenant on their side also)... very few landlords do it this way but its totally up to you!

Now the important stuff...
Can i get a referral to a good investment/multi family Realtor for you in your local area, #1 i would be able to make a little money from the referral #2 you would be assured of getting the best realtor in your area for your needs, which translates into possible 10's of thousands to you or even better... being aware of properties that hit that a lessor agent may not even know to make you aware of ;) Realtors have the ability to know things like who has the largest market share of inventory in your area, who sells the most investment homes, who obtains closest to their list price, who has training in seniors, staging, etc.etc.etc. So... if you would like me to have a local agent contact you who will lead you through the process, help you find the property you want and represent YOU (with zero obligation on you)... please PM me and id love to help you!
dcrane
 
Hand Fed Coal Stove: Crane 404

Re: Tenant pays for fuel, how to handle?

PostBy: NJJoe On: Tue Jan 15, 2013 12:06 pm

Thanks dcrane, but my gf is a realtor in NH and she is handling my search already. Appreciate the helpful advice so far in this thread!
NJJoe
 

Re: Tenant pays for fuel, how to handle?

PostBy: franco b On: Tue Jan 15, 2013 12:15 pm

With oil you stick the tank and measure the number of inches of oil in the tank. The oil Co. or a chart on the net will tell you the gallons. The tenant pays only for the oil in the tank and is reimbursed in the same way when leaving.
franco b
 
Hand Fed Coal Stove: V ermont Castings 2310, Franco Belge 262
Baseburners & Antiques: Glenwood Modern Oak 114
Coal Size/Type: nut and pea

Re: Tenant pays for fuel, how to handle?

PostBy: dcrane On: Tue Jan 15, 2013 12:45 pm

NJJoe wrote:Thanks dcrane, but my gf is a realtor in NH and she is handling my search already. Appreciate the helpful advice so far in this thread!


oh thats perfect... she will know how to draft the leases and handle it all. Its a great time buy so go get em'!
dcrane
 
Hand Fed Coal Stove: Crane 404

Re: Tenant pays for fuel, how to handle?

PostBy: michaelanthony On: Tue Jan 15, 2013 4:04 pm

I was under the impression a security deposit was inregards to the condition of the rental unit inside the walls of the space less normal wear and tear. Heating is simple if it natural gas, the utility co. can read your meter for you when a lease begins and transfer it to the occupant and vise versa when vacant. Any frozen pipes due to the leasee not heating can come from the security deposit. With oil I would include heat and hot water and charge accordingly, why not get the money up front instead of chasing it!
michaelanthony
 
Hand Fed Coal Stove: Vigilant 2310, gold marc box, vogelzang pot belly coat rack
Coal Size/Type: Pea, and a little nut
Other Heating: Very cold FHA oil furnace

Re: Tenant pays for fuel, how to handle?

PostBy: dcrane On: Tue Jan 15, 2013 4:37 pm

michaelanthony wrote:I was under the impression a security deposit was inregards to the condition of the rental unit inside the walls of the space less normal wear and tear. Heating is simple if it natural gas, the utility co. can read your meter for you when a lease begins and transfer it to the occupant and vise versa when vacant. Any frozen pipes due to the leasee not heating can come from the security deposit. With oil I would include heat and hot water and charge accordingly, why not get the money up front instead of chasing it!


security deposit is as you stated (who said anything about "security" deposit?
gas is as you stated.
the rest of what you stated is kinda wrong (you do get oil up front, with their deposit on the lease or rent agreement).
The only reason a landlord would pay for heating fuel is when their is one heating system for more then one unit.
dcrane
 
Hand Fed Coal Stove: Crane 404

Re: Tenant pays for fuel, how to handle?

PostBy: crazy4coal On: Tue Jan 15, 2013 7:14 pm

They move in with a full tank and when they leave the tank is filled. Make sure you get a deposit that will cover damage and a full tank of fuel. Make sure you do a credit check on everyone before they move in. If they won't let you do one, You don't want them.
crazy4coal
 
Stove/Furnace Make: buderus
Stove/Furnace Model: logana

Re: Tenant pays for fuel, how to handle?

