Should I include bills in the price of my rent?
When you rent out your property, should you include the bills in the price of the rent or not?
Do you include bills in the price of your rent? If not, have you ever considered it?
Rent Guarantee Insurance
For many landlords, this isn’t something they have considered taking on as it is a lot more work, but for some, an all-inclusive tenancy is a better option than a non-inclusive one. It’s important that landlords choose the right option for them and their tenancy.
What is an all-inclusive vs. a non-inclusive tenancy?
The short answer here is that with a non-inclusive tenancy, the tenant pays the landlord their rent every month and organises other bills themselves. An inclusive tenancy rolls the bills and rent into one payment that goes to the landlord to distribute accordingly.
But let’s break it down in a little more detail:
Landlords roll rent and other bills into one monthly payment. These usually include utilities, council tax, TV licence and internet
Landlords only responsible for a monthly rent payment
Popular with younger tenants, particularly students
Tenants pay their own utility bills (gas and water), council tax and broadband services
With as many bills included in one monthly payment as possible, tenants can budget more effectively
Saves time for landlords and is a lot less hassle
In HMOs, it’s easier to split bills evenly in one flat payment
Tenants can find the best supplier deals for them, choosing the right price point, the best broadband speed etc.
H2: When should I offer an all-inclusive tenancy?
This is entirely up to you – all of your rentals could be all-inclusive if you want! But as a general rule of thumb:
- HMO. An all-inclusive tenancy is ideal for an HMO (House of Multiple Occupancy) as the tenants usually don’t know each other. While friendships can and do develop between housemates, this is not always the case and splitting bills could become a fraught situation that you will be called in to mediate. Avoid this by including all the bills in a flat payment, so in the event one tenant fails to pay, you can deal with them directly, without creating issues with other tenants
- Student flats. If you rent to students, an all-inclusive tenancy is a good idea. Similar to a HMO, students may not know each other well and an all-inclusive tenancy can avoid issues. However, for most students this will be their first time living away from home and managing their own finances. By rolling up all the payments into one, you are making it easier for them to budget
- Solo renters and professional couples. Older renters are used to managing their finances and would probably prefer a non-inclusive agreement, as this allows them to hunt down the right deals for them. Whether this is choosing superspeed broadband over something slower but cheaper, or a greener energy company, they are likely to want to make that choice themselves
- Families. As with older renters, families are likely to want to make their own choices about bills, so they can monitor their budget more closely and make savings where possible
Something to consider when making your choice is that costs are rising across the board, particularly when it comes to rent and energy bills. As of April 2022, energy bills spiked and another increase is expected in the autumn. If you are offering an all-inclusive tenancy, these are increases you would have to pass onto your tenants, so make sure that you are calculating correctly for these increases. Our free Expense Tracker can help you keep on top of your income and outgoings and help you make the right choice about required increases.
Given the energy increases, it’s worth talking to your tenants about how this will impact their payments, so they are reassured that you are looking after their best interests and looking for the cheapest deal possible. This will hopefully avoid any acrimony that could affect your otherwise good relationship.
Now is also the time to be thinking about protecting yourself and your investment, make sure that you have Rent Guarantee Insurance, just in case your tenant is unable to make their payment. Whether this is a one-off due to sickness or change in job circumstances, RGI gives you the breathing space you need to work with your tenant to get things back on track.