Cost of Separating Gas Meters?

Question

I'm looking at buying a 4-plex right now. After running the numbers and doing some pretty thorough research, this property appears to be a cash cow except for one little problem...

there is only one gas meter, one electric meter and one water meter - i.e. - ALL of the utilities are paid by the landlord (which basically kills 80% of the net profit each year).

Looking at each of the utilities - gas is by far the most expensive one. Fortunately, each of these 4 units already has it's own forced air furnace and ductwork (I'm not sure about the lines to each unit).

Does anybody know - how much would it cost to split one gas meter into 4 separate gas meters? Since the individual furnaces & ductwork already exist, are we looking at a few hundred bucks? A few thousand bucks? Ten thousand bucks or more? I really have no idea.

I know this is a difficult question to answer with precision, but I'm just looking for a ballpark idea from anyone who has been through this before. The cost of this "improvement" is an important, decision-making piece of data (because if I can't unload this cost onto the tenants, the deal won't work).

Thoughts?

Bret L. · Answer

I just had this done.  800 per meter.  That's just the meter, thats excluding all the new black pipe after the meter. That's in Lancaster, PA.

Arlan Potter · Answer

The first step is to contact the gas company and see if they will add 3 meters and what they would charge.

After that, a whole host of questions to be answered first. It would be relatively easy if the gas lines are all in the attic and fairly easy to split to each unit.

The electrical can also be a real problem if each unit does not already have its own breaker box.

Water almost impossible to separate if the unit has a concrete slab.  Fairly easy if a raised floor.

I wouldn't worry about it. Just charge what you need to make your needed return. And make sure the tenants know that if the bills get too high, the rent goes up.

It could easily be over $10,000

Bill S. · Answer

@Seth Williams I have looked into this. Here my gas company charges nothing for the extra meters. After all they now get 4 base fees for what they used to get 1 base fee. Usually it's very easy to daisy chain on the new meters at the location where the gas line comes into the property where the existing meter is. Here the contactors run the flexible yellow pipe which is super easy all be it more costly for materials. If I was doing what you are discussing here. I would budget $2k for the work. Before you actually are fully committed to the project you should get bids. It's easy to over look code issues and such.

Remember you would also need for each unit to have their own gas water heater and then if the range is gas that would need to be piped so the lines aren't shared. If all of these prove costly, just have them pay gas for heat and then as the budget allows switch the other gas appliances over to the individual meters. The gas heating savings will likely pay for itself in the first year.

Remember that you can't just start making tenants pay for their own gas. You need to make sure and give proper notice if on MTM agreements. If they have leases you will need to wait until the current lease ends in order to make them start paying for gas.

Kyle Hipp · Answer

seth, I would definately check with you gas provider. I purchased a property and it had no natural gas as the water heaters were electrical and the furnace was oil. I replaced the furnace to a high efficiency natural gas forced air unit. The utility ran the line to the house and installed the meter for free. If they would have had to run over 100' then they would have charged for the overage. The utility wants new customers and might just do it for free like that. The only cost then would be to run new lines from teach individual meter to the individual furnace and water heater (if applicable).

Water split up was also reasonable with the meter being provided. A plumber just had to split the lines in the house itself. About $600 all said an done. This was a pretty easy job asall the connections were in the basement and there were already two water heaters.

I have not split up electrical however that seems like a nightmare depending on how the house is. A good electrcian can make it look easy though.

Seth Williams · Answer

I finally got some answers from the gas company in my area (DTE Energy). They are telling me that to re-meter this 4-plex, it would cost $936 for the first unit, and then $338 for every unit after that (so it averages out to $487.50 per unit in this case - or $1,950 total).

This doesn't include any new gas lines that may be needed (which are about $9.75 per linear foot). It also doesn't include any new appliances that may be needed in each unit (like new hot water heaters - if all 4 units are currently sharing one hot water heater at the moment).

So at the very least, I'm looking at a cost of roughly $2,000 - and possibly upwards of $5,500 or more (if new appliances and gas lines are needed).

It's not cheap, but given that the current landlord pays more than $3,000 annually for the gas bill at this place - it's an improvement that would definitely pay for itself in fairly short order  (and significantly improve cash flow in the future). Is it worth the cost? I think so - though it may change my offer price a bit.

Minhdoan Ngo · Answer

Hello @Sarah Settle, I actually ended up keeping it as is since I plan on performing a 1031 exchange on the property. The process for separating utilities seems fairly straightforward after some research through PG&E and the city. Here is a list that I put together initially to help keep me organized. Hope this helps!

PLAN AND DESIGNApply for PG&E permit onlineContact applicant to schedule field meetReceive approval from the City of the separate addressesField meetDetermine if trenching is neededDetermine if plumbing is neededDetermine if vegetation removal is neededDesign project

PERMITTINGReview and approve designApprove PG&E permitIdentify City permits neededApply for City permitApprove City permit

CONSTRUCTIONArrange for trenchingSchedule PG&E buildPrepare for trench inspectionComplete gas workPG&E constructs utility facilitiesComplete municipal inspection(s)Confirm meter installation datePG&E connects your service

CLOSEDocument and file all paperwork

Steve Babiak · Answer

A few other considerations to ponder.

Do other rental units in that area have the tenant paying for those utilities, or is landlord paid utilities the norm there?

If there is a common area in the building, then you will need a landlord paid service for covering the common areas. Electric will almost always require this, especially for things like hard-wired fire and CO alarms. Water would need this if you had a central laundry. And if there was hot water being fed to the laundry ( if there is a laundry I can't imagine no hot  water there), then a separate landlord paid water heater and gas line would be called for.

Water shut-off for non-payment can be a problem if each water meter does not have its own shut-off at the street. If you only have the one shut-off like you now have, and one tenant refuses to pay their water bill, the water company will shut off at the street - affecting all units. Leading to unhappy tenants who did pay for water.

John Huynh · Answer

@Angel R. I believe the units already have their own separate furnace

Angel R. · Answer

Wouldn't you need new furnaces per meter box?

Sarah Settle · Answer

Hey @Minhdoan Ngo did you ever finish separating the utilities in your property? I’m also in California and trying to get some guidance on where to start for a rental. Any info would be greatly appreciated!

Cost of Separating Gas Meters?

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