Adding Value and Controlling Costs

[Chris Good]

In a softer rental market like we seem to be in now, it becomes much more important to focus on the boring fundamentals like controlling expenses. One of the ways we have been doing that in our multifamily properties is by adding sub-meters to the water lines of each apartment and passing the water usage costs along to the residents. If the property has publicly serviced sewer, which is most times billed based on the number of gallons of water used, by using sub meters, we now have the information we need to pass along the sewage charges. Then we simply divide the trash charges among the number of units in the building. With that we can eliminate our utility costs which increases our bottom line and adds value to the building.

In a building with 5 apartments, where the average monthly water, sewer, and trash (W/S/T) costs run $75 a month which is about our average, that would equal $375 each month and $4,500 a year. If the building is evaluated at a conservative 10% CAP Rate, the value of the building is increased by $45,000.

We’ve found this to be more readily accepted by our residents than simply charging a flat utility fee because it gives the resident more control of their costs. Most times the water usage drop is significant and the residents are much more likely to notify you when they have a leaking toilet etc.

We've also found that the expenses for the material and install is often recovered within two years or less.

Sometimes we need to reduce the rent by $20-30 less than what we would otherwise be able to rent it for, but in some cases, it doesn’t affect the rent at all.

I have been using meters from a company called True- Submeter for the past 5 years. They monitor the meters remotely, and send you and the resident a statement on the 1st of each month with the resident’s W/S/T usage and charges for the previous month.

I use their Model TSN1 - PVC Meter which currently costs $95 each.
Each building also needs at least one router which currently costs $195.

If you have your meters in a centralized location, you only need one router but if the meters are scattered throughout the building, you may need multiple .

There’s a monthly $6 fee per unit for the monitoring and invoicing.

If you decide to give it a try, feel free to use discount code msam10 for a 10% discount.

If you have any questions or comments feel free to reach out to me directly.

And if you need to buy a building to put Sub-Meters in, I’m happy to chat about that as well 🙂