Sub-Metering or RUBS with Low Rent Apartments?

Question

I own a few 4-plexes near Cedar Rapids, IA. Rents are in the ~$550 range and the tenants pay for their own electricity. I understand and appreciate the concept of sub-metering or RUBS, but I wonder how effective these tactics would be on lower income rentals. My concern is that tenants looking for a $550 apartment won't love the idea of paying for additional utilities, so they may look elsewhere. Does anyone have any experience (good or bad) or advice with implementing one of these systems on lower rent range apartments?

Jedd Braunwarth · Answer

@Doug Karkow thought I would jump into give my input as I have actual experience with this since I own rentals in IA and MN as well as a submetering company. Lower rent rates and submetering or RUBS really is not an issue, most do not even ask what utilities cost per month, they look at base rent, as you mentioned. The issue I have seen with lower end units with submetering is it is  just one more payment they have to make and that you or another company has to collect. So, just as it is already with tenants, you pick a bad one and they will not pay, be late, never pay, make up excuses, etc. Lower end rentals, with my experience in submetering, just adds to collecting another payment. The flip side is when you do submeter these units the tenants are held responsible for the water and leaks are reported, they do not waste water, etc. Your water bill for your entire complex will come down significantly the first month you install water meters and pass the bill back to the tenants.

Andy Petzold · Answer

We manage properties that are setup in both ways in that price range. Most tenants don't seem to mind one way or the other. I'm sure they prefer to have it "included", but I can't say we get much protest when water is separate.

Edward B. · Answer

@Doug Karkow, it really is market dependent. If everyone else in your area and at your price point is including water in the rent then yes you may have trouble renting if yours does not. If it is a mix then you have to choose your side. May be, though, that you are the only one including water. Regardless it is getting easier and more cost effective to submeter with modern technology so I think you will see more and more landlords going in that direction.

James W. · Answer

@Jedd Braunwarth I do not want to waste a lot of your time now since I don't have a specific need at this time but I'll be in touch if I have an application it may work with.

Jedd Braunwarth · Answer

@James Woodrich Yes, our system is 100% automated. We monitor and bill apartment units in states all over the U.S. without ever going on site. We even have some in Ecuador! Our system comes with a private wifi network and cellular set up to log data. Basically a plug and play system. Send me a private message as I do not want to this thread to get to far off topic on our company as that was not my intent.

James W. · Answer

@Jedd Braunwarth do your submeters require wifi or in person visits to determine the usage by a tenant?  Is it possible to sub meter without going onsite to check useage or purchasing wifi?

I do not have a specific need at this time, but am looking at a property that is a no go unless I would be able to pass things back.  It would realistically require new mechanicals and better energy efficiency at the same time to make work as it would not be possible to pass back the cost at the current rate.

Also, does your company just do water or all utilities (water/gas/electric)?

Doug Karkow · Answer

@Edward B. I agree - technology is making sub-metering cheaper and easier, and more and more owners may view is as a cost effective way to increase their NOI.

@Andy Petzold This is great to hear, Andy! Especially from a local property manager! A part of me was suspicious that the average tenant wouldn't balk at the additional utility expense since I imagine most will simply focus on the base rent. Perhaps it's due to laziness in truly comparing comparable rentals, or perhaps it's because the expense information isn't readily available for some rentals. Either way, It sounds like it's worth investigating the costs of implementing sub-meters a little further.

@Lane Kawaoka I will have to check with the local utility provider on this. The tenants currently pay for their own electricity, so I wouldn't have imagined that water would be an issue, but maybe different utilities come with different credit requirements. But, I'm a firm believer that there's always a solution. Perhaps unqualified tenants could pre-pay utilities with rent while I handle their water bill. It would require some additional thought, but it seems to be worth digging further into! And I'll be sure to connect!

Sub-Metering or RUBS with Low Rent Apartments?

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