multifamily is residential or non residential for water billing ?

[Lak Chilam]

Hi,

My property is in Atlanta. we have a water main meter(8in) and getting 9000$ permonth for 64units property. I know which is very high, my property is listed as non residential as per water company since meter is 8in, currently I am paying as a landlord full monthly water bill and all my profits this bill is eating.

I ask the water company my property has submeters if i make those active is the water bill going to reduce by making the property as residential? they mentioned that still one main meter which is 8in so its not going to reduce, i mean each tenant gets 140$ monthly which is ridiculous. any suggestion to reduce the water bill ? or even if I charge back to tenants i don't want they feel burden such a high price.

Thanks, Lak

[Frank Chin]

I don't know the water rates where you are. But as you, I thought my water rates were too high, and originally thought there were leaks. But I did a walk through of the property, checked all the sinks and toilets, didn't see anything out of the ordinary, and I was going to have a plumber come and take a more careful look.

I owned several triplexes and duplexes in the NYC area, and water bills for duplexes increased from $280.00/ 3-months 10 years ago, to $580/ 3-month on the last bills, and I thought of major leaks. But they have everything online now, and further checking indicated my water usage per month was calculated as 344 gallons per day for the property. 

So I wondered, is that high? The next thing I did was to research the average water use per day per person, and found the average person uses 80 to 100 gallons a day. I got six people living in this duplex, so daily usage should average 480 to 600 gallons per day. Based on this, the 344/ day figure came in on the low end, and I concluded I didn't need plumbers checking leaks after all.

So my suggestion is for you to check the number of people actually living in the property, including unauthorized tenants, and the average daily water usage. Originally the water department provide the usage by cubic foot, which I then have to covert to gallons, and divide by the number of days in the period. Now with the online info, they provide average gallons per day figure.

After this if the usage is out of line, then have plumbers check for leaks.

Years ago, in my triplexes, I found many tenants had unauthorized people not on the lease living with them. I found this out when my hot water tanks which has a useful life of 10 years conked out in six. If it happened to one, no big deal, but this happened to several of them. While the tanks are still under warranty, my plumber made a comment I must have double the number of people living in the place than I thought while he submitted the warranty claim. He said the optimal life of a 50 gallon tank is for five people, and I must have more than 5 people living in the place. So following his hunch, I found one tenant with his parents not on the lease living with them, another apartment, a single tenant with a girlfriend not on the lease living there, same story with the remaining apartment, 2 additional tenants. I have a total of 10 people living in the place, whereas the leases show five. 

So after that, I kept a careful eye on the number of residents living there, and water usage actually went down.

So before you go crazy about residential vs commercial, sub-metering etc, have these issues checked out. Sub-metering is another issue altogether depending on how common it is in your area and the expense of doing it. If no one in the area charges separately for water, I wouldn't either. Checking for leaks and the number of residents is a more practical first step.

[Lak Chilam]

Hi, Thanks for the explanation. I am not thinking any water leaks either. Initially I thought leaks but after research every day usage of water per unit match’s to no of gallons shows approximately same. It is the unit price the water company charges since it is apartment complex due to 8in water meter they says it is commercial. The rate they charges costing 140$ pet unit water bill. Usually water bill should be 60$ average but costing more than double. I want to turn on submeters but bill/unit rate  not going reduce cause main meter is still big so water company charges as non residential rate itseems. I don’t know what to do :(

[Frank Chin]

There's an article regarding water charges in Atlanta and sounds like the numbers you cited is in the ballpark. See: Atlanta utility charges They cite figures of $150/unit. The increase is from $50/unit due to the "Clean water Atlanta" project, which mirrors the numbers you mentioned.

They compare Atlanta to NY, and if my tenant's usage approached the average usage, I'll be paying almost as much as you. If my tenant's usage is 600 gallons per day, on the high end, instead of 344/day, the actual usage, my water charges would run almost $1,200 every 3 months for the duplex, or $400 month for the duplex, coming to $200/month per unit.

