Separate meter, submeter, or just build the utilities into the rent

Question

Got the plan set back from the designer for a 700 square foot cottage behind the main house and the electrical page has a note that says "owner to confirm metering approach prior to service application." So that's my week.

Three ways I can go, as far as I understand it.

Separate meter. The utility runs its own service to the cottage, tenant has their own account, their own bill, their own late notices. Cleanest separation. Quote came back at $8,400 for the second service plus the trench, and the timeline adds about five weeks because the utility schedules on their own calendar and not mine.

Submeter. One service off the main house, a submeter on the cottage feed, I read it and bill the tenant. Costs me maybe $900 installed. But now I'm a small utility company, and how you're allowed to bill submetered usage varies by state and sometimes by city, so that's a question for someone local before I commit.

All in the rent. Flat rent, I pay everything, I price it in. Simplest for me. Nobody argues about a bill. But a tenant who pays nothing for power runs the heat with the window open in February, and I'd be the one funding that.

I'm long holds and I don't like recurring arguments, which pushes me toward the $8,400. Then I look at $8,400 and think about how many years of flat-rent overage that actually buys, and I stop being sure.

How are the people with occupied ADUs handling this?

gregpowell66 · Answer

Trenching twice is what I'd think about hardest. You've got the trench open once for the sewer lateral and the water line. If you're ever going to want a second electrical service, that's the day it costs the least, and the day after backfill it costs three times as much. I've watched owners save $8k on service and spend $19k five years later cutting a driveway they'd just poured.

On the operating side, flat rent works fine on a small unit with a mini split and good insulation, because the ceiling on how much power a well-built 700 square feet can burn is low. It stops working on a converted garage with an old air handler, where I've seen a single tenant put $340 a month through a unit the owner priced at $110.

So I'd ask what your envelope actually looks like before you decide. If you're building tight and heating with a mini split, flat rent and no argument is defensible. If you're doing anything with existing ductwork, get the meter in.

The submeter middle path is the one I'd be most careful with, and only because the billing rules on it are local and I've seen owners find that out after the fact.

Separate meter, submeter, or just build the utilities into the rent

1 reply