What's The Concept of Using RUBS ?

[Tj Hines]

Bigger pockets. Can I get someone to explain how the RUBS system works if you own an apartment building and looking to bill back for water, trash etc? 

Let's say the operator is paying $40 bucks per unit. How much of that can he bill back to the tenant? 

[Omar Khan]

@Tj Hines

The above comments are very useful and I will echo what @Andrew Campbell is saying i.e. you can't ever bill back 100%. Also, RUBS is municipality dependent and not all municipalities will allow it (check where you're investing to confirm).

In Texas as an example, the Texas Commission on Environmental Quality (TCEQ) has defined regulations for how tenants can be billed, what deductions an owner must take, what billing fee can be assessed, and more. In contrast, Colorado allows RUBS billing with very few limitations.

To learn the rules, contact one of the following:

- Your State’s Public Utility Commission

- Local National Apartment Association (NAA) Affiliate – http://www.naahq.org/about/join/Pages/AffiliateDir...

- A third party utility billing services provider.

As to how RUBS works:

A ratio utility billing system or RUBS billing is a method of calculating a resident's utility bill based on occupancy, apartment square footage, number of beds, or some combination of factors.

Using RUBS to bill residents for water, gas and/or electricity expenses has several advantages including:

- Requires no capital investment to get started

- Enables owners to recoup a large portion of the overall utility expense

- Can be implemented quickly

- Immediately improves cash flow.

You’ll need a lease signed by your residents authorizing utility billing. If your current lease doesn’t address billing, draft a lease addendum and encourage tenants to sign it. You may have to implement the lease as tenants renew and/or when new residents join your community.

The articles in the references section (below) offer greater detail as well as videos to help you. 

References: 

Ratio Utility Billing (RUBS)

How To Calculate a RUBS Water Bill