Should your buy-to-let be ‘bills included’?
When Zoopla set out to establish the 10 most desired features renters are looking for, all the expected answers were given – gardens, parking and pets allowed – but there was one request, however, that may prove more surprising to landlords.
When the property portal analysed the most common search terms used by home hunters between July and September 2020, it found ‘bills included’ was high up on the moving wish list – taking seventh spot ahead of the search terms en-suite bathroom, rural setting and studio.
The majority of available buy-to-lets don’t include the cost of utilities within the monthly rent, although there are exceptions. Student house shares, professional HMOs and dedicated build-to-rent properties that form part of a larger development are more likely to be offered with at least broadband costs included.
Zoopla’s results present a question: should more rental properties be offered with ‘bills included’? Here we offer our thoughts on the proposition.
- It’s not a profit-making exercise
Landlords should use ‘bills included’ as a way of attracting tenant interest and not making money. In fact, landlords can only recharge for the units of energy used, a standing charge and any VAT. This is called the ‘maximum resale price’ and a landlord can’t charge any more than this.
- Appealing to budget conscious tenants
Many renters like the convenience of one monthly fee covering not only their accommodation but also their gas, electricity, water, landline rental, TV service and broadband too. The flip side is some tenants prefer to shop around and switch suppliers on a regular basis for the cheapest deal. That’s an aspect out of a renter’s control when bills are included.
- Leave time to look for the best deals…..
On a ‘bills included’ basis, the job of finding the most economical deals – and swapping to different products when fixed rates end – falls to the landlord. It takes time to keep comparing the energy market but it’s vital to ensure you’re not paying too much, as high costs can result in above-average (and off putting) rents.
- ….and monitor usage regularly
Landlords need to keep on top of their tenant’s gas, electricity and water (if metered) usage to ensure they’re not out of pocket and that means lots of meter reading. It is possible to tailor a tenancy agreement to include set usage restrictions, with a stipulation that anything used over the limit will be charged as an extra. In reverse, landlords can also incentivise tenants to use less with a cash-back offer.
- Cap it to control costs
Offering ‘bills included’ needs to be cost-effective and controlled, so landlords should look at capping expenditure to ensure tenants don’t take advantage. There is an element of trust involved, although smart meters are a good way of reminding renters how much gas and electricity they’re using.
Prepayment sub-meters, where the credit is loaded by the landlord, are a more serious way of keeping usage under control, although smart heating controls are an easier alternative. These allow a landlord to set maximum heating temperatures and time limits in a remote capacity.
In terms of broadband, ‘phone costs and line rental, landlords can discuss spend caps and unlimited deals with suppliers, which will help them budget and set an appropriate level of rent.
- Go green for extra savings
All rental properties need to be energy efficient by law but going above and beyond the minimum EPC rating of E will help reduce utility costs and save a landlord offering ‘bills included’ money in the long run. The caveat is a possible short-term investment in eco improvements – an outlay that needs balancing with how ‘bills included’ will impact ease of letting.
If you are a first-time landlord or are looking to expand your buy-to-let portfolio, ask us for advice and a local lettings market report.
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