I just recently change the billing to monthly to more closely monitor things.

[Frank Chin]

Just to add, you mentioned charges of $60/unit going to $140/unit, almost numbers of $50/unit to $150/unit cited in the article. Any landlords raising rents due to these increases? Looks like you'll have to raise rents by $100/unit.

I noticed the article is dated in 2010, and they just recently raise your rates?

[Cheryl Foster]

@Frank Chin - You are extremely helpful to this investor. Generosity with your time and expertise is what makes BiggerPockets great!

[Lak Chilam]

I got this property few months back by thinking I can charge water (RUBS) to tenants. But $140 charge a bit high. Probably i need to increase rents as you said. 

I just spoke to city engineer they estimated 2880 per unit to install new individual water meter and also mentioned that they don’t do individual water meters for apartments itseems. May be i need to give a thought to turn on submeters to monitor usage of water.

Thanks,

Lak

[Frank Chin]

I agree, $140 is a bit high if it was $60/month not that long ago. But as it was pointed out, it seems $150/month is the average. So RUBS will not cut down total consumption IMHO.

With RUBS, allocation is based more or less on square footage. To me, it punishes tenants who's hardly at home. That's guys like me working long hours at the office, those who travels weeks at a time. It rewards those with unauthorized tenants not on the lease. Being the landlord of duplexes and triplexes, water usage is dependent on the number of people in the unit, and the time they spent there.

I have people sneaking their parents in, who don't work, four people in the apartment, two of them home all day using the bathroom. An identical apartment occupied by a traveling salesmen hardly home would mostly likely be allocated the identical amount based on RUBS.

I listened for a year to a co-worker whose landlord allocate utilities. His cooking gas allocation was the most ridiculous and unfair. The bill was around $30.00 for him and his landlord, so he's allocated $15.00. He constantly watches who comes and goes in his landlords unit, watching their relatives coming, them cooking big dinners, and how many dinners a week. He and his wife enjoys pizza and Chinese takeout. According to him the allocation should at most be 25% to him or $7.50/month, not $15.00

His rent back then was $750.00 and I asked him how comparable rents are in the neighborhood. He tells me he spoke with neighbors and no one pays extra for gas, and he would move when something suitable comes up. Just for the fun of it, I asked him if his landlord charged $775 for the apartment including gas, would he rent it. He said he would, he likes the neighborhood. 

So I was thinking that a system like RUBS, if not generally applied in the area, would increase paranoia and increase turnover, besides the additional work and expense involved in billing, getting the bills out, and collecting it. And when the water bill increases, tenants would complain it's their neighbors taking long showers, not them. I know, I take short 5 minute showers, and people at work boast about taking half an hour showers in the morning, which is why they're late. Why am I subsidizing them if I live in the same building?

Anyway, good luck being a new landlord. 

[Lak Chilam]

After a bit research today realized as Frank mentioned that Atlanta some water developments and raised costs. Looks like notation wide Atlanta come 1st in high water charges. Decided to go with Guadian   Company who can do sub meter readings and charge back to tenants.

[Frank Chin]

Make sure you can do it under existing leases, if your tenants are not month to month. If you took over a property, you have to honor existing leases. My lease list the utilities provided including water, so I can't suddenly present a water bill to a tenant who never got one before. In my case I don't plan to because no one else does. While NYC water bills had gone up $100/month per unit for 2BR in the last ten years, rents have gone up 30%, around $500/month for a 2BR, so I'm not hurting.

Oh, I plan to check back with you to see how it went with you as I'm curious. particularly with a large increase like this. In principle, I agree people should pay for use of water they use as it promotes conservation of a vital resource. How to do it right legally is another matter. For instance, to honor leases, you might bill some tenants, while not others waiting for their lease to expire. People talk and you'll have to explain why tenant A suddenly got a water bill, and tenant B didn't.

[Lak Chilam]

Thank you. Yes, I am presenting waterbill only to new tenants and lease renewal tenants (notifying 2 months before) so far implemented RUBS for 10+ tenants.