Utilities

Utilities refer to the essential services that are needed for a property to be habitable and functional. In a real estate context, they usually include:

Electricity: This powers lighting, appliances, heating and cooling systems, and other electrical devices in the property.

Water and Sewer: These services provide potable water for drinking, cooking, bathing, and other uses, and they also handle the disposal of wastewater.

Natural Gas: Many properties use natural gas for heating, cooking, and sometimes for appliances like clothes dryers.

Trash and Recycling: These services handle the regular collection and disposal or recycling of waste.

Internet and Cable: While not as essential as the other utilities, these services are still very important in most residential and commercial properties today.

In the context of real estate financial modeling, utilities can represent a significant expense. For rental properties, the landlord may cover some or all utilities, or they may pass these costs on to the tenant. The specifics can vary widely based on the type of property, the terms of the lease, and local regulations.

Utilities are usually considered part of operating expenses in real estate. However, the way they are handled can impact net operating income, cash flow, and other key financial metrics. For example, if a landlord decides to include utilities in the rent, they might be able to charge a higher rent, but they would also have higher operating expenses.