How do you estimate utilities?

Question

So I've built this excel document that does rough calculations of 2% test, Cap Rate and CoCROI and while I'm pulling most of the numbers from sources I can find (realizing they are not exact, but in the ballpark), the one thing that keeps tripping me up is how to estimate utilities.

I know that every building will have their utilities set up differently. Sometimes the landlord just pays for water, sometimes water and gas, etc, and then each state is gonna be different (I'm looking in Ohio), but is there anyway to get a decent handle on utilities...at least enough to get a number for initial calculations?

I have a feeling the answer was "no", but figured I would throw it out to the experienced investors to see how they do it.

Thanks,Lloyd

Jill F. · Answer

Here (Akron, OH) you can call the local utility companies and give them an address and tell them you are considering renting or purchasing and need the average utility costs and they'll tell you the average for the last two years and they'll also give you the winter/summer average so you can estimate heat/cooling costs.

Nathan Gesner · Answer

A couple options:

1. Ask the listing agent or Seller to provide you with an average utility cost for the Landlord for the past year; or

2. Go to Google and search for "average utility (city name)" and you can usually pull up something that will give you a rough estimate of what utilities cost.

Matthew Paul · Answer

You have to guess .    I have a small 1 bedroom cottage . When there was a single guy living there his utilities cost him $80 a month .  Then a single woman moved in and her utilities were $140 a month .   She had asked the other tenant what the utilites ran .   She came to me and said there was something wrong with the electric ,it was more than what the previous tenant was paying .

I asked her if she used the oven , did laundry , blow dry her long hair , and kept the thermostat set to 70 degrees .   She said  YES

I said , he had work uniforms , cooked infrequently , had a crew cut , and turned the heat down when he left .  BIG difference

Bill B. · Answer

I think once you see a few bills for each kind of utility and divide by the number of people you’ll get a good grip on it. You could ask a couple building owners, especially sellers. I don’t know if the utility companies would be willing/able to provide any guidelines but they might. The trick of course would be to try to convert as many utilities as possible to tenant paid as they will go down if the tenant is paying for them, that I guarantee.

Jason L. · Answer

A word to the wise to only use these as a proxy. I bought a duplex last year. Before buying, I called the city and asked for a 12-month history on the utilities. The average bill had been about $125 with a high watermark of $138 (and yes, that was with both units fully occupied). I've owned the house at full occupancy for 7 months now and my average utility bill has been $165 with a high of $205. Hard to really say why it's been so much higher since I bought it, but it's a good lesson to be learned that, A) always be conservative with estimates (call the city but then add 20% to whatever they tell you, just to be safe), and B) tenants don't give a flying you know about water consumption when they're not the ones footing the bill!

Lloyd Stein · Answer

Thanks everyone. Great information and suggestions!

Nate Zachrich · Answer

@Lloyd Stein I would contact the utility company in the area that your potential rentals are in they would give you the best estimate and they may potentially be able to give you some of the old utility figures other than that it's just kind of a guess

Frank Chin · Answer

I've been looking into the issue of water bills for years. Here in NYC, water for a duplex runs $175.00 to $200/month. In nearby Long Island, quarterly water bills run $50 to $75.00/quarter, yes that's $25.00/month, even in the summer time with lawn watering.

And water bills has to do more with the number of tenants, and how they use water. I hear about tenant that don't give  a fly about water usage. But in my home, my wife goes to the bathroom every hour, and flushes it at least twice when she goes. Don't know what would happen if I tell her she doesn't give a fly abut the water bill. We're both retired now, but when we were both working, she's at work flushing toilets every hour on the employer's dime, and I work long days, so I only get a chance to use the toilet mornings and nights. Water bills were lower. I had Southeast Asian tenants and it's customary for them to have relatives come, stay a few months on their visits, and they hang around the house taking showers, using the bathroom all day. Currently, I have a tenant babysitting her sisters toddlers all day, at our rental, with it's corresponding water bill. And when the same apartments is rented to a traveling salesmen, single, the water usage goes down 90%.

And the answer for renters with visitors hangings around is to charge extra, which I include in the lease a per person additional rent for the duration of the visit.

Believe it or not, DEP (water department) of NYC has a website where we can estimate water usage, and our usage is below average. When my wife the our two girls on vacation for a month this past summer, I stayed behind, the average water bill of $175/month fell to $85.00. The city website and our monthly bills showed the average consumption for households like ours, and we're below average even at $175/month. This even includes the renter babysitting her sister's kids.

I've been thinking of low flush toilets, but in recent times in NYC, rents have escalated so much that I haven't gotten to it. I think I save 4 gallons per flush. Guess the other way is for my wife to take more vacations, or hold it in longer between going to the bathroom.

That's why water use averages are only guesses, and there many other variables involved.

Kyle McKnett · Answer

Call the utility company and ask for an estimate. Most will provide you with one.

Lloyd Stein · Answer

I'll give that a shot. Thanks!

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