Water Expense problem

[Ken Latchers]

Your advice appreciated with this dilemma:

I am about to close on a 6 family (1987 construction). Rent is currently $2100/month. There is one meter and I JUST found out the monthly water bill is like $300-$350 - I almost fell out of my chair!!! My house water/trash bill is only like $33/month. Anyway, this is what I am thinking
:
1) There is a laundry room (outside shed with a couple free commercial washers & dryer and space heater). It is only protected by a padlock, and door often left open and neighbors may be sneaking their laundry in. And seller pays a tenant $50/month to clean it. PLus paying for space heater in cold weather. I was thinking of closing down the laundry room and taking the flak from the tenants.

2) Waiting a month and then prorating the water among the apartments. I am sure I will also get flak for this too. I should mention, the 4plex next door has separate meters (and water company charges $5000 to put in 5 more meters - Yccch).

NOTE: I won't have any problems getting replacement tenants, but I am trying to figure how to slash the water bill without ruffling too many feathers.

[Joel Owens]

Long term pay the money and put in the separate water meters OR as a condition of the sale make the seller put in and pay for the installation of separate water meters prior to closing.

Ken hate to break it to you but 50 bucks a month for water/trash is NORMAL. If they have a big family they can use 75 to 100 dollars a month worth of water.I call it "liquid gold" and it is the number one expense landlords worry about on these older buildings.

If you have leaks that bill could go much higher.Are there any outside water faucets on the building?? During the summer months the tenants will run the water outside for the kids with sprinklers and also wash their cars and their buddies cars running up the bill high.So you need to look at water usage and billing all year round.You need to research also if the water company is allowed to lien the property for unpaid water bills and under what circumstances.

If the water company puts in separate meters for that price and then the tenants have to get water on in their name you should take that and run with it.

In some other areas even if you want to pay when rehabbing a building the engineering department will not allow you to hook up to do separate meters with a line from the street.

I can tell you also that splitting out the cost of water used will not work as the tenants will cry foul that one tenant is using more water then they are etc.

Also if the tenant does not pay the water bill they consume up to 30% more on average according to statistics when it is built into total monthly rent price AND the tenant will usually be slow to report any leaks or not report them at all (leaky faucets,running toilets,bad shower valve,etc.).

So you can keep things status quo,put in meters for each unit (recommended),or also use the RUBS system.The RUBS system is (residential utility billing system).A private company comes in and puts meters on each unit instead of the water company.Then they bill the tenant for usage and collect payment for you for a fee.

You still have to cover payment to the water company as it's one line going in with separate meters but the tenants argue less as the landlord isn't saying this or that person uses this amount but this third party company does.

You have to check as RUBS is not allowed in all jurisdictions.

For your area also check if utilities are included in the rent payment from most of all the other multifamily landlords close by.If it is you will have a big problem metering and charging as the tenants will jump ship unless your base rent is much lower to compensate.Not a little lower but MUCH lower.

If your research concludes that most have metered out in the area and do not include utilities in total rent payment then it is a good move and customary for the area.Do not overpay for this property.Water is the biggest investment killer for multifamily long term if not handled correctly.