How are utilities billed in a small apartment building?

[Jon Ostojic]

I'm considering doing 1031s out of a few SFH on the west coast and purchasing some small apartment buildings. In researching different markets I find deals like this:

http://www.loopnet.com/Listing/5175-Warrensville-Center-Rd-Maple-Heights-OH/11817181/

But utilities, if not billed to the tenants, would seem to eat up a lot of the cash flow.  Like in this property of about $45k gross annual rental income, utilities would be about $5k. The units are separately metered. I've never leased an apartment and am not really familiar with how utilities get billed in them. Or does that vary per market?

Any other thoughts on this property as a deal or not are welcomed as well as I'm still determining what to look for myself.

[Hadar Orkibi]

@Jon Ostojic  first I suggest you make sure the location is good and that the actual rents and occupancy are correct and verified. 

Who is managing the property?

Ask the seller to provide you with copy of all leases, Schedule E tax returns and bank statements to verify that the Actual / Economic occupancy is correct and True!. 

In regard to utilities, It is very common to have the tenants pay for Electric and Gas while the landlord pay for water Trash etc. 

There are 2 main ways to cover thees costs:

1. Add around $35 per month to the rent of Each unit to cover the cost.

2. Implement RUBS. (Ratio Utility Billing System.) This is a system that calculates the cost of utilities for each unit and a good way to charge back. 

NOTE: RUBS are not conman in every market, some market accept them and some don't. You will need to ask a local property manager to fined out if you don't know. 

If RUBS are  not a GO then option 1 should be.