<p>I would appreciate some ideas on a situation we have with renting a house to a family member. The rental agreement is coming up for renewal. We purchased a house two years ago and the family (two adults and two kids) have been living there and paying us a nominal monthly fee. The problem is that we have been paying all the utility bills and their electricity bill some months is higher than the rent they pay us. Over the coarse of a year we would come out ahead if they paid no rent but paid the utilities. </p>
<p>Since they don’t see the bill they don’t have any incentive to save energy. However, we are concerned that if they have to pay the bills directly they won’t do so and the utilities will be shut off. (Or my MIL will jump in to help them as she usually does and she doesn’t really have money to spare.) </p>
<p>Their lack of money is a long-standing situation. Both of the adults work but at minimum wage jobs without benefits. They don’t really live beyond their means; they just don’t have the means to pay for the basics. The dad, my BIL, seems to have no ambition to get a better job and we aren’t really sure what he does with his time other than sleep. The mom is very active with her church and the kids activities and in the community. She is enrolled in a free training program to try to get a better job in the medical area. She has told us that she would prefer to leave her husband but right now doesn’t have enough money to live on her own. </p>
<p>I don’t think there is much we can do on their general financial situation since we have tried to offer suggestions and my MIL is very involved with the family. However, I would appreciate ideas on how we can deal with the rent/utilities issue. Thanks.</p>
<p>Wow…well you are in a situation. Assuming you can afford it financially I would take the loss on my taxes, consider it my charitable contributions for the year and call it all good.
I’m sure others will disagree but given that you don’t want the utilities shut off and you don’t want the MIL to spend money she doesn’t have, I don’t see a lot of other great options.
My mother was in a similar situation, eventually due to a lot of factors, she sold the home (she had inherited it).</p>
<p>If they’re only paying you a nominal monthly amount and you’re paying utilities, I assume that you are in fact contributing in large part to the support of this family. I also assume that you’re willing to continue to do so. If the utilities, and getting them to conserve, are your issue, I would suggest contacting the utility companies. A lot of them will do an analysis of a house and suggest areas where savings can be realized, whether through weatherstripping, using energy saving lightbulbs or turning off the TV. Make sure your relatives are educated on energy conservation and what they can do to keep the utility bills down. Then tell your relatives that you expect them to conserve, and require that they pay you the cost of utilities in excess of a certain amount. You’re more generous than I am - while I’m often willing to help out family, I wouldn’t help support the family of a man who has no ambition and spends his time sleeping for very long.</p>
<p>I would bump up the rent to cover your losses in utilities. You are right though, the fact that they don’t see the bill gives them no incentive to conserve.</p>
<p>Thanks for the quick replies. I hadn’t thought about contacting the utility companies before for an energy audit but that is a great idea. The house is smaller and news than ours yet their bills are the same or higher most months. That is a good idea about charging them when the utilities go over a certain amount. Not surprisingly the relatives have bad credit so I would also need to see if the utilties will let them put the bills in their name. </p>
<p>They seem to be barely able to cover the amount we are charging them now which is $350 a month so I don’t think raising the rent will help much. </p>
<p>A little more background is that the house is in a different town about 3 hours drive from us. My MIL lives there and her fiancee has been very helpful with doing any repairs needed on the house. My MIL is constantly thanking us for providing the house and my BIL occasionally thanks us (we don’t talk to him that often) so that helps. Before we bought this house another brother employed him. But the brother finally got fed up and said someone else needed to help out. The rest of the family is energetic and hard-working so it’s a mystery why this one brother turned out the way he did.</p>
<p>It’s a strange situation in which to exist, wherein you are supporting your family and another. My sister is doing the same thing for a disabled sibling. Sis pays nearly $1000 monthly on the mortgage and disabled sib pays utilities, some maintenance, and $300 monthly in rent/mort.</p>
<p>It is incredibly awkward and my sister is getting tired of it after nearly a decade. She is feeling a bit used and unappreciated, not that disabled sibling should be saying thanks every day, but that she accepts the aid as her due, she needs it so some one should provide it. She is very much an old hippy, anti-govt etc., yet accepts that disability check from the evil govt. She is also lousy in managing money and paying sister gets asked to make improvements to the property or do maintenance, whilst disabled sister wastes money on stupid things (it would not be any one else’s business if she were paying her own way!)</p>
<p>Paying sister lives 15 or so hours away by car, she has driven up for an annual visit with her DH and been asked to clean the gutters whilst the disabled sister had her perfectly healthy adult son living there :eek:</p>
<p>I don’t think it likely they are going to change their habits. Is it your job to support them? Do you want to, even though you don’t have to? As you have described, it is too risky to trust them with utilities in their name. It is more delicate than usual because you’re in business with family. I think it likely they don’t know- or won’t believe the utility costs unless they see them, so be prepared with documentation. You cannot control others that may want to chip in on their bills. To charge them when they <em>go over</em> assumes they have the money to pay extra. If they could/would pay that, then they can pay a higher rent instead.