PostBy: SMITTY On: Tue Jan 15, 2013 7:26 pm

When we moved in, at closing, we had to pay for the oil left in the tank for the house, AND oil left in the greenhouse tank. We paid the current market price per gallon based on the estimated # gallons left.

Most of the apartments around here are heated by electric heat pump (basically an A/C unit running backwards). Eliminates the fuel equation, but it's VERY PRICEY. Most of the ones in the city are all natty gas.
SMITTY
 
Stoker Coal Boiler: Patriot Coal - custom built by Jim Dorsey
Hand Fed Coal Stove: Harman Mark III (not currently in use)
Coal Size/Type: Rice / Blaschak anthracite
Other Heating: Oil fired Burnham boiler

Re: Tenant pays for fuel, how to handle?

PostBy: michaelanthony On: Tue Jan 15, 2013 10:44 pm

dcrane wrote:
michaelanthony wrote:I was under the impression a security deposit was inregards to the condition of the rental unit inside the walls of the space less normal wear and tear. Heating is simple if it natural gas, the utility co. can read your meter for you when a lease begins and transfer it to the occupant and vise versa when vacant. Any frozen pipes due to the leasee not heating can come from the security deposit. With oil I would include heat and hot water and charge accordingly, why not get the money up front instead of chasing it!


security deposit is as you stated (who said anything about "security" deposit?
gas is as you stated.
the rest of what you stated is kinda wrong (you do get oil up front, with their deposit on the lease or rent agreement).
The only reason a landlord would pay for heating fuel is when their is one heating system for more then one unit.


Maybe it's been a while, I thought you would pay first months rent and security deposit which is to go into an interest baring account and returned including interest during the walk through when I leave???
michaelanthony
 
Hand Fed Coal Stove: Vigilant 2310, gold marc box, vogelzang pot belly coat rack
Coal Size/Type: Pea, and a little nut
Other Heating: Very cold FHA oil furnace

Re: Tenant pays for fuel, how to handle?

PostBy: Richard S. On: Tue Jan 15, 2013 10:47 pm

SMITTY wrote:When we moved in, at closing, we had to pay for the oil left in the tank for the house, AND oil left in the greenhouse tank. We paid the current market price per gallon based on the estimated # gallons left.


You didn't have too, I would of told them to take it because I don't want it. ;)
Richard S.
 
Stoker Coal Boiler: Van Wert VA1200
Coal Size/Type: Buckwheat/Anthracite

Re: Tenant pays for fuel, how to handle?

PostBy: michaelanthony On: Tue Jan 15, 2013 10:55 pm

SMITTY wrote:When we moved in, at closing, we had to pay for the oil left in the tank for the house, AND oil left in the greenhouse tank. We paid the current market price per gallon based on the estimated # gallons left.


When we bought our house 5 yrs. ago oil was over 4 bucks a gallon and when I submitted our second counter bid I said "and the oil in the tank, so the absentee owner wouldn't have to pay someone to come and get it." The realtor had power of attorney and didn't realized she lost a grand, tank was practically full. :dancing:
michaelanthony
 
Hand Fed Coal Stove: Vigilant 2310, gold marc box, vogelzang pot belly coat rack
Coal Size/Type: Pea, and a little nut
Other Heating: Very cold FHA oil furnace

Re: Tenant pays for fuel, how to handle?

PostBy: SMITTY On: Tue Jan 15, 2013 11:02 pm

Good score Mike! 8-)

Richard S. wrote:
You didn't have too, I would of told them to take it because I don't want it. ;)

:lol: They would've loved that ... especially after dealing with me nickle-and-diming them to death for a week straight. They almost told us to take a hike after I tried to get them to roll a Model T Ford and a Sears lawn tractor into the deal. :D In the end I made out pretty damn good considering the state of the market at the time (2003).
SMITTY
 
Stoker Coal Boiler: Patriot Coal - custom built by Jim Dorsey
Hand Fed Coal Stove: Harman Mark III (not currently in use)
Coal Size/Type: Rice / Blaschak anthracite
Other Heating: Oil fired Burnham boiler