Heat Included
Those were key words to you when you saw an ad, and applied for a unit. Heat Included meant you were protected from exploding oil or propane prices. It meant you could keep the heat up to 72 not 65 because…well… someone else is footing the bill. No more extra sweaters, no more kid’s runny noses. Heat Included. Yes!
Let’s face it…we live in Maine. That means basically 9 months of winter, and 3 very cool months in summer to round out the year. Heck this past August, some nights were down to the 50’s. We are a “heat” state. Florida, that’s an AC state.
So, heat is a fundamental aspect of LIVING LARGE in Maine.
If you are a “heat included” renter, please bear in mind how rents get calculated. You see rents are set by Owners, in advance, after factoring expenses, to run a building (insurance, mortgage, taxes, equipment, management, utilities like heat, etc) and adding a profit percentage in, and then dividing that required survival number by the number of units in the building, and by further dividing by 12 months.
Bear in mind, this process requires the Owners to guess or estimate a bit. When they plan utility expenses for 12 months, believe me, they are guessing what they’ll need/spend.
So, in those buildings where heat is included, the Owner front loads the estimated cost of heat into the rent. Your heat, your neighbor’s heat, its all factored into the rent and essentially amortized over all the units of the complex/building.
In effect, you are pre-paying every month for your heat.
Now, this can be helpful when and if like last summer (summer 2008) petroleum prices dramatically spike upward. You have price protection because your lease fixes your rent, and it’s the Owner who gets burned because they are obliged to provide heat even when the price of oil goes through the roof!
But, it has some disadvantages to you as well. If you do not heat as much space, or can live at a lower temperature in your apartment, too bad. You get no credit towards the rent, no thanks for dropping your thermostat to 67. The total heat bill, like all fixed expenses, is amortized over all units regardless of usage.
In effect, you might be paying for heat you never really used.
Worse, suppose one year your Owner got seriously burned by high oil bills. Guess what. They will over-estimate utility costs the next year to account for and off-set the risk, and that means your rent the following year goes up even if oil prices do not rise, and even if oil prices fall. In that scenario your Owner pockets the windfall.
Heat included means you are trading the ability to self manage a cost, in exchange for one year of price protection. That’s maybe a great bargain, but you need to understand the risk of that trade.
It also means you pay the same share of the freight if you are careful, and the same as your neighbor who leaves his kitchen window open in February because they are thoughtless. In other words, you pay the same if you are frugal and the same if your neighbor is a thoughtless wasteful jerk.
There is no FREE anything. Heat is simply factored in by Owners in some fashion. Were it not, your rent might be less.
So, consider whether you are willing to give up the ability to manage a cost element like heat. You do gain assurances from price spike and that can be a good trade.
Just understand the bargain you are striking.
Tim Murphy
Padzilla.com
