RUBS vs Sub-Metering Lakewood, OH (Cleveland)

Multi-Family and Apartment Investing
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RUBS vs Sub-Metering Lakewood, OH (Cleveland)

Trey Eaton
Investor · Washington, DC · Member since 2015 · 4 posts · 0 votes

Hi all, 

I recently purchased my first small apartment building (11Units) in Lakewood, OH. The utilities (water, rubbish removal, boiler gas, domestic gas, and common area lighting) are paid by owner. The electricity in each unit is paid by the tenant.  This winter has been extremely cold and has driven my utility costs higher than I anticipated.  I want to know what people are doing to lower their utility expenses for small apartment buildings.

I have been researching Ratio Utility Billing (RUBS) and Sub-Metering as possible options to lower my cost burden.

Please let me know what you guys are doing.

Thank you, 

Trey 

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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
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My friends that own over 100 unit buildings tell me about 80% pay on time with bill back, 10% pay late with collections on them, the other 10% do not pay the water bill and you have to decide to evict or just take the loss overall figured into your numbers.

I can't stand landlord paid utility. I would buy a lower cap for a better area and no landlord utility.

Just remember if it is NOT COMMON for the area to separate out utility then you will waste your money. Example if 15 buildings in a 2 miles radius but all include utility in rents then the tenants will leave your place if you try to stick it on them.

So I research the area before considering buying or not. 

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    The market value is still the same with or without the sub meter. In the end its just going to even out.

    a unit with free heat may rent for $600. Same unit without free heat may go for $550. 

    0Reply
  • Davon Lowery
    Investor · Whitttier, CA · Member since 2015 · 405 posts · 110 votes
    11y

    Congratulations Trey!

    I am looking forward to the discussion on this very topic, as I'm affected in the same way, although not to your extent. My perspective is, I have received 2 bids, 1 for separating the lighting/electrical approximately $5-7000. The 2nd for separating the water $3-5000.

    Now, in my case, the ROI on executing is only supported by my hold philosophy; contrarily, this could be a selling point from a flipper to a long term holder but, I doubt the inverse is applicable.

    0Reply
  • Trey Eaton
    OP
    Investor · Washington, DC · Member since 2015 · 4 posts · 0 votes
    11y

    Thank you James, 

    Do you have any experience with RUBS? How do the tenant react to a RUB coming to the building? How would you off set this? New stoves for everyone...? JK.

    Trey 

    0Reply
  • Ben Leybovich
    Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    11y

    What do the apartments rent for now, Try?

    0Reply
  • Jeff Greenberg
    Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
    11y

    We have implemented a very successful RUBBS program at our 62 unit in Houston.  Half  of the property is already sub metered for electricity and our PM isn't even using it.  Using sq footage and number of tenants the tenants are billed back each month with little or no kickback.  To start it off we did lower the rents to market and then added the RUBBS on top.  I do believe that people are more conservative if they know they are going to have to pay. As @Ben Leybovich said Try.  Try it on new lease ups and see if it makes it harder to rent.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    11y

    My friends that own over 100 unit buildings tell me about 80% pay on time with bill back, 10% pay late with collections on them, the other 10% do not pay the water bill and you have to decide to evict or just take the loss overall figured into your numbers.

    I can't stand landlord paid utility. I would buy a lower cap for a better area and no landlord utility.

    Just remember if it is NOT COMMON for the area to separate out utility then you will waste your money. Example if 15 buildings in a 2 miles radius but all include utility in rents then the tenants will leave your place if you try to stick it on them.

    So I research the area before considering buying or not. 

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    2Reply
  • Matt Sicignano
    Investor · Smyrna, GA · Member since 2014 · 96 posts · 72 votes
    11y

    Excellent idea! Couple of selling points; you don't have to do 100% pay. You can phase in 20% co-pay, 30%, or even 100% once the market adjusts. And you have the flexibility to adjust as the costs fluctuate. The conservation effect will be enormous, as well. We have places where gas is included. Only fireplaces and stove use it. Cheap, right? Except when the fireplace is used as a source of heat in winter! People were leaving the fireplace on all day, coming back to a 85 degree unit! Once a 40% co-pay was instituted, bills reduced by 50%, with no reduction in lifestyle. Do it!

