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Why All-Bills-Paid is a Case-by-Case Scenario

Why All-Bills-Paid is a Case-by-Case Scenario

I recently met with a first-time multifamily investor who was in the search phase for the perfect property. We discussed the importance of neighborhoods (i.e., location), current tenants, property classifications, and the many other considerations that go into such investments. Then, he made an interesting statement. “If I offer all-bills-paid, I won’t have to worry about anything else as much. Everyone likes having all their bills paid.”

While there’s truth in the statement, I found it to be a great opportunity to discuss the unique considerations that accompany such properties. Here’s a brief recap:

  • It’s not widely applicable. You can’t just choose any property and make it all-bills-paid; at least, not without considerable additional investment. All-bills-paid properties are designed as such, without meters on each individual unit. While you can turn a property from an all-bills-paid property to one that is not, and vice versa, there is an associated cost. So, it’s often best to purchase a property that is already setup to accommodate your planned pricing strategy.
  • Your pricing strategy will determine the type of tenants you attract. He was right when he said that everyone likes all-bills-paid. And, for this reason, all-bills-paid properties rarely have vacancies. Yet, the stereotypical tenant for these properties aren’t always on-time with payments, don’t always take care of the property the way they should, and aren’t likely to be loyal, long-term tenants. Understanding this as you go into the decision to offer all-bills-paid will at least help ensure you have realistic expectations of what’s to come.  
  • It can come back to bite you. While an all-bills-paid offering might make you popular and keep your vacancies to a minimum, it can also cause your costs to skyrocket if you don’t have rules and safeguards in place. When you aren’t paying the bills, it’s easy to lose sight of the associated costs, and that can cause tenants not to be as conservative with utility usage. If you don’t have min and max thermostat settings, for instance, or slow-flow hardware in the bathrooms, the resulting utility bills could make you rethink your decision to offer all-bills-paid.

Just like everything in multifamily investing, the right strategy can get you where you need to be financially. It’s just important to understand these scenarios and have realistic expectations before making the investment.

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