As I see it that you have a few choices if you want to keep it as a rental home.</p>
<p>One is leave it as it is, take the loss, and know you are helping them(some would say enabling). Do you want that? Can you afford that?</p>
<p>Or, because it’s family, show them the utility bills to document you aren’t suddenly being money-hungry, then raise the rent the least you must have. Offer to let them stay for the new rent, or go elsewhere.</p>
<p>Or, simply tell them it isn’t working out, you’re glad you were able to rent to them so cheaply so they could get on their feet, but, now you’re going to seek market-value rent for the home and you think it best not to continue renting to relatives. Naturally if you choose that option, give them the courtesy of extra notice, more than just what the law requires. </p>
<p>If you choose the “show utility bills and explain” option, expect them to try to talk you out of an increase by telling you they will cut down on utility costs so their rent better covers the cost. Respond to them: “Great! Then over the course of the next yr, when you see their lowered costs, maybe you can adjust their rent downward”. Don’t keep the rent low now based on their promise that next yr’s costs will be lower. Unless of course, you are willing to keep losing money. All the weatherstripping in the world makes little difference to someone that doesn’t have to pay the bill.</p>
<p>Whatever option you choose, always always always get it all on paper. Better to avoid a dispute-especially with family- than to win a dispute.</p>
<p>You must find a way to give them an incentive to conserve, even if it is making them responsible for 10% of the utility bill… even if means paying them if the utilities are less than xx. I don’t think you can expect anyone to conserve if they are not paying for utilities. The rates I pay motivate me to freeze my butt off in the winter, wrap myself in heavy blankets at night and walk around the house in sweaters during the day. If I was not paying for heat I would probably leave it on full blast and open a window for some fresh air if it got too hot!</p>
<p>What is the risk of putting the utilities in their name? They won’t want them shut off, so should have motivation to pay them. If they do end up owing, they owe, not you.</p>
<p>If they are low income, perhaps they can qualify for some low income reduced rate program?</p>
<p>Here’s my solution:
Add all the utilities bills for the last 12 months, divide by 12.
That gives you the average monthly utilities.
Raise the rent by the average monthly utilities.
Give them the incentive that they get a rebate if the utilities go below that amount.
The (cumulative) rebate will be issued at the end of one year.</p>
<p>I thought I had posted this reply earlier but I don’t see it. Sorry if it comes up twice. </p>
<p>Thanks so much for all the ideas. I hadn’t thought of any of those especially the rebate idea. I agree that we need some sort of incentive on the utilities. I need to add up all the bills and see where we stand. I will also check into the reduced rate program on the utilities. I am guessing their take-home pay is around $1,000 a month so they might qualify for something. I did find a free energy audit program that the city where they live offers. </p>
<p>When we bought this house my main concern was they would want us to do a lot of maintenance on the house and they would be complaining about things. Fortunately they haven’t complained about anything (except when a tornado hit the backyard) and they haven’t even come to visit us. So this has actually worked out better than I thought it would. </p>
<p>Some people would consider this a problem, but I can see where this could be seen as a plus!</p>
<p>PS: I’d advocate a change in the title of this thread. This is not a rental situation. It’s a supporting deadbeat relatives situation.</p>
<p>At some point, just like your BIL’s brother, you’ll say enough is enough. Don’t be afraid to sell the house when that time comes. Sounds like the family will move on to another teat on which to attach.</p>
<p>You purchased the house two years ago and they’ve lived there since? Did you purchase it specifically for them to live in, or did you intend it to be a profit-making rental property for you?</p>
<p>time to go over for a visit and replace all the lightbulbs with flourescents. You can just say you are ‘greening’ the house. Meaning you are trying to save some of YOUR green That might not make a huge difference, but it can’t hurt</p>
<p>If you calculate the market rate rental vs. the losing money situation you are now in, can someone who is a tax expert tell us at what point you could claim the whole family as dependents on your federal taxes? Seems to me if you are providing more than half, the whole group could be your dependents… what’s the market rate for rentals in the area? (I’m assuming house rentals don’t include utilities - we’ve never lived where that’s included)</p>
<p>Thanks for the ideas and suggestions. If we rented the house to 4 college students we could get about $1,000 per month in rent. If we rented to a single family I would expect to get a little less. We did buy the house for them to live in but with the expectation we would at some point either sell the house or rent it out. The house is in College Station (Texas A&M) so the housing market is steady. Utilities are usually not included. </p>
<p>I mentioned your suggestions and ideas to my husband yesterday. In the past he has felt sorry for the kids involved. But yesterday his tune had changed and he said he wanted to transfer the utilities to their name and if the utilities got cut off too bad He was mad because the brother hasn’t sent a rent check yet this month and hasn’t communicated anything about it to him. We talked to the SIL who was desperately trying to apply for job training programs and figure out some way to support herself so she can leave the BIL. The MIL reported an hour or so later that the BIL was as cheerful as could be and so nice. The BIL just seems clueless. </p>
<p>I am thinking we should send the new rental agreement and information about the utilities by certified mail so nobody claims ignorance of this new development. I was going to call the utility company about transferring service to their name. We obviously don’t have other rental properties (and no plans to expand our holdings after this fiasco) so if anyone has other ideas about how to do this please let me know. </p>
<p>Can they qualify to get the utilities intheir name? If so, the special programs for low income families would be a good thing to explore. If they pay utilities, I am guessing they’ll stop paying rent? Is that manageable for you? How big is the house? Is there an extra room that could be rented to a college student to help defray costs?</p>
That might not make a huge difference, but it can’t hurt</p>