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    The building from the original example, this is what is paid by owner.

    • water
    • rubbish removal
    • boiler gas 
    • domestic gas,
    • common area lighting

    Can't charge the tenants for common lighting. An apartment in Northeast Ohio charging for water is unheard of. Trash is a common dumpster. & you have a large central boiler.

    At the end of the day, if similar apartments are "all in" at $600 you will not get away with charging $600 + extra's.

    Doesn't make sense to go through the cost to charge people $500 in rent + $100 in other charges when you can just save the money, effort & headache by charging $600.

    0Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    11y

    I have a similar issue with a 20 unit building. My initial plan was to put in electric heat in the units. Some of them already had window mounted electric heat and air. But the building was built in the 30s so the electric won't support much more load. To upgrade I'd be looking at completely rewiring.

    So instead we just raised the rents. On all new tenants coming in we tacked on $70/month for utilities. It worked well. Most of the tenants have turned over and we're back to 100% occupancy.

    1Reply
  • Account Closed
    Seattle, WA · Member since 2014 · 37 posts · 24 votes
    11y

    Hi Trey,

    Please be advised that RUBS is not allowed in the Cleveland-area per The Codified Ordinances of the City of Cleveland, Part Three, Land Use Code - Housing Code, Title IX - Housing Code, Chapter 375 - Landlords and Tenants, Section 375.05(a)(1)(2).

    Ohio submetering companies such as Guardian Water & Power do offer retrofit services for small apartment buildings. Your residents are then billed for their water/sewer usage every month based on local rates by the submeter company.  

    The first step is to confirm whether or not each apartment unit has it's own main shut off valve or hot water tank.  

    Hope this helps,

    Chris Apostolos 

    2Reply
  • Christian CarsonPro Member
    Cleveland, OH · Member since 2011 · 400 posts · 223 votes
    11y

    My duplexes are sub-metered for water...so it's not unheard of in Northeast Ohio ;)

    That said, it's a pain to collect from tenants. Most of them just pay an extra $100 every couple months to satisfy the water bill.

    It is nice to have the submeter data to see if one unit is using an unusual amount of water -- helps put the kibosh on leaks and such.

    0Reply
  • Federico Gutierrez
    Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    11y

    @Trey Eaton What did you end up deciding upon?

    I have an 8unit where I have to pay water and trash in Cleveland OH. After listening to one of the podcasts this sounds like a good solution. I would be interested to see what feedback you got and what the initial outlay/capital cost on your side was

    0Reply
  • Jerome KaidorPro Member
    Investor · Hayward, CA · Member since 2013 · 122 posts · 65 votes
    11y

    This is becoming a serious issue in California.  We are in the fourth year of a major drought.  The governor has declared an emergency.  Water rationing is coming!  How do I enforce it at my apartment complexes?  In the Central Valley, the summer temps routinely climb into the triple digits.  Children play in the water.  Then they go on to other things, and leave the water running.   Tenants wash their cars.  In their apartments, tenants take leisurely baths and showers.  I have heard of families just leaving the shower water running for a few hours while everybody takes their turn.

    0Reply
  • Jason Barr
    Investor · Cleveland, OH · Member since 2011 · 11 posts · 2 votes
    9y

    @Trey Eaton Interested what direction you ended up going and why.  What did you learn?  I own properties in Lakewood as well.

    0Reply
  • Michael Tempel
    Property Manager · Minneapolis, MN · Member since 2014 · 380 posts · 167 votes
    9y

    We are planning on putting RUBS at many of our communities in 2017.   We can set it up to do a partial payment based on the percentage and formula of the overall bill.  Our goal outside of saving money is focused on conservation.   Water will go up sooner than later, so we want to be pro-active vs. reactive. 

    0Reply
  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @MichaelTempel

    Are you sub metering or are you doing a formula based the amount of tenets, bathrooms etc?  Considering this myself, if the tenet limits the water they use instead of just letting it run because they don’t have to pay then that seems like they can use less water and save money.  The podcast this week  said that you expect a 30% drop in the amount of water.  If that is true thats true it seems like you take 15% and they keep the other half everybody wins.  

    0Reply
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