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By the end of the year, I will be renting a small apartment with one other person and we will be splitting the costs. I am a college student so I've only lived either at home or in dorms.

In general, is it usually cheaper to rent an apartment with the utilities included at a set fee, or is it better to pay for the utilities yourself? I know that this will vary from property to property, but I want to know which is generally better.

I'm not sure if I should include this in this question, but I'm also wondering if it's possible to estimate how much certain utilities would cost if we were paying for them separately from rent. That way I could make a more educated comparison between properties with and without utilities included.

Edit: I forgot to mention in the question originally that I will be living in New England. Between this and the fact that I easily get cold, I would expect to be using heat more than average in the winter.

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    You need to check the costs locally. Where I live, two houses one across the street from the other pay significantly different amounts on their utility (>100% difference) because they're serviced by different utility companies. – littleadv Jan 14 '12 at 0:08
  • @littleadv not to mention that two houses can have very different bills based off of things like the HVAC systems, window types, etc. – Kellenjb Jan 14 '12 at 19:45
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    I don't have much to add to all of the other answers, but do be careful with "utility included" places having a limit on how much they will pay for. Going with utilities included will prevent fights with your roommate about how much one of the other is using. – Kellenjb Jan 14 '12 at 19:50
  • @Kellenjb Without saying too much, I'd like to add that there will not be such arguments because of certain details that I don't want to go into here :) – atlantiza Jan 14 '12 at 20:01
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I am from Australia, so don't know how relevant my answer will be for the US, but I'll try anyway.

If you are having your utilities (electricity, gas and water usage) included as a set fee as part of the rent, I would say that the landlord has taken the average cost for these utilities and added a buffer incase you and your house-mate use more than the average. They would probably then review the costs after a certain period to see if they need to incease them or not.

If you think you are a low user of the utilities (ie use water sparingly, turn off the lights when you leave a room, etc.) then you may be better off paying for the utilities separetly. However, since you are sharing with someone else, and if you don't know whether they are a high user or low user, then you may end up paying for some of their usage as well. These are the things you may wish to consider.

In the end you will have to decide if you want to pay one single bill each week or month, or have all your costs separated so you know you are not over paying for something you may not be using. Some people feel that not knowing and making one single payment is easier and less stressful, while others may be concerned about not knowing and need to know all the amounts to put their minds at ease. You have to decide which type of person you are.

Personally, I would be the type that wanted to know the exact amounts to pay, but as mentioned earlier, this is made harder by the fact that you will be sharing with someone else.

To estimate the amount for each utility you will need to firstly estimate what your usage is for each utility and then multiply this by the rates charged by each utility company (this can be found on one of the utility company's previous bills). Maybe you can ask the Landlord that you wish to pay the utilities separately for the first couple of months and then decide if you wnated them included with the total rent after that. That way you can work out actual costs and decide which outcome is better for you. There is no harm in asking.

  • Yes, even though I've never really had my own place, I really wish I could find out exactly how much everything will be ahead of time. But I'm unsure of how to estimate my usage, so I suppose I can't estimate the costs anyway. Thanks for trying to help with that. I think this is a really great reply even if you are from elsewhere. – atlantiza Jan 14 '12 at 0:46
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The advantage with the utilities included is that you know what that will be each month therefore budgeting is easy.

Assume that the landlord knows what they are doing and they will not be losing money on the deal, so you will be slightly overpaying.

There is no way to determine how much of the utility fee is profit, because each building will be different.

Also assume that everybody in the building will waste electricity. Yet the landlord will still make a profit.

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    +1 for pointing out the moral hazard created when you get unlimited resources for a fixed cost. – Nic Jan 14 '12 at 2:43
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Well, it depends. The average utilities that most other tenants use will be added onto the rent, probably with a bit of a margin in case you use more than most tenants have.

If you expect you will be using WAY more energy than the average person, i.e., you're heating the place to 75 in the winter and cooling it to 65 in the summer, leaving lights on all the time, and running SETI@Home or bitcoin processing 24/7 on a dozen computers, you MIGHT be better off with your landlord paying for your utilities.

  • It's not uncommon for me to be cold in normal temperatures, and I will be living in New England, so I guess a major factor could be that I will be heating more than the average person during the winter. But do you think this alone would be enough to make me side towards rent with utilities included? Or no because it's not a year-round thing? – atlantiza Jan 14 '12 at 0:42
  • I think you would really have to try to use enough energy to save any money on it. The landlord will inflate the numbers so that he doesn't lose money across all the tenants in the building, none of whom have a financial incentive to conserve energy. So they'll all be running the heat a few degrees higher than normal, forgetting to turn lights off when they leave rooms, etc. – Adam Jaskiewicz Jan 14 '12 at 1:39
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I think you mentioned that you live in New England. You can expect to pay $100 - $200 a month in heat, during the winter. Much less during the summer. I'm in Albany, and that is common.

Also, I have lived in a place where heat and hot water are included. This is usually because it is a centralized heating system. You usually don't have control of the heat in these buildings, but I've never found them to be uncomfortable.

I have always paid my own electric. It's rare a landlord pays for your electric bill... But electricity has gotten cheap with the glut of Natural Gas.

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If you’re going to pay for utilities by yourself, the fees could be the following. During winter months, or if you don’t use air conditioning, expect to pay $30-$50 a month for electricity. A lot of your bill will simply depend on how much you’re home, how much you watch TV, how careful you are about turning off lights, etc.
On average, expect to pay about $250-$300 per year for air conditioning. The bills for heat could vary from $100-300 per month. Expect to pay about $45 on the Internet. Approximately you will can spend on utilities an amount equal to 20% of your monthly rent